Managing a rental property allows property owners to enjoy passive monthly income as an additional way to make money. However, that revenue could be in jeopardy when skipping a tenant screening process before allowing new renters to move in!
Choosing the wrong residents leads to rent non-payment, damage to the property, problems with neighbors, costly lease violations, and other inconveniences that can lead to income loss. To succeed as a rental property owner, it’s essential to establish a top-notch screening process. This means screening every prospective tenant thoroughly before renting to them.
How do you go about doing that? Today, our Roy property management team shares tips for screening to help you enjoy quality residents!
Tenant Screening is Crucial for Excellent ROIs
Having a thorough tenant screening process helps property owners avoid the wrong tenants. However, many landlords fail to implement a proper screening process, leaving themselves vulnerable to potential eviction lawsuits and other financial losses—including a low return on investment.
No one wants to deal with problematic tenants, but they can be a reality of owning rental property. Damages to your rental property and eviction costs can push you off track from your rental property goals, so investors must be sure that tenants aren't the kind of people who will neglect paying rent or mistreat your property.
Good Renters Are Good For ROIs
A thorough screening process can help improve ROI by identifying and removing troublesome tenants before they cause property damage or miss rental payments. By conducting a background check, verifying tenant employment and income information, and interviewing past landlords and references, a property owner can ensure that only responsible individuals live in their rental properties.
In addition, reviewing credit scores and eviction records can help property owners avoid renters who have a history of not paying bills or removals from past rental homes. Prospective tenants must be able to afford to pay rent and meet the requirements of the lease agreement.
As a general rule, confirm that a potential resident’s income should be at least 2.5 times the monthly rent amount and not be tied up in other financial obligations that could prevent on-time rental payments every month. In addition, past evictions can indicate a history of not being able to pay rent or violating lease agreements.
What Is a Thorough Tenant Screening Process?
So, when reviewing credit history, criminal backgrounds, income verification, and rental history, what should property owners look for to determine if a potential resident will be a good tenant or not? While you may choose your tenant criteria, we recommend establishing minimum requirements for prospective tenants to protect your rental property and finances.
Establish Screening Criteria
Setting specific required criteria can help you avoid late or missed payments, neighbor complaints, criminal activity, or eviction. Property managers can help you set the ideal standards to meet your goals and find good renters, including:
- A minimum credit score (often set at 620 or higher)
- An income threshold proportionate to the rent amount
- No eviction within a specified time frame or recency
- Three months of proof of income
- Separate pet applications for tenants with pets
- Valid photo ID
- Valid social security number
Setting these minimum requirements for applicants will weed out undesired tenants who would otherwise waste your time and money on an application process that leads to a rejected application.
In addition, applicants must give written consent to conduct background checks. If a potential tenant refuses to give consent, make sure your criteria clearly state that refusing the screening process means they won’t be considered for your properties.
Red Flags to Consider
What are the red flags and common issues property owners should watch for when screening potential tenants? These red flags could mean potential problems or liabilities.
- Prior eviction filings on a rental credit report
- Fake documentation
- Low credit scores
- Too many delinquent accounts
- Violent criminal records
- Unstable or recent employment status
You can avoid getting placed in an unsafe or uncomfortable landlord-tenant relationship by looking out for these red flags. If you notice any of these factors during the screening process, it may be time to consider other tenants for your rental property.
Find the Right Match With the Right (Legal) Questions
Be sure your application and interview process includes critical questions (without violating Fair Housing laws). Work with an attorney and a property manager to create an effective rental application and screening process that follows all landlord-tenant laws.
The benefits of keeping high-quality tenants longer who pay on time, keep the property in check, and know how to submit a maintenance request correctly are worth the effort of a thorough tenant screening process!
Improve Your Tenant Screening Process With Roy Property Management Experts
Many property owners struggle to identify ways to improve their ROI, but Reeder Asset Management offers many solutions. By screening tenants for potential problems until we are confident that we’ve found excellent tenants to keep your rental property and income safe, we reduce the potential for costly issues!
Reach out to our property managers today to learn more about our Roy property management services. We can answer any questions about “what does a property manager do!”
Learn more about improving returns! Get our "10 Things You Should Do To Increase the ROI for Your Rental Property" checklist for free!