Why Tenant Screening Services Are a MUST.
Don’t fight the holidays.
The most important decision you’ll make as a property manager serving your landlords is choosing the right tenants for their properties. As rental applications come flooding in, it’s hard to differentiate the good from the bad. The upsides of a good tenant are clear: steady cash flow and a caring symbiotic relationship.
But the downside is often neglected, as we all have a tendency to underestimate how fast things can get out of control. The wrong renter will cost you thousands of dollars at best... and tens of thousands at worst. And after all, you’re hired as a property manager in the first place to help your clients avoid unpaid rent, nonpayment, legal fees, and turnover costs. Glancing over an application form with no real digging may get you into some hot water. Thankfully, we at Snappt have compiled a comprehensive solution with our diligent tenant screening process.
These are the five most important things to notice when screening for the best tenants.
1. The Basics
Your moral compass should guide you here, but if not, the Fair Housing Act will. Obviously, you can’t turn down a tenant based on disabilities, family status, gender, ethnicity, sexuality, or religion. However, you can filter them out based on the number of vehicles they hold, pets they raise, or their smoking habits.To comply with Fair Housing Laws and be on the safe side, we suggest you put all these requirements in writing, in publicly accessible documents, inside the contracts you enforce.
2. Criminal Records
With the basics covered—we turn to safety. Before money, creditworthiness, and work history, we want to ensure the prospective tenant isn’t dangerous to you, the neighbors, or the property.
Obviously, serious offenses are a big no-no — and while you’re within your rights to deny applicants if they have a criminal record — do so with common sense: traffic tickets a few years old probably won’t affect the applicant’s ability to pay rent on time, or a good indicator of their character for that matter; especially if all other aspects of their application look good. Needless to say, a potential tenant who ran a red light once likely isn’t a threat to the safety of the neighborhood. However, serious felons, sex offenders, violent individuals, or applicants with a similar criminal history should be handled seriously and denied accordingly. Do your due diligence. In matters of criminal background checks, your judgment is imperative. The rental property owner and the community it is in will appreciate your efforts.
3. Verifiable Income & Employment History
Sure, applicants need to earn more than they’re paying you, but how much more? A common ratio is usually 3x the total rent in total income, so if the monthly rent is $1,500, their gross income should be $4,500 or more.
Additionally, their employment history is a definitive factor, with some landlords looking to see if a job was held for at least six months — while others are more lenient — opting for 3 months. This shift happened because people have been job hopping recently, and the gig economy is rampant. Of course, the more stable, tenure-like past roles they had, the better.
4. Credit Score
Income is not an indicator of financial literacy or solid responsibility, because while a person can make over $100,000 a year, their spending and splurging habits might hinder their ability to pay their dues on time or in full.
When reviewing a tenant credit report, look for patterns of credit card misuse. If they do exist, dig deeper for the reason. For example, if Covid made a decent, hard-working person foreclose or declare bankruptcy—the numbers might just tell half the story. Aim to find a person who is on top of all his cards and bills—and who is financially responsible.
5. Rental History
This is last because the first four are better indicators—mainly because the world has changed.
Many wealthy and dependable nomads like Airbnb’ing. Also, more recently, applicants don’t have great history because of Covid wreaking havoc worldwide and the trending work-from-wherever policies that followed. So, if they haven’t lived anywhere for a long amount of time, it may not be a red flag. However, eviction history is.
Remember: it’s better to find applicants with no rental history at all than to find applicants tainted with evictions, chronic late payments, disruptive behavior, tussles with their previous landlords, or major property damage. The former shows a blank slate—deserving of a chance. The latter shows a pattern of neglect.
We covered the five most important elements of tenant screening and why they are listed in that order. The legal basics, then safety, the tenant background information like income and stability at work, how they manage financial obligations, and of course, their actual rental history.
Learn more on how the Snappt software works or request a demo.
