Choosing the right property is an important part of the equation when it comes to investing in real estate. But if you’re going to fill the property with sub-par tenants, your investment income can potentially suffer. Not only that, but you’ll be stuck with nothing but headaches from problem renters.
Before you allow anyone to take the keys to any one of your units and sign a lease, it’s imperative that you thoroughly screen each applicant. While you might be anxious to fill your vacancies and start collecting rent, you’d be better off with an extra month or two of no rent in order to give yourself time to find the perfect tenant who will pay you on time, take care of the place, and not be a nuisance to neighbors.
As part of the screening process, consider the following tips to weed out the bad seeds and choose the applicant who will make the best fit as a tenant.
1. Insist on Proof of Identity
Considering the rise of identity theft these days, it makes sense to be prudent enough to verify an applicant’s identity. Ask for photo identification and try and get driver’s license numbers. Don’t just take their word from it over the phone that they are who they say they are. Keep copies of such information for your files.
2. Perform a Background Check
When you list your rental unit for lease, mention that a background check may be performed. Anyone who may be uncomfortable with this because of a shady past may just skip the application process altogether and move on. For the remainder who do decide to go ahead with the application, a background check can prove to be very helpful.
You want to know if the prospective tenant has any history of skipping out on rent, been evicted, or has been convicted of any crime. Anything that creeps up as a red flag when a background check is conducted should probably mean that you should skip over that applicant and keep looking.
3. Perform a Credit Check
While you’re at it, have a credit check conducted on potential tenants to make sure they are financially capable and responsible enough to make rent payments on time every month. The last thing you want is to constantly hound your tenant for rent every time payday rolls around.
A credit check will tell you what a potential tenant’s credit history is, but you’ll need to get their permission in writing in order to be legally permitted to conduct a check like this. Just make sure you pull the credit report yourself rather than depending on the tenant to provide you with an accurate report themselves.
4. Get References
It’s helpful to get contact information from a prospective tenant’s previous landlords and employers. These people can give you some pertinent information on the people you’re screening and can tell you if they’ve had any problems with them in the past. Odds are if they’ve caused issues with previous landlords, they’ll probably cause some problems for you too.
5. Don’t Incriminate Yourself
There are certain things you can do and ask when screening for tenants, but there are others that you can’t. It’s important that you protect yourself against any potential litigation as a result of discrimination by following the regulations of the Fair Housing Act (FHA). This act was established to make sure that tenants are not denied tenancy because of their race, sex, age, religion, or any other type of similar reason.
6. Ask Lots of Questions
As long as you adhere to the FHA as mentioned above, there are plenty of questions that you can and should ask in order to make sure you choose the right rental candidate. Some questions that you may want to ask include:
The answers that you get will give you a pretty good idea of what type of tenant the applicant will be and whether or not they may be truthful about what they’re telling you.
The Bottom Line
You’ll have to deal with tenants for at least 12 months since most leases are at least that long. As such, you’ll definitely want to make sure that you pick the right person. A great tenant can be so easy that you will barely need to be in touch with them other than to collect rent.
But a bad tenant can be a real nightmare and can cause you nothing but hassles. While thorough screening won’t necessarily guarantee that you’ll land the best tenant, you can definitely increase your chances of finding a great renter and avoid ones that would probably turn out to be duds.