“Important Factors In A Tenant Screening Report” written by Mike Marko.
You have a stack of rental applications. You need to decide who to rent from you… so what is the next step?
As a property manager, when renting properties on behalf of your investors you should be thinking about the tenant screening report, and it can help determine the most qualified applicants to rent the property.
Approximately 15 to 20 years ago, a few handshakes were enough to seal the deal in renting a property. Unfortunately that kind of agreement was old-fashioned and often times ended with tenants who could not pay rents or left the property damaged and needing repair. Now, an extensive tenant screening process has been added and put in place to make it possible to find the most qualified renters.
The article below will help you understand the important factors that you can find in a tenant screening report. I also talked about an effective way of weighing its information.
Know More About Tenant Screening
If you’re a rental property business owner, tenant screening process is needed to avoid bad and costly renters and to find more qualified tenants. More qualified tenants mean you make better profits from the properties.
The tenant screening process allows you to more easily verify information given to you on applications and in the interview process. However to make best use of the tenant screening processes you need to have knowledge about tenant screening reports. You also need to learn the legal (and illegal) ways of accepting and rejecting a tenant for the rental properties.
What Is Tenant Screening
Tenant screening is a process that landlords or property managers use in evaluating prospective tenants. The purpose of the tenant screening process is to get reports and verify information that tenants have provided. You can then use the information to determine if the applicant is capable of fulfilling the responsibilities of renting the property they are applying for.
Finding out and determining through past rentals and financial history allows you to understand the tenant’s ability to pay the rent. Additionally the tenant screening process allows you to determine if the applicant has taken care of previous rentals. It also can help you to identify any improper behaviors found when verify the tenants application and references.
A major advantage when doing tenant screening is to check the background of prospective tenants and discover their real personalities which ultimately determines if you will rent to them or not. The tenant screening processes help you avoid or minimize the possibilities of having a bad tenant, incurring damages or paying rents late on the rental property they will be renting.
A bad (or unqualified) renters are identified as renters who don’t pay rents on time, damage the property, and or are involved in criminal activities etc. The risk of having bad tenants could affect not only you, it could also affect the people who are currently renting your property. As the property manager, it is your responsibility to protect your present tenants from bad tenants or tenants that are involved in criminal activities. To ensure that you have done your due diligence in the tenant screening process it is practical to conduct a tenant screening once a prospective tenant passed a rental application form.
This process can help you determine whether you will accept the tenant or not.
Reports Included In Tenant Screening
When a prospective tenant completes and submits a rental application it’s time to start the tenant screening process. In filling out the application and meeting with the prospective tenants it’s customary to inform them of your tenant screening processes and types of reports that will be obtained in helping determine if they are a qualified to rent your property.
Prior to starting the formal tenant screening process, you need prospective tenants to fill out or sign authorizations for reports to be run to complete in the processes.
Normally tenant screening includes an extensive background check, credit checks, and criminal activities reports. There are a lot of companies both online and in your neighborhood that offer services in checking the background and other relevant history of the applicant.
When you hire a tenant screening company you will typically receive an extensive tenant screening report after they completed their research. To complete the tenant screening process there are a number of important reports that need to be looked at and evaluated.
Below is a list of the most common reports used when doing tenant screening:
Credit Report – A credit report includes information about the applicant’s credit history. Everything that is related to the applicant’s credit activities will be included in the report. Evictions, bankruptcies, the amount of debts, current money in the bank, credit card balances, the number of credit accounts and bank accounts are included in the report because these items will be important in determining the applicant’s financial status and capabilities.
Rental History – A rental history includes information about the applying tenant’s past rental experiences. The rental history report usually includes specific events in the applicant’s past rental activities. Assume to see information about bounced checks, late rental payments, breach of lease terms, complaints, damage to the property, and eviction proceedings.
A rental history report will help to identify evictions or previous landlords to call and directly verify past rental history. It’s common and has almost become a requirement to get a rental history report every time a tenant submits a rental application to the property owner or landlord.
Criminal Records – Property managers or owners also need to check the criminal record of the applicant. This is commonly needed because it is the property manager’s responsibility to protect the current tenants in the rental properties from any possible criminal activities.
When a criminal activity report shows past criminal behavior it’s important to review this information with applicants. It will help you determine if you still want to rent the property to them. By verifying and asking questions directly to the applicant you are able to determine if past criminal charges could be a factor to deny the applicant’s rental application. However, the law states that an applicant with criminal charges which did not lead to a conviction is still eligible to rent a property. So my suggestion is to treat each applicant separately and determine when verifying the information if they qualify for rental of the property they are applying to rent.
Employment Summary – Most tenant screening reports include a summary of the applicant’s employment status as well as past history of employment. A qualified tenant has the ability to pay the rent on time. In order to pay the rent on time, the applicant should have a stable job or reliable income.
The benefit of knowing vital information about the employment status is having an insight about the applicant’s capability of paying monthly rental fees and how long could they sustain in making payments. The employment summary report is an excellent way to find out through investigation if the applicant is a good employee or has problems dealing with people and authority.
Past Address and References – Past addresses of the applicant will also be included in the tenant screening report along with references and feedback from previous landlords. The contact information of friends, previous landlords, and employers is needed in verifying the identity of the applicant. It’s best to verify references using contact information from an outside source like a tenant screening report or the internet. The reason we suggest this to avoid any misleading references or fraudulent information the applicant could supply on their application and forms.
Warning Signs To Be Taken Seriously
When reviewing screening reports it is best to use them as a way to find red flags or additional items that need to be discussed directly with applicants. A screening report can give you reasons why you will accept possible tenants but it can also give you reasons why you need to reject their rental application.
Here are some red flags or warning signs in a screening report that could help you in choosing qualified tenants.
- Poor payment history
- Financial instability
- Criminal convictions
- Previous rental history
- Eviction record
- Identity Theft
The payment history and financial stability of the tenant could help you determine if they can afford to rent your property. Any blemishes regarding their credit such as bankruptcy and judgments are huge red flags so be cautious in accepting tenants with these items on their report. Failure in paying debts, rent, or any kind of payment is an indication that the tenant is having financial problems. Most experienced property managers will deny applicants that are having financial problems.
Aside from the financial status, you also need to pay attention to the behavior of the applying tenant. Criminal convictions and eviction records could give you an insight of what kind of behavior does your tenant will do inside your property.
Additionally screening reports might help you identify applicants who are stealing identities to use them to mislead you in renting the property. Identity theft is a serious threat to any rental property business. The probability of criminal activities inside the property will rise and it could damage the credibility, and reputation of your business.
Final Words About The Important Factors In A Tenant Screening Report
Using the tenant screening processes and reports is a major factor in helping you find qualified renters for your properties. You should focus on reviewing the applicant’s tenant screening report before you make a final decision.
Normally when applicants have good credit scores, positive rental references, no criminal reports, and excellent employment reference it means they have a better chance of being a good tenant. It’s important to weigh the important factors when choosing the tenants in your property. Having the right tenants in your property will only bring success to your business.
Learn more about rental property management business with other articles on our website.
Have questions and want to connect?
Add me on Facebook then shoot me a message:
Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.