A rental unit can be a lucrative investment. A bad tenant, however, can cost you money in unpaid rent and time spent trying to recoup costs and evict the tenant. Proper tenant screening can help weed out problem applicants. Landlords and rental management companies often use third-party screening services to perform background checks on applicants. Information gleaned from such investigations, along with additional steps that you may take, might help you avoid renting to a bad tenant.
1. Ask the prospective tenant to fill out a rental application, including the tenant's name, previous addresses, Social Security number, driver's license number or state ID number, place of employment and amount of income. It should also specifically request permission to perform a background check on the applicant. Ensure the applicant signs and dates the application.
2. Verify the applicant's rental history yourself or have a third-party service do it for you. Many landlords view this component as one of the most important when evaluating a prospective tenant. Rental history tells you how the applicant handled previous rental obligations. Ask if the applicant paid rent on time. If there were late payments, find out how many. Also ask if the applicant gave the required amount of notice before moving, if the applicant broke the lease and if any eviction proceedings were initiated against the tenant.
3. Review the tenant's credit report provided to you by the screening service. A low credit score may be a red flag. Look for unpaid debts to other landlords, bankruptcy filings, a delinquent payment history, wage garnishments and unpaid liens that may indicate the applicant has a history of not paying bills. Also check the amount of outstanding debt present on the report and any other credit criteria you view as important to the decision-making process.
4. Look over the applicant's criminal history. Some management companies and landlords do not rent to applicants that have been convicted of felonies. Some will rent to applicants if the felony was for a non-violent crime. You must determine the standard of acceptability for your situation. It's also helpful to see if the applicant was convicted of a crime involving a violation of a financial trust, such as embezzlement, fraud or theft, which may indicate a lack of trustworthiness on behalf of the tenant.
5. Verify the applicant's employment status by contacting the employer. Most landlords request a copy of an applicant's paycheck stub. Paycheck stubs can be forged, however, so it's important to actually speak with the applicant's employer. If the applicant is self-employed, request bank statements or previous tax returns to verify the applicant's source of income. If the applicant works as an independent contractor, you may also request a copy of Forms 1099 from the previous year.
6. Determine if the applicant's total application meets your standards. Some applicants may be strong in some areas, such as a high credit score, while lacking in others, such as rental history with other landlords. If the applicant isn't acceptable, simply deny the application. If the applicant is borderline, you may consider requesting an additional deposit or requiring a cosigner. Each situation is different and will require an assessment of acceptability from you.
- To help cover the costs of a background check, you may require an application fee from all prospective tenants. This fee is usually nonrefundable, but ensure that the applicant knows this beforehand by clearly indicating it on the top of the application.
- Although you could attempt to verify the applicant's credit, employment, criminal history and rental references yourself one by one, it's often more cost effective to hire a third-party screening service that can do all of that for you and present the information to you all at once for your review. You may locate such screening companies by performing an online search for "tenant screening."
- Always get the applicant's written permission before performing a background check. If you check someone's credit without their permission, you could face a civil lawsuit and the imposition of civil fines.
Items you will need
- Signed rental application
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