How to Screen Tenants in 5 Easy Steps

If you are going to see success as a landlord you must have good tenants.  It is the life blood of the business.  There is no quicker way to fail then have tenants who don’t pay and/or don’t take care of your property.  Not only does it affect your business it will also affect your mental state.  The good news is that getting a good tenant is not about luck, but about doing your home work.

Bad tenants have certain tendencies that you can discover by doing the following 5 steps.  As you begin your due diligence just keep in mind that it’s more important to get a good tenant then it is to avoid a month without rent coming in.  Even if it means multiple vacant months…You should have planned for vacancies any way right?

Screening Tip #1:  Have Them Fill Out a Rental Application

tenant screening

A rental application is where you will get an applicants personal information.  It will be the basis for building their tenant profile.  It is important to have a good rental application, so don’t just go making one up.  Get one from an experienced landlord that you may know or by joining a local real estate investing association.

What to Look for on a Rental Application:

  • Employment History.  This is where you establish their stability.  How long has the tenant been at their current job? Has he or she switched jobs multiple times in the last few years?  Usually people who constantly change jobs do so because they have problems following rules.
  • Income.  Quite simply can their income cover the rent without over extending themselves?
  • Financials.  Bank accounts and credit cards, including balances and minimum monthly payments.  An applicant might have the monthly income for rent but if they are in debt and have other money obligations they won’t be able to pay the rent.
  • Previous rental information.  Addresses, amounts of rent paid, and reasons for leaving. Are there any gaps in rental history, or are the names and contact inf0rmation for any landlords missing from the application?
  • Pets and Roommates.
  • Personal references. Names, how long they have know them and phone numbers.

Screening Tip #2: Run a Credit Check

Look for a history of late payments, collection accounts or major issues such as bankruptcy.  While even the most responsible people will have a few late payments, look for a pattern or multiple months behind.  If the tenant has maxed out all of his credit cards, carried hefty loans or has several unpaid balances, he may struggle to keep up with the rent payment.  Make sure they have a reasonable debt to income ratio.  This will help you feel more comfortable that they will be able to meet your rent requirements.  As part of the rental application you’ll need to get permission to run a credit check.  It is illegal unless you get written permission.  When looking at the credit report you want to learn two main things about the applicant…History and Debt.

Screening Tip #3: Run a Background Check

To further build on the applicants profile you’ll want to get a background check done. In your application you are most certainly asking them to list any criminal convictions. They may list them or they may not, but it is your job to validate what they put on the application. Even follow up with minor infractions to make sure they are giving you the full story.  Three items you want to look for in a background check…

  • Evictions. If you find out about any evictions you may want to reconsider renting to that person.
  • Criminal Records. You are allowed to discriminate against someone with a criminal record. I for one would not want to rent to someone who has been convicted of a crime. You will have to make your own decisions on how comfortable you are.
  • Public Records. Here you will want to find out about any legal problems they may be getting sued for. Such things as unpaid rent, child support or other financial matters.

Screening Tip #4: Talk to them

Some of the most useful information you can find out about a potential tenant is by just talking with them. You won’t want to grill them with question after question, just be friendly and start up a conversation. A few points of information you can try to get out them are…

  • Pets
  • If they are looking for a roomate
  • Do they smoke or do drugs
  • Are they personally responsible for another’s well being

It can be tough to pull out some of this information but with some practice you’ll become an expert. Again though, you have to remember that you can’t take what they say as the full truth. Use your best judgement and do a little follow up to confirm what you have been told.

Screening Tip #5: Show up at their current residence unannounced

This is one of my favorite screening methods. There is no better way to find out who you are potentially renting to then seeing them in real life. The key is to show up when they aren’t expecting you. No time to clean up or have a friend watch their dog.  You just tell them you were in the area and needed to drop off a form for them to sign. You won’t want to do this for every applicant you get, only to make a final decision.

Doing the proper due diligence on potential tenants will go a long way to making you a success when renting out your property.  Bad tenants are every where and many of them are experts at deceiving landlords who are desperate to fill their vacancies.  Remember to always budget for vacancies and never compromise on your standards because an applicant has a sob story.  This is a business after all.

Bonus Guide – Ultimate Tenant Screening Guide

For a great guide to screening tenants I’ve found this very useful.  The guide has a very good infographic that will walk you through the steps to the ultimate tenant screening.