Selecting a new tenant to rent your apartment or home to can be a stressful and exhausting process, and you may not even know where to begin! This guide will give you a jumping off point and highlight what you need to consider when reviewing tenant applications and selecting a new tenant.
Before You Begin
When beginning the tenant screening process, one of the first things you should do is become familiar with the federal and state housing laws. The Fair Housing Act states that it is illegal to discriminate against someone for their race, color, national origin, religion, sex, familial status, or disability. It’s important to follow these rules if you want to avoid a discrimination lawsuit and potentially paying a large fine or legal fees. That being said, there are many legal ways to judge whether to enter into a housing agreement with a tenant.
Many landlords recommend developing a written, or otherwise documented, set of tenant screening criteria that can be used to evaluate tenants equally. By holding all tenant applicants to the same set of criteria, it becomes easier to specify exactly why a tenant’s application was rejected. This can protect you during discrimination lawsuits.
Before a tenant can rent from you, you need to have them fill out a rental application. There are multiple items to screen when viewing a tenant’s rental application, and we’ll help you figure out what to include in the application. This will help you develop your documented tenant selection process.
Checklist
Tenant's Financial Situation
It’s important to check if a tenant’s financial situation qualifies them to rent from you. Make sure to run a tenant credit check because it can indicate whether they can pay their rent on time. Pay special attention to credit cards being charged off, or other large financial delinquencies such as bankruptcy, because this will indicate the amount of risk you face with your potential tenants. You should also request to see a potential tenants financial information, such as their bank account balances, amount of debt, and minimum monthly payments. By comparing this information to their current income, you will be able to get a sense of whether they will be able to afford the monthly rent payments.
Criminal History
You should run a criminal background check on your potential tenants. All you need is the tenant’s name and date of birth; make sure to verify that this information is correct in case your tenant is trying to falsify information to avoid showing their criminal history. Keep in mind that some states have laws against discrimination for certain crimes. Additionally, you may be charged with discrimination if you turn away everyone with a criminal record. Instead, consider the severity of the crime, when it occurred, how many times it has occurred, and if these crimes can hurt other tenants or your property.
Employment History
You should look at your potential tenant’s employment history. See if they have a stable job or if they’ve switched jobs more than once recently. If they have trouble keeping a single job for a long period of time, their income will most likely not be steady enough to rely on when it comes to paying rent.
References
Contact your potential tenants’ references, especially their past landlords, in order to determine what their behavior is like in a rental property. Try to speak with both their current landlord, and a previous landlord, since the current landlord may be trying to get the tenant off their hands. If a tenant has been evicted from a previous property within the past 7 years, you face the risk of having to evict them from your property. You don’t want to have to evict a tenant or deal with damaged property, so it’s important to see how they have behaved in the past.
Interview
At some point during the tenant screening process, it is common to hold an interview with the potential tenant. Sometimes this takes the form of a pre-screen interview, an interview after the application is submitted, or to conduct an informal interview during the property tour. Use this time to go over the documents they submitted, discuss living preferences, clear up any potential issues found within the tenant's application, or simply see if they are a good fit for your property. It is a good idea to consistently ask the same questions to avoid discriminating against potential tenants.
Online Tenant Screening Services
To help you with the tenant screening process, there are many services available to you online that will make the process easier. These services will check credit reports, criminal backgrounds, eviction history, and more, depending on which service you use. Using these services, you can send the application directly to the prospective tenant so they can fill out the application online. Some services require a monthly fee to use while some require a single fee for each application. You can often choose whether you want to send this fee directly to the applicant for them to pay, cover this cost yourself, or collect the fee from the applicant to cover the cost. There are many options to choose from, so make sure to compare the different options to see which works best for you.
Here are some online screening options:
Once you complete these steps to find the perfect tenant, you can feel confident signing a rental agreement! If you want to continue your research on this topic, check out the additional resources below.
Additional Resources
- Fair Housing Act
- Applications & Interviews
- Extensive Tenant Screening Guide
Legal Tenant Screening Guide - Guide to Real Estate Investment
