How to Choose the Right Tenants for Your Rental Property: Things to Consider

No screening method is completely foolproof, but if you properly screen tenants, you can reduce the risks of late rent payments, damage to your property, and much more. The purpose of screening is to take a more in-depth look at prospective tenants who seem to be a good fit.

A tenant with a good credit record

If tenants earn a stable income and pay their bills responsibly, they are also likely to pay their rent on time and take proper care of their property.

Verify income: The first step is to verify income, and applicants must supply copies of pay stubs. Ideally, a tenant’s income should be about three times the expected rent. You should also call an employer directly to confirm employment details and history.

Perform a credit check: The three major credit bureaus are Equifax, Experian, and TransUnion. They collect financial information about individuals from various sources such as credit card insurers, auto finance companies, etc. You will need applicants’ names, addresses, and Social Security Numbers or Individual Taxpayer Identification Numbers to run the credit check. You can find out whether applicants have a history of paying their bills on time or have prior evictions, civil judgments, or bankruptcies.

Evernest, APM, and Mynd are some of the best rental companies in Boulder. The experts working in these companies will do tenant screening for you and make sure only well-qualified tenants are placed in your rental property.

Criminal background check

There is no nationwide database of criminal records, so doing a thorough criminal background check can be challenging and time-consuming. You can be held liable if you choose to rent to someone convicted of serious criminal offenses. On the other hand, there are guidelines you must follow when screening applicants based on a criminal record. There are some cities that totally ban screening based on a criminal record. Some states don’t allow landlords to discriminate against applicants convicted of certain petty crimes.

Tenant’s rental history

If possible, you should talk to two previous landlords. The current landlord may not answer truthfully if they want to get rid of the tenant. Ask questions such as:

• Did the tenant pay rent on time?
• Did the tenant look after the property?
• Did the tenant cause any damage other than reasonable wear and tear?
• Did the tenant make many complaints?
• Did the neighbors ever complain about the tenant?
• Did the tenant give proper notice?

If the applicant is a first-time renter and doesn’t have a rental history, it is best for you to get a co-signer on the lease.

Laws governing choosing of tenants

Landlords are required by law to treat all applicants equally. The Fair Housing Act is designed to prevent discrimination based on various factors such as race, ethnic background, religion, sex, or because an applicant has a family or a disability. Many states also have their own fair housing rules landlords must follow. Landlords have to be able to explain exactly why they accept or decline applicants. For example, they are entitled to reject an applicant with a poor credit history and not enough income to pay the rent. They can’t reject a single mother with a child who has a good income.

Long-term or short-term tenants

With short-term tenants, you stand to make more money, and it is also easier to raise the rent. Other benefits are more flexibility, fewer tenant clashes, and tax advantages. However, it takes time and energy to keep looking for new tenants and to make sure that the property is clean and ready for the next tenant.

If you have long-term tenants, you have a monthly income rental you can rely on. You do not have to constantly find new tenants, and once a tenant signs the lease, you know how long you can expect them to stay. However, with long-term tenants, you have less earning potential and flexibility. The vetting process for applicants who want to stay in your property over the long term also has to be more thorough.

Selection criteria: Family structure/pets etc

As a landlord, you have the right to set policies and rules for your properties to make them safe and comfortable to live in. Using a written set of rental criteria can help you to avoid accusations of unfairness. It helps you to remain consistent throughout the tenant selection process. For example, you may decide to limit the number of people per rental unit for health and safety reasons. You may decide whether to allow tenants to have pets or not.

Conclusion

If you acquire great tenants, you are more likely to have a consistent cash flow, lower your long-term tenant acquisition costs and reduce rent collection and eviction costs. Instead of just trusting your instincts, a thorough screening process can help you to select well-qualified tenants.

Photo by Erik Mclean on Unsplash