When it comes to tenants, I, Mark Roemer, feel it is very important to screen them properly. There are many warning signs that a tenant will not be a proper fit. With a good tenant, you will have the ability to sleep well at night knowing your property is being well taken care of. On the other side of the coin, you will always be worrying if they are destroying your house.
The problem is, when you are meeting with the tenant, they will all come across as the best tenant in the world. There is no real way to tell on the initial walk-through. You are going to have to look a little deeper into their background. You will definitely want to do this prior to signing the lease. Once the lease is signed, you are pretty much stuck until the lease is up. That means that pretty much anything they do from the time they sign until the contract is over is out of your control.
There are two ways that you can go about screening potential tenants. The first way is to hire a property management company. They are going to take a cut of the rent when they provide this service. The other way is to do it yourself. While it may seem like the best idea to trust it to the professionals, it really is something you can do on your own. Below, I am going to discuss the ways that you can screen the prospective tenants in a way that will have you sleeping sound at night.
You should never rent a property without having an application from the prospective tenant. This will allow you to get vital information from them to help you better see the whole picture. Many state and local municipalities have approved rental applications. All you need to do is go to your local city hall and pick one up. If you don’t like it, or you want more information that they have listed, then you can always make your own based on the sample one you picked up. Below are the things you are going to want to make sure are included in every rental application
Current and previous employers – This will allow you to see what kind of person they are. If they are the kind of person to hop from one job to the next, there might be a problem. Make sure they list the reason for leaving the job. In today’s job market, it is not uncommon to have someone that does a lot of contract work. If they have completed a contract several times in the last few years, this should not be held against them.
Income level – Obviously it is rude to ask them outright how much money they make. However, you can have a pay range with a checkbox. Simply have them check the box that is most appropriate. The reason that you are asking for this information is to see if they will have enough money to cover the rent and normal living expenses.
Financial information – This should include all credit cards and bank accounts. The most important part of this is to make sure they list their current balance and minimum monthly payments. This will let you see the entire picture of their financial situation. This is vital information to make sure they will have enough left over at the end of the month to pay rent.
Previous landlords – You are going to want to contact these people. They are the best source of information on whether or not a potential tenant is a right fit for your investment property. If you find out they have destroyed the place, then you might not want them in your home either. Be sure that you don’t go too far back in time. People grow up. Therefore, if the tenant is in their thirties, make sure you are not going back to the first apartment they ever lived in. That landlord knew what they were getting into when they let a younger person into their apartment.
Lifestyle information – You are going to want to know how many pets they have as well as how big they are. Another thing that you are interested in is how many people will be living in the unit. A good landlord will have insurance that will cover the building and all occupants therein. Make sure that your insurance will cover the number of people they are requesting to live in the unit.
References – This one is nice to have, but not exactly required. Sometimes you can tell what kind of person they are by the friends they keep. If you do ask for this information, make sure you get phone numbers and the length of time they have been friends.
On a side note, make sure that somewhere in the document that it says you have the right to use the information in the application to check what you need to. This means that you are going to want to make it known that you will be doing a background check on them. This means that you are going to need to run the credit check and talk to people. Before accepting the application, remind them that they have signed over permission for you to do just that. If they do not agree to any of the above, then you simply do not allow them to live in your home.
This may seem like a lot of information to get just to let someone live in your home. Rest assured that it is necessary. I have had many friends fail to do a proper background check only to have their property destroyed by a tenant. You have spent a lot of money on your investment. It would be a shame to have it destroyed over something that is simple to do. It may sound like a lot of work, but it will all be worth it when you are sleeping sound at night not worrying about your property.