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How Do I Choose The Right Tenants?

Your success in generating income from your property hinges on the quality of tenants who occupy your property. If your tenants pay their rent on time and treat your property well, much of your risk as a landlord is mitigated. If they don’t, you can face the loss of income, property damage, and a string of legal proceedings that will cut into your profits.
The single most effective way to avoid problems and keep your property generating income is by choosing the right tenants. The quality of the tenants you choose will make or break the success of your rental business. The following is what you need to know to choose the right tenants for your property.

1. Look at Tenants From a Long-Term Perspective

There may come a time when your property is sitting empty, and you worry because you can’t afford to have the space unoccupied. When your fear of losing income takes over, you may not be able to look at the situation objectively, and you may make decisions based on emotions, rather than what’s really in your business’ best interests. You want to make tenant decisions based on your long-term needs, not your short-term panic. It’s imperative that you carefully screen tenants which takes time and effort. Though you may be tempted to cut corners on screening procedures, don’t. When you choose a tenant without carefully screening them, you are setting yourself up for more problems and bigger losses later.

2. Have Potential Tenants Fill Out An Application

Tenant screening begins with an application. The application lets you collect the information you need to perform background checks and gives you an overview of who the person is. Your tenant application should include:

  • Name
  • Social Security Number
  • Date of Birth
  • Contact Information
  • State and Driver’s License Number
  • Addresses of Previous Residences and Dates of Residency
  • Contact Information of Previous Landlords
  • Current and Past Employers and Contact Information of Supervisors
  • Income
  • Bank Information and Credit references
  • Three Personal References with Contact Information and Their Relationship to the Applicant

3. Screen Everyone Who Will Occupy The Property

Any person over 18 who will be living in the space should be screened thoroughly. That means conducting background checks, credit checks, and rental histories of everyone who will occupy your property. If they have a financial cosigner or guarantor, that person must be screened even if they are not living on the property.

4. Get Answers to The Hard Questions

If a tenant is going to be living on your property, you have a right to know who they are and if they are reliable and responsible. You need to know before they move in if they will be able to pay the rent and if they will take good care of your home. An eviction can easily cost you as much as $10,000, so be sure to get answers to the following questions.

  • Why are they leaving their current home?
  • Where are they employed and what is their income?
  • What is their credit score? (They may not know this. Have them complete a credit report authorization form, which is required by law so that you can perform a credit check.)
  • Including the rent you are charging, what is the ratio of their debt to income?
  • Do they have a criminal background? What kind and how long ago were the charges?
  • What is their residence history? How long have they stayed at each residence? Have they ever been evicted? Have they ever caused damage to a property?

How they answer the questions will likely tell you as much as what they say. Do their answers seem evasive? Look for any inconsistencies between what they put on their application and how they answer your questions.

5. Verify That Their Answers are Accurate

Of course, not every prospective tenant is going to be completely forthcoming with information, so you have to verify that the answers they provide are accurate. You can run a credit check once you have the prospect’s written consent, and you can also run a background check on them. Call the personal, professional and residential references they provide to verify that the tenant is representing themselves truthfully. Do your due diligence to ensure that you are speaking to the actual past landlord and not the friend or family member the applicant is trying to pass off as their past landlord.

6. Don’t Cut Corners

Don’t skip any part of the screening and verification process. It may take less time and cost less money to avoid a thorough screening, but you’ll pay more later if you let in the wrong tenant.

7. Know When To Hire A Professional

If the screening process seems too difficult or time-consuming, you may want to outsource it to a professional. A reputable property management company has years of experience in tenant screening and selection and can take the entire process off your plate. It’s better to outsource it than to do it poorly yourself and pay the price later with unpaid rent and damaged property.