Investment Property: How to Screen for Quality Tenants

Investment Property: How to Screen for Quality Tenants

One of the most stressful elements of property management is dealing with difficult tenants. Between killing cash flow with late rental payments, and causing financial nightmares with damageheaven forbid you have to go through an evictionbad tenants can sink a small business. What most people don't realize is that the vast majority of tenant-related problems can be eliminated by simply avoiding bad tenants altogether with thorough screening. Here are a few tips to improve your screening process.

Obviously, the most essential piece of the screening process is the application. Provide a thorough application that includes all the pertinent information about the potential tenant. Make sure that the application is completely filled out, and that you have a copy of the applicant's valid driver's license or other official identification, and check that the name and information on the ID matches that on the application.

Next, you'll have to investigate the applicant's financials. Request the past three months' pay stubs to be sure they can afford your rentstandard operating procedure. Call the applicant's employer to verify that they work there, that there are no problems related to the applicant, and that there's no reason to believe the applicant will be unemployed in the near future. Also, request their three most recent bank statements. While this is not always required, the applicant should be willing to provide them; if not, then you have a pretty good reason to be wary. It is also important to check the applicant's credit and criminal history. A credit score above 600 is usually considered reasonable for a tenant, and you want to steer clear of anyone with a history of evictions or criminal behavior.

On the application, make sure you include a space for the applicant to provide information about previous rental engagements. Landlord contact information, rental amount, etc. This is important so that you can call the previous landlords to inquire about the tenant. Use caution when dealing with contacts, as many applicant's just use their friends to pose as landlords and vouch for them. One good method of weeding these applicants out is to ask the "landlord" about the rent, quoting a price other than that provided by the applicant. If the person you are speaking to doesn't correct you, then they were probably not the landlord.

If you adhere to these methods responsibly, selecting quality tenants for your properties should not be a problem. Simple things like providing a driver's license alone can eliminate an enormous number of potential bad tenants. Use common sense, and think about who you want living in your space.

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