How to Screen Tenants
At MartelTurnkey, our turnkey rental properties are sold with a lease and tenant in place, vetted by a local, professional property management company. But eventually that tenant may move on, and you’ll need to fill the vacancy. With a property management company running your turnkey rental, you don’t have to lift a finger. Even so, if you’re becoming a landlord, you’ll want to understand what goes into the process and why the screening process is so important. Following is some information about both the need for tenant screening and how to conduct the process. This will give you insight into the extreme value of a quality property manager like those that MartelTurnkey works with.
Why Do Tenant Screening?
The tenant directly impacts your landlord experience whether or not you plan to hire a property manager for your rental property. Tenants do more than just pay rent. You can regard tenants as stewards in many ways. In fact, property managers want great tenants for you, as well. Think about it. When there’s a vacancy, the property manager doesn’t get paid. They typically make a modest percentage of rates, or a per door flat fee. But if there’s no rent, no money for the property manager. So your interest is the same as the property manager’s interest. They want to get you a good tenant who pays on time and lets them know when something needs attention.
Good tenants take care of your property in your absence and alert you or your property manager to any problems. They change HVAC filters as requested, turn off the outside water main in winter to avoid spigots from freezing and maintain a temperate climate to avoid freezing pipes indoors. They park in designated areas only and preserve civil relations with neighbors.
A bad tenant can cause a great many problems for the property owner, including:
– financial strain caused by late and/or missing rent payments
– neighborhood disputes arising from misbehavior/activity/boundary violations/noise
– property damage
– damage to landscaping
– abuse of furnishings/appliances
– escalation of problems due to failure to report in a timely manner
When you consider all the ways a quality tenant serves you and all the ways a bad tenant can sour your landlord experience, you gain insight into why tenant screenings are crucial and what you should be looking for in a good tenant.
The Goal of a Tenant Screening
You want a tenant that is going to consistently pay rent on time, take care of the property, keep in touch with you or your property manager about any problems and not cause disturbances in the neighborhood. To that end, you’re looking for a tenant who can keep a job, understands the workings of a house, is respectful of your investment and who fits well into the culture of the neighborhood.
Tenant Screening Background Checks
A traditional tenant screening typically includes a criminal background check and a credit check.
Criminal background checks may cover local, state and federal offenses.
Depending on state laws, the criminal background check may reveal if the person has an arrest record, outstanding warrants, citations or even dismissed cases where there was no conviction. This check will also inform you if the applicant is on any kind of official list, such as the registered sex offender list.
A criminal background check tells you if the applicant is or was a criminal. You can then use this as a piece of the puzzle to form your overall picture of the applicant.
The credit check will reveal how well the applicant manages their finances. You can purchase a credit check that gives you just a credit score, or you can get a deeper credit check that gives details about payment histories, charge-offs, bankruptcies, etc.
The criminal background check and credit check are the two most commonly used tenant screening tools used. However, there are less formal tenant screening strategies to consider.
Additional Tenant Screening Strategies
Keeping in mind the role of the tenant in caring for your property investment and respecting the neighborhood culture, here are some additional screening strategies to consider using in order to ensure a successful tenant fit.
Call the Former Landlord(s) – Take a few minutes to call the previous landlord(s) about the applicant’s history there. You can only legally ask certain questions, but those questions are sufficient. You may be able to ask:
– Did the tenant pay the rent on time each month?
– Did the tenant get their deposit back?
– What was the rent?
– Would you rent to them again?
– Was the tenant responsive to communications?
– Was there any trouble with the tenancy?
View the Applicant’s Car – You can get a pretty good idea of how well your applicant would take care of your property by how well they take care of their car. The car doesn’t have to be a late model, but ideally it’s in good repair and clean.
Consider How They Present Themselves – Did the applicant dress for the interview in an appropriate manner? They don’t need to dress like it’s a job interview, but apparel shouldn’t be at the other extreme, either. This conveys their respect for you and the process.
These are all things that your property manager takes care of with MartelTurnkey properties. Our property manager teams vet all tenants for a minimum income that’s three times the rent, are currently employed, and have had no prior convictions or evictions.
How Not to Screen
It’s unfair and illegal to screen tenants on the basis of sex, race, religious beliefs, physical or mental handicaps, nationality or familial status. Everyone deserves to seek and find appropriate and affordable housing. Never let personal or perceived prejudices cloud your judgment when screening tenants. Doing so not only makes you vulnerable to legal ramifications; it also may prevent you from getting a quality tenant who could have taken excellent care of your turnkey rental property for many years.
Think Outside the Box
Finally, don’t automatically exclude tenants that don’t fit in the standard box of what you think is the ideal tenant. For example, many people these days don’t have W-2 income. Be willing to accept proof of income from alternative sources like private wealth, Paypal or other “gig” income sources.
Many landlords do quite well with Section 8 tenants. refusing to consider this segment of the population may mean missing out on regular, guaranteed subsidized rental income.
The credit score is helpful but it doesn’t tell the whole story. Ironically, those with lower scores are more likely to renew leases from year to year. Those with higher scores are more likely to leave to buy their own homes, and you could be looking at more vacancies in between lease terms.
Also, some people have trouble paying credit card debt due to medical or other issues, but they always make sure to pay their rent on time. This is why you should always check with former landlords.
Finally, don’t automatically exclude applicants with low hourly pay jobs. A big giant salary isn’t always necessary to live on. If your rent is within their means, an hourly job could work out just fine. It’s more important to calculate the income to rent ratio at either 4:1 or 3:1 to estimate affordability for your rental.
As you can see, it’s crucial to consider everything the prospective tenant is responsible for, and to obtain enough information to get a big picture of their suitability as your future tenant.
You don’t have to do any of this when you buy a MartelTurnkey rental property with one of our property management teams already in place. Our property management teams take care of all landlord issues, from screening tenants to fixing screens! MartelTurnkey properties are true passive income opportunities. To browse available MartelTurnkey rental properties, click here.