After you've posted your property online and found a few potential tenants, the next step is the screening process. The goal of your screening process should be to collect more information from the renter, evaluate, and narrow down all of your potential renters to find your ideal tenant.
The process of finding the perfect renter can seem daunting and time-consuming, but it doesn't have to be. As a property owner or property management company, you probably (and rightfully) fear renters' inability to pay the rent but it's not the only thing that you should be concerned with.
Comprehensive and effective screening of potential tenants means evaluating information about the renter and making an informed decision to rent or not to rent to them based on Fair Housing Laws and what's best for your business. It can also means eliminating a lot of potential headaches and possible problems before they occur.
The rental application process will include several documents including:
- A Rental Application
- A Credit Check
- A Background Check including criminal history and rental history
As a property manager or host, requiring a rental application provides you with information that will help you navigate the tenant screening process. The documents you ask for from potential renters will be used to help you decide which renters are the best fit for you and your property. These documents should be outlined in the description of your online post to let renters know what to expect when they decide to inquire about your rental unit.
The rental application for each new tenant should include:
- Tenant's full legal name
- Date of birth
- Social security number
- Number of other people living in the space
- Preferred move-in dates
- Eviction history, including a history of voluntarily broken leases
- A copy of the front and back of a government-issued identification card
- Smoking habits
- Any pets that will be living with them
- Income requirements and proof of employment or income: If you have an income requirement for monthly rent, this is the place to make sure renters know about that. Ideally, a renter's monthly income would be approximately 3x the amount of rent. For renters that are currently employed, this can mean providing a month's worth of paystubs to show monthly income. For renters who are moving for employment, an offer letter detailing the compensation of their position should be provided. Offer letters should include a tenant's position, income, and company name and contact information.
- Past 2-3 years of rental history and landlord references with contact information
Often, a credit check is included in the rental application process in order to make sure the potential tenant can pay for each month's rent.
Since there are a wide variety of available companies to perform this kind of service, make sure you choose one that is reputable since credit check information is highly confidential and sensitive. Processing the results can take anywhere from a few seconds to a few days, depending on the agency. Experian and Transunion both provide a service for potential tenants to purchase their own credit report and allow landlords or hosts the opportunity to view it.
Once you receive access to the credit check, you'll be able to see potential tenants' credit scores, credit history, late payments, unpaid accounts, bankruptcies, and debt. If you come across anything worrisome, ask the tenant about it. Credit reports sometimes have mistakes, and sometimes a well-qualified tenant might have a good reason for an alarming result. If you want to reject someone because of their credit, refer to the Fair Credit Reporting Act to make sure you follow the legal guidelines.
Financial health is not and should not be the only concern when searching for quality tenants. Potential tenants should also undergo a background check that will take a look into criminal history and criminal background at the state and federal level. A good background check will provide criminal records, eviction records, and public records that will track involvement in legal battles for potential tenants — a prospective tenant with a history of being sued for nonpayment may be one that you want to pass on.
Cozy's system for securing extensive and secure background checks is convenient and easy to use for hosts and renters alike.
Questions for Prospective Tenants
Your rental application will cover some major questions and provide important information. Once you've found potential tenants who meet your requirements from the rental application, it's time to take the process of screening tenants a step further. Websites like Kopa make this process easier by keeping everything online, but you can also have a 15-minute phone call with the renter. If you feel comfortable, video chatting is even better because you can see their face and better understand their personality (and potentially even see where they're living now).
So, now that you’ve got some prospects, it’s time to narrow down your selections by asking some key questions.
- Why are you moving? A new job, needing a larger place, or moving in with a partner are all very common reasons to move. If the tenant is moving because they’ve been evicted or had problems with their previous landlords, that may be a red flag.
- How long have you lived in your current residence? There are good reasons to move around, and maybe you’re only looking to fill a vacancy for a short time. However, if you’re looking for someone to stay for a while, you may want someone who doesn’t move every few months.
- How many people will be living in the property? The fewer people in your property, the less wear and tear you’ll have to deal with later. Additionally, most municipalities limit the number of people that can legally rent and/or reside in a property, so be aware of those laws.
- Do you have pets? How many? Are they housebroken? Allowing pets is a great way to widen your tenant pool and research shows that owners with pets are more likely to stay in a space longer, but they can also be destructive and the result of destruction may not be something you want to deal with. If you're okay with dogs, but cats are a no-go from you as a host, it would be helpful to know that prior to approving a potential renter. If you do accept pets, now would be a good time to remind the potential renter about any pet fees or pet rent.
- Can I contact your employer and/or previous landlords for references? A “no” to this question is a pretty sizable red flag. You should aim to speak to more than one former landlord to get a consistent picture of who your prospective tenant truly is. It is better to have a phone call with these references directly instead of accepting a letter from the tenant – letters can be forged.
- As a follow-up to an answer about eviction or broken leases on the rental application, why did you break a lease, or why were you evicted? Reliable tenants may break leases for good reasons. A job relocation and other unforeseen circumstances, for example. However, you want to know that your prospective tenant sees a lease as a serious contract that they are obligated to. If they've been evicted, let them explain. A medical or family emergency may have caused a particularly unfortunate situation that has no bearing on their financial situation today.
Things to Keep in Mind
Tenant qualifying standards must be the same for every single tenant who applies to fill your vacancy. Under the Federal Fair Housing Act, it is illegal to alter these requirements or have different requirements based on certain characteristics of potential tenants. Many other states have their own fair housing laws, so make sure you're aware of any additional specifications.
As a host or landlord, the Fair Housing Laws prevent you from selecting or declining prospective tenants based on the following protected classes:
- National Origin
- Familial Status
While it may seem like common sense to avoid discrimination based on these things, there are some questions you'll want to avoid in your interview process.
- "Where were you born?"
- "Do you have children?"
- "Have you ever been arrested?"
- "Do you need information about the church/temple/mosque nearby?
- "How old are you?"
- "Do you have a disability?"
While all of these questions, at first glance, may seem like easy "getting to know you" questions, they can also be seen as digging for discriminatory information. As a landlord, it's best to keep these questions away from potential tenants and, instead, allow them to volunteer personal information. Discrimination is not always obvious and can sometimes be hard to navigate. The U.S. Department of Housing and Urban Development (HUD) has a great compilation of everyday situations where discrimination based on protected classes can be seen and where you can learn more about what housing bias looks like.
There is only one exception to the Fair Housing Act — if you are screening a potential tenant who will be living in your home with you as a roommate or housemate, then questions and preferences regarding these protected classes are acceptable based on the Council vs Roommates.com case. Just beware that some of these questions may make people uncomfortable.
We know that finding good tenant for a rental property is a #1 concern: you want to find someone that will care about your investment property as much as you do. By creating a thorough application process and ensuring a space for open and honest communication and expectations, you won't have to worry about having to choose between good tenants or bad tenants; instead, because of your organization and property management savvy, you'll get to choose between good tenants and great tenants. If you'd like to save yourself time on this whole process, check out Naborly, which specializes in tenant screening.