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Tenant Screening: Finding the Perfect Renter

Oct 20 2016

In this guide, you’ll learn how to qualify every prospective renter who contacts you by eliminating unqualified and problem tenants early in the application process through proper tenant screening. You may feel like you don’t have the time to screen every renter carefully — after all, each day your rental is vacant, you are losing money — but tenant screening is one of the most critical aspects of the leasing process. Lead qualification will help you weed out poor tenants, leaving you with responsible, long-term renters at your property. Here are several steps landlords should take to find the best tenants.

Step 1: Prequalify tenants over the phone

Hearing the phone ring or receiving a notification in your inbox is an exhilarating feeling. That means people are interested in your rental, but don’t immediately invite prospective tenants to a showing — the tenant screening process starts here. You don’t want to waste your time on people who aren’t serious or aren’t qualified for your property.

Frame your questions carefully

The way you ask questions can dramatically affect the way renters answer them. If you say, “This unit only fits two people. How many people will be living here?” it tells them exactly what you’re looking for, giving them the opportunity to be dishonest. Instead, ask, “How many people are looking to move with you?” to get them to disclose their information first.

Not qualified for this property?

Wait! If a prospective renter doesn’t fit the property they’ve inquired about, you may have a unit later on that will be a better fit. Add every prospective tenant to a spreadsheet so you can track the progress of each rental application and compare qualifications. If you have more than a handful of rental properties, you will need a lead tracking system to stay organized and match prospective tenants to available properties that fit their needs.

Invite prescreened renters to the showing

After filling out the prequalification sheet for everyone who’s expressed interest, you should be left with the most serious prospects. Invite them to take a tour of the apartment or rental property.

Step 2: Show the property

Don’t skip this step, no matter how perfect prospective tenants sound during the prequalification. Put a face to the name and meet your renter. After your renter signs the lease, you’ll have many interactions with them during their tenancy, so it’s important to get a feel for their personality. A good landlord-tenant relationship can go a long way toward reducing problems at your rental property.

Add social pressure

Rather than invite prospective tenants to individual showings, host a rental open house. Attendees will realize that that they’re competing for the unit, which in turn will increase their interest and create a sense of urgency to move through the application process faster than the other prospects.

Keep track of these attendees in your spreadsheet.

Step 3: Accept and analyze applications

While you may have a good — or bad —feeling about an applicant, going with your gut instinct won’t protect you in court if you’re facing discrimination accusations or evicting a tenant. Require all interested renters to fill out a rental application for your records. Look no further: Download our free, customizable rental application form!

Use the same criteria for all applicants

To avoid fair housing violations, remain objective and use the same application and requirements when screening renters. This will allow you to fairly compare prospective tenants and choose the best one based on hard facts.

Keep a paper trail

The applicant’s paperwork can help protect you against discrimination complaints. Although it is ultimately your choice as the landlord to decide who lives at your property, tenant selection must stay within the guidelines mandated by the federal Fair Housing Amendment Act. Also check your local and state discrimination laws for additional regulations. To minimize the risk of a fair housing violation, treat each applicant equally and hold on to the paperwork for at least two years. If you face a fair housing charge, your documentation can help support your case.

Check applications for disqualifying factors

Carefully read all the applications and check for any obvious disqualifying factors or inconsistencies. For example, if the applicant is currently unemployed and has no other income sources, that’s a red flag.

Be wary of false information

It’s not a criminal offense to lie on a rental application form. Some people give false information because they think landlords won’t double-check. Don’t assume application information is accurate until you’ve run credit and reference checks.

Step 4: Perform reference checks

Even though a rental application looks great, don’t stop your tenant screening process there. Dishonest people can still slip through the cracks during the application and prescreening process. Checking references will give you a more complete picture of your tenant’s financial and rental history.

Check LinkedIn for employers

Search for the applicant and their employer on LinkedIn. Their LinkedIn profile should match the employment history on their application. If they don’t have a LinkedIn profile, nearly everybody is found on Google. If the information you find online seems inconsistent or is nonexistent, keep this in mind as make your reference calls.

Carefully construct questions

Companies have various regulations on how much information they’re able to disclose about their employees, so just use employer phone calls to verify information on the application. For example, instead of asking, “How much does Thomas Baker earn?” ask, “Thomas Baker stated in his application that he earns $4,550 per month. Is this correct?” You’ll increase the likelihood of getting a response if it’s a yes or no question.

Be wary of impersonators

Landlords and employers can easily be impersonated. Carefully word your questions to make it possible to catch fakers off-guard. For example, don’t tell them what their role is by saying, “Hi, I’m a landlord doing reference checks on Thomas Baker and he listed you as his landlord. How was he as a tenant?” This will tell the person answering the phone that they’re supposed to be a previous landlord. Instead, ask questions such as, “Hi, I’m a landlord doing reference checks on Thomas Baker. How do you know him?” If you hear, “We met in college,” you’ll quickly detect a fraud.

Check for criminal and sex offender history

Unsurprisingly, landlords aren’t very keen on tenants with a conviction history or a record of sexual offense. While some credit checks will include criminal history, it may exclude certain convictions. Use a third-party site such as TransUnion’s SmartMove service to conduct a full criminal background check. Use a “Megan’s Law” database to see if the applicant is a convicted sex offender. Landlords may deny applicants for convictions of criminal offenses.

Step 5: Run a credit report

Honest applicants will be upfront about their poor financial history or bad credit, while other renters may try to avoid straight answers about their credit. Credit reports are an important part of tenant screening and can tell you a lot about a renter: payment history, bankruptcies and sometimes criminal convictions and previous evictions. Don’t trust anything until you see the numbers yourself in their credit report.

Perform a soft credit check

All three major credit rating agencies (Equifax, Experian and TransUnion) offer services that allow tenants to initiate a credit report that can be shared securely with a landlord. These soft checks will not ding a renter’s credit. Be wary of accepting a copy of a credit report directly from a prospective renter. Printed and digital copies can be altered. By using TransUnion’s SmartMove or Experian Connect you can feel certain that the information is accurate. After you enter your information, all you need to obtain a credit report through these services is the applicant’s name and email address.

Analyze the report

Once you get the report back, look for any history of poor payment history or a low credit score. Credit scores will tell you if the applicant makes credit payments on time or owes money, and also indicates the length of their credit history and the types of credits used. If your tenant doesn’t pay his credit card bills, he might not pay his rent either.

Get credentialed if you run reports often

To run a credit report yourself, you need to be credentialed to access sensitive information. Use a screening solutions company such as NTN Online to get started with obtaining your credentials. You may need a business license to prove that you are a professional in rentals.

Step 6: Make a decision

After reviewing the tenant’s application, checking references and reviewing their credit report, the applicant will either be signing a lease or receiving a rejection letter.

The rejection letter

Unqualified applicants — those with poor credit, insufficient income, negative references or a history of criminal offenses — should be turned away. According to the Fair Credit Reporting Act, which is a national regulation, landlords must provide prospective tenants with a letter informing them why they were not approved, what agency you used to process their credit report and information on how they can receive a copy of the credit report. If you had a good reason to turn them away, it will all be backed by documentation.

Lease or rental agreement signing

Congratulations! You have your next tenant. Review all the rules and regulations of your property with your new tenant to make sure they have a clear understanding of your expectations. It’s crucial for the tenant to have all of the funds for the security deposit and first month’s rent ready to hand to you before signing the rental commitment. Once you have received all payments, have tenants sign two copies of the lease and give them one copy for their records. To make it easier, consider using a digital lease.

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If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.

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