Tenant screening is one of the most crucial steps in ensuring a successful rental property experience. The right tenant can mean consistent rental income and fewer headaches, while the wrong one can lead to missed payments, property damage, and endless stress.
Should you handle tenant screening yourself, or is it time to outsource this critical task?
In this blog, we’ll explore what tenant screening entails, the benefits of professional tenant screening services, and how to decide what’s best for your property management strategy. So, keep reading to make sure you’re taking the proper steps to fill your rental property with reliable tenants.
What Does Tenant Screening Involve?
Screening tenants isn’t just about running a credit check and hoping for the best. It’s a multi-step process designed to identify renters who are financially stable, responsible, and a good fit for your property. Let’s review what a thorough screening process typically includes.
1. Reviewing Rental Applications
A tenant's application is the first step in gathering critical information. This includes:
• Social Security numbers for running background checks
• Previous addresses to verify rental history
• Contact details for employers and prior landlords
By thoroughly reviewing this information, you can identify potential red flags early, such as inconsistent work histories, unexplained gaps in rental history, or incomplete fields.
Additionally, a well-crafted application helps ensure that you’re collecting uniform data across all applicants, which is crucial for adhering to fair housing laws and maintaining a consistent screening process.
2. Conducting Credit Checks
A credit check offers a detailed look into an applicant's financial habits and reliability. Are they paying bills on time? Do they have excessive debt?
This step isn’t just about ensuring they have a good credit score; it’s about understanding their ability to handle financial obligations responsibly. For example, a high credit score might indicate a history of paying bills on time, while a low score could signal financial instability or a pattern of missed payments.
Reviewing the credit report also lets you see how much debt the applicant carries relative to their income. Higher debt levels, even for someone with a decent income, could mean financial strain, increasing the risk of missed rent payments.
However, remember that credit scores alone often don’t tell the whole story. It's important to look for patterns and context, such as recent job loss or medical expenses, that might explain a temporary dip in financial health.
3. Running Background Checks
Background checks are your first defense in protecting your property and community. A comprehensive background check goes beyond essential criminal records to include eviction histories, lawsuits, and even sex offender registries. This ensures you’re safeguarding your property and providing a safe environment for neighbors.
It's important that criminal records alone shouldn’t disqualify an applicant, either. Many states have laws about using this information, requiring you to assess the relevance and recency of any offenses. A professional property management company knows how to navigate these nuances while remaining compliant with the law.
4. Verifying Employment
Contacting employers to confirm income and job stability helps ensure the tenant can afford the rent. Reliable tenants typically earn at least three times the monthly rent, which can vary depending on local market conditions.
Is the tenant a long-term employee with a steady income, or do they have a history of short-term jobs or frequent job changes? While income stability isn’t the sole indicator of a good tenant, it can strongly predict their ability to meet financial obligations like rent payments.
5. Contacting Previous Landlords
A call to prior landlords can reveal whether the tenant has a history of late payments, property damage, or lease violations.
Did they pay rent on time? Did they leave the property in good condition? Were there any complaints from neighbors or lease violations? These are crucial questions to ask when vetting a prospective tenant.
However, not all landlord references are equal. Some landlords might be reluctant to share negative feedback, especially if they’re eager to see a problem tenant move on. Others might be overly harsh for personal reasons.
To navigate this, it’s helpful to ask specific, open-ended questions, such as: “How would you describe the tenant’s communication style?” or “Was their security deposit returned in full?” These questions provide deeper insights while reducing the risk of biased responses.
6. Evaluating Fit for Your Property
Beyond the numbers, a successful tenant screening process also considers how well a tenant's lifestyle and habits align with your property’s requirements. For example, an applicant with multiple pets might not be suitable for a property with strict no-pet policies, while a tenant who works odd hours could be a better fit for a single-family home rather than a shared rental space.
This step requires understanding your property’s unique requirements and how well an applicant aligns with them. It’s not about discriminating against certain groups or lifestyles but ensuring that the tenant and property are a good match.
A well-matched tenant is more likely to stay long-term, treat the property respectfully, and contribute to a positive rental experience for everyone involved.
Why Consider Outsourcing Tenant Screening?
While it may seem straightforward, tenant screening is a time-intensive process that requires attention to detail, legal compliance, and a strong understanding of potential red flags. Here are some compelling reasons to outsource this task to professionals.
1. Save Money on Screening Costs
Property managers often have access to bulk discounts for credit and background checks through industry memberships. This can significantly reduce the cost compared to running individual reports yourself.
2. Eliminate Emotional Decision-Making
Choosing a tenant is a business decision, but it’s easy to let emotions cloud your judgment. A professional property manager maintains objectivity, ensuring decisions are based on data and facts rather than personal feelings.
3. Avoid Personal Attachments
It’s natural to want to build relationships with tenants, especially if you’re personally involved in managing your property. However, this can sometimes lead to leniency, such as delaying rent collection or overlooking lease violations. A third party enforces rules without bias.
4. Spot Warning Signs of a Bad Tenant
Professional property managers know what to look for when screening tenants. They’re skilled at identifying tenant red flags, such as inconsistencies in rental history or questionable references that someone without experience could easily miss.
The Risks of DIY Tenant Screening
If you choose to handle tenant screening yourself, it’s essential to understand the potential risks involved.
Legal Compliance
Tenant screening must adhere to federal, state, and local fair housing laws. A small mistake such as asking the wrong question or rejecting an applicant for a legally protected reason can result in costly legal consequences.
Additionally, laws around what information you can use—such as criminal records or credit reports—vary by jurisdiction, making it easy to break a rule inadvertently. Failing to comply with these regulations doesn’t just risk fines; it can also harm your reputation as a landlord or property owner.
Professional property managers are well-versed in these laws and can help ensure every decision is legally sound and defensible.
Time Investment
Tenant screening isn’t just a one-and-done task—it’s a detailed, multi-step process that requires careful attention at every stage. Reviewing applications, contacting references, running credit checks, and verifying employment takes time. Therefore, each step can be more complex than it initially seems.
For instance, contacting employers and previous landlords often involves multiple follow-ups to get the necessary information. If you manage multiple properties or have a full-time job, finding the hours to dedicate to this process can be overwhelming.
Overlooking Key Details
Without the right tools or experience, it’s easy to miss crucial information, like an incomplete application or a misleading landlord reference.
For example, a potential tenant might list a friend as their “landlord” to cover up an eviction, or they might have recently moved multiple times, signaling instability. These details might not immediately stand out to someone without experience in tenant screening.
Property management professionals, however, have the training and resources to spot these issues quickly, ensuring you don’t end up with a problem tenant. Missing just one key warning sign could cost you far more in the long run, from lost rental income to potential property damage.
How Outsourcing Tenant Screening Works
When you hire a professional property management company, they handle every aspect of the tenant screening process, ensuring you get high-quality renters without the stress. Here’s what they typically do:
• Market Your Property Effectively: Attracting the right tenants
starts with a strong listing.
• Handle Applications: Property managers process
applications, ensuring every detail is verified.
• Run Comprehensive Checks: They use specialized software
and databases to run credit and background checks
efficiently.
• Verify Employment and References: A property manager’s
network and experience make these calls more effective.
• Recommend the Best Candidates: They provide top options
based on data, ensuring compliance with all laws.
By outsourcing tenant screening, you’re not just delegating a task—you’re leveraging the expertise and tools of professionals who can streamline the process, minimize risks, and ensure you secure the best possible renters for your property
Is Outsourcing Right for You?
To decide whether outsourcing tenant screening makes sense for your property, ask yourself these questions:
• Do I have the time and expertise to conduct thorough
screenings?
• Am I familiar with the legal requirements involved in tenant
selection?
• Have I ever made emotional decisions when choosing
renters?
• Do I know how to identify red flags in applications or
references?
If you answered "no" to any of these, outsourcing could save you time, money, and stress.
Find the Right Tenants With Professional Property Management
Tenant screening is the cornerstone of successful property management, but it doesn’t have to be a burden. By outsourcing this critical task, you can protect your investment, save time, and gain peace of mind.
Whether you manage one property or many, partnering with a professional property management company like Lucroy Residential ensures that your tenants are vetted thoroughly and your rental business thrives.
