Every landlord dreams of finding the best possible tenants. However, this is one of the hardest things to accomplish, simply because many landlords don’t go through the trouble of screening potential tenants. Are you one of them?
Even though you may have committed the same mistake in the past, there’s still hope for you. The fact that you’re reading this means that you’re looking for information on how to do a background check on a tenant – and that’s a very good start!
Why Do a Background Check?
There are several reasons why you shouldn’t even think about skipping this step.
- It will give you an idea on how likely they are to pay rent on time. A thorough background check will give you a clear picture of what type of person you’re dealing with, since it will provide crucial information about their employment, credit, and legal history as well as their relationships with their previous landlords.
- It significantly reduces tenant turnover. Having a rigorous screening process in place will attract tenants who better meet your criteria and are more likely to stay longer.
- It can protect you from certain liabilities. As a landlord, you are responsible for ensuring that your tenants won’t put you or anyone else in your building and community at risk.
- It can protect you from running a loss. Nobody wants bad tenants. By doing a background check, you can protect yourself from ending up with renters who don’t pay, damage your property, or engage in any illegal activities. It can also save you from renters who are habitual complainers, allow extended guests, or regularly sublet the property.
Without the necessary information, you wouldn’t know if you’re making the right decision. Would you risk running a loss or putting anyone at risk due to lack of information? It wouldn’t be wise, right? With knowledge comes power, so do yourself a favor by running a background check on potential renters.
How to Do a Background Check: A Step-by-Step Guide
Since background checks are a landlord’s best friend, you might want to know how it works. What information do you need and how do you go about it? Here’s what you need to know to successfully screen potential renters.
(Note: This can vary depend on local and state laws. Please review the legal regulations where your business operates to know what you can ask in your area.)
- Pre-screen applicants. Since a background check will cost you some money, it’s best to do some sort of pre-screening to eliminate unworthy candidates early on in the process. Ask applicants a set of questions to determine if they are a fit for your rental property. You can ask them about their expected move-in dates, how many people will be living in the household, and if they have pets. You should also ask them about their rental history (e.g., were they in good terms with their previous landlords, have they broken a rental agreement or got evicted, etc.) to see if it raises any red flags.
- Gather information. Ask applicants to complete a rental application detailing their personal information, current income, employment history, names and addresses of their landlords (current and previous), and banking and credit references.
- Ask permission to conduct a credit check. In compliance with the Fair Credit Reporting Act (FCRA), you need to secure a written permission from the applicant before obtaining their credit report. Aside from assessing the applicant’s financial capability to pay their rent, the credit report will also provide information about foreclosures, bankruptcies, and evictions.
- Do a background check. The FCRA explicitly requires landlords to use an approved Consumer Rating Agency (CRA) for obtaining a background check on potential renters. Doing a thorough background check is crucial, since it will uncover the applicant’s credit, eviction, and criminal history and will allow you to decide if they are a perfect fit for your rental property.
- Conduct reference checks. After pulling a background check using one of the many verified tenant screening services for landlords, start doing some reference checks. Let’s face it: The background check usually won’t provide the whole picture, so get on the phone and contact the applicant’s employer, previous landlords, and personal references. Cross-check the information they provided and get to know them as a person before coming to a decision.
- Review and analyze information. Using all the information you have at hand, assess whether the applicant makes the cut or not. To come up with a more informed decision, pay particular attention to the applicant’s rent-to-income ratio (rent should be 30% or less of the total income), credit score (600 or higher), and rental history.
- Respond to applicants. Inform the applicants of your decision. If you decided not to accept them, tell them the reason why. To avoid complaints for illegal discrimination, make sure they are aware of your screening criteria.
Doing a background check on potential tenants may be an extremely sensitive job, but you absolutely need to get it done if you want to avoid unnecessary headaches. No landlord would ever welcome the thought of experiencing late payments or non-payment and property damage or wants to go through a lengthy and complicated eviction process, so knowing how to do a background check on tenants will go a long, long way in ensuring your business success.
However, some landlords may feel completely overwhelmed with the task at hand. After all, your cash flow and the fate of the business may largely depend on the information provided within the pages of the report. To complicate matters, not everyone knows how to do a thorough background check.
If you don’t know what to do or where to start or don’t have the time to do everything by yourself, you’ll be better off hiring a highly qualified tenant screening services for landlords. While you can do this on your own, you can have the assurance that you’re getting the best background check for landlords and are not missing anything if you have a competent property manager by your side.
And that’s where Tenant Planet, Inc. comes in.
Hiring a Property Manager? It’s About Time!
While it is undoubtedly a highly rewarding endeavor, managing a rental property entails full-time commitment. Aside from overseeing the day-to-day operations, maintaining the books, and making sure that everything is in accordance with the existing laws, you also need to choose the best possible tenants. After all, that’s what your success hinges upon. And you can only do it if you have properly screened them prior to signing the rental agreement.
That’s why you need to team up with a credible and highly committed property manager like Tenant Planet, Inc.
At Tenant Planet, Inc., we can help you run the business smoothly and protect you from all the headaches that come with it. Interested in what we have to offer? We’d love to connect with you and bring effective solutions to further improve the way you handle your business so please feel free to Request a Proposal. Or if you just have questions or comments, email us at parker@tenantplanet.com.