I have repeatedly stated in many of my posts that a vacant property is only the second-worst thing a landlord can experience. And the first?
The first is undoubtedly having the wrong type of tenant in your property. A good property will get occupied tomorrow or the day after but a terrible tenant has everlasting effects.
TransUnion SmartMove has data that states that the cost of evicting a bad tenant average to $3,500USD + all the non-monetary costs of your time and energy to go through all the necessary procedures.
Today, in this post; we put prospective tenants in the hot seat of effective tenant screening to give landlords the tenants they deserve.
What is tenant screening?
Tenant screening is a process or period whereby landlords or property managers evaluate a potential tenant. The focus of screening is to determine how viable a tenant is; concerning satisfying lease agreement terms and rules on the property and for the landlord.
Tenant screening ends with a decision from the landlord or property manager on whether or not the applying tenant can enter a lease agreement with the landlord.
Tenants or meet the required screening threshold are approved and those who don’t; are not.
What does a tenant screening show?
For the Landlord, screening should cover the following 5 categories of tenant information to be all-encompassing
- Basic Personal Details.
- Current Personal living details.
- Previous Rental History (If previously a tenant).
- Personal Finance Details.
- Property Integration Details.
An effective tenant screening procedure is designed to respectfully explore aspects of an individual’s personal life and lifestyle that would directly affect a landlord and the law under the following perspectives:
The perspective of a landlord is that they are a business owner and the prospective tenant is both a customer in that they pay for a functional product (agreed living environment in the home) – and an employee in that they must keep to standard when it concerns how they live and treat the home.
If the tenant cannot meet the duties and responsibilities needed as an “employee” they will not be “hired” – accepted as a tenant and if the landlord cannot meet the expectations as a “business” the tenant will not move into the property.
The law perspective holds the tenant and landlord accountable to a basic standard of operating and interacting with themselves and with the state. Any corners cut concerning the law can result in serious legal ramifications for both the tenant and the landlord.
This post will focus on screening for the benefit of the landlord for ensuring a tenants’ ability to uphold tenancy duties and responsibilities within the law.
As important as it is for a landlord to screen a tenant, the tenant’s must be aware that the landlord also has responsibilities and duties that they owe the tenant. A tenant must equally learn to effectively screen landlords and properties. You can learn a lot from my post on landlord screening (HERE).
1. Basic Tenant Details.
These details aren’t necessarily the most influential when it comes to a landlord deciding on whether or not to allow a tenant to accommodate their property; the details here are more important for informing the tenant on who they are.
- Full Name
- Date Of Birth
- Contact details (phone and email)
- Marital details (family dynamic; single, married, married with kids, etc)
Date Of Birth and Identification will likely be the most important details of information for a landlord as the age and the citizenship of the tenant can have attached legal and business considerations.
2. Current Tenant Living Details.
These details are important for analyzing how long the tenant will likely remain in the rental property if given tenancy. They are also important to realize how the landlord will have to proceed in evaluating the tenant due to their circumstance.
A tenant who’s renting after living in a home they owned will need to be evaluated differently from a tenant who wants to move into a landlords’ property from another rental property and from one who was couch surfing or is flying the nest that is their parent’s home.
- Where is the tenant currently living?
The address of the property.
- How long have they lived there?
Typically, if a tenant has been living in a non-rental property (parents, couch surfing, home-owning) for less than a year, it is ideal to ask these questions again for the previous places they were staying before their current accommodation.
- Tenants’ relationship with their current living arrangements.
Did they own the property, was it a rental property, free or paid couch surfing from friends and family, parent’s household or they were living in a home that they previously owned.
- Tenants’ reason for vacating?
A potentially crucial factor when screening a tenant. Reliable verification of this reason could unveil behavior that could potentially make a prospective tenant not viable; say if they were kicked out for property damage, not paying rent or not having a job (mum and dad).
2. Previous Rental History (If the applicant was a tenant)
These details will only apply and become useful for a landlord when the prospective tenant has reliably established that they are currently moving from another landlord’s rental property to this current rental property.
As a landlord, there is no greater and more important referral than that of the 2nd last (or older) landlord of the prospective tenant. Unlike the tenants’ current landlord, any older landlords are unlikely to have any biases or agendas over the tenant.
The current landlord may not want the tenant to move and give false-positive referrals or might want to make a problematic tenant your problem and give you false positive referrals – Petty? Yes. Likely? Also yes.
Despite that, prior landlords have indispensable firsthand experience with the tenant which gives you vital information over whether or not to accept the tenant into a lease agreement.
Landlords should ask tenants who are coming out of another renting arrangement for the following information.
- The name of their current and previous landlords (Up to 3 landlords back).
- Addresses of each mentioned tenancy residences.
Having the address of the property is crucial to giving you the option to verify that the tenant has given you the details of the prior landlords’ and not the contact number of their friend who will vouch for them – Also likely.
- Reason for vacating each property.
This is in the tenants’ opinion; which you should compare to the opinion of the previous landlords.
Sometimes the tenant will be coming out of a particularly “bad break-up” with their current landlord and both parties are giving conflicting “finger-pointing” reasons as to why the tenant is leaving.
In such a case, it becomes far more important to have access to previous landlords who will be able to vouch whether or not the tenant is problematic or viable.
- The contact number of each landlord.
You should always contact the tenants’ current landlord to just see if they can reveal some information that will help you as a landlord to make a decision.
I rest by my statement that contacting the 2nd last landlord + will likely give you a truer representation of the tenant but any landlord is better than no landlord.
Just try running a small background check on the landlord to make sure that you’re not talking to the tenant’s best friend.
- Rent paid at each of the previous tenancy.
The only situation concerning rental history whereby the most recent landlord gives you more useful information than that of older landlords.
Coupling the rental period in the current tenancy arrangement + the reason for vacating the current property + the rent paid in that tenancy arrangement = the potential viability that the tenant can pay the current rent price.
*The above equation is more a supplementary tool to use with proof of finances (more detailed below) than a sure-fire way to make sure the tenant can pay the tenant rent.
4. Tenant Financial Details.
Arguably one of; or the most important information needed by a landlord to approve a tenants’ tenancy proposal. After all, you can’t approve a tenant who can’t pay rent – being a landlord is a business, not a charity.
The following are key details to screen when it concerns a tenants’ financials.
- Company details (Name and address).
- Company contact details (Name, position contact).
- Period of employment (start date to end date).
If the tenant has been working or has worked at their most recent job for under a year, a landlord may consider asking for the employment history information on their previous longer lasting job.
Unless the tenant is a freelancer of some sort, the most recent long-lasting occupation will allow for more a knowledgeable assumption of w tenants; ability to sustain their salary and pay rent.
- Monthly Net Salary (Aka proof of funds).
The most effective means for this is through bank statements for a period of about 8 months+. This allows a landlord to make a trend of the spending habits of the tenant for a more accurate representation of their rent-paying ability.
Just because a prospective tenant works somewhere prestigious, does not mean they can handle their expenses well enough during the month to pay rent on time.
Monthly bank statements show you how much leverage (buffering income) a tenant has to spare. The more income they have that isn’t being used by the end of the month – the more likely they are to be able to pay rent consistently.
- Other sources of income details (Sources and monthly net income from sources).
Just because a tenant doesn’t have a conventional job doesn’t mean they aren’t tenancy worthy; it just means you have to look at their finances with a keener eye for details. The same founding factors of wanting bank details to checking income consistency and money management still apply.
The main critical factors that specifically apply for freelancers and entrepreneurs ensuring income stability and that they have a good nest egg if something happens to them
You can learn more about what you should do and what you can expect when your tenant doesn’t have a conventional job or has just lost their job (HERE).
- + the same details for the spouse.
If a prospective tenant is married, knowing the financial details of the tenants’ spouse is important. This information helps a landlord establish the risk of the tenancy from the partners – if both partners are working, there is a lower risk that an unforeseen problem would lead to the tenants being unable to pay their rent.
- + the same details for the guarantor.
A guarantor is a failsafe who is liable to pay the landlord rent if a tenant is unable to make their monthly payment. They are usually only critical for when a landlord is discussing tenancy with an individual who has no prior rental history or a borderline dangerous financial history.
If you are renting to students, guarantors are vital in avoiding potential payment hiccups down the line.
5. Property Integration Details
These details are concerned with a tenants’ lifestyle decisions and choices that potentially pose an avoidable risk to the landlord’s property.
By law, these details may not be discriminatory and must focus on protecting the landlords’ property and not their personal biases.
Tenant’s can be discriminated by the following:
- Sexual orientation.
- Health needs (Disability, service dogs, etc).
Tenant’s can be asked the following for property concerns
- Pets (types and training).
- Lifestyle choices (drugs, smoking and drinking habits).
- Work behavior and requirements (movement in and out of the property).
- Guest expectations.
- Prior convictions (Not arrests).
Who should screen tenants? – Can you screen a tenant by yourself?
Tenancy screening can be done by any relevant party in the lease agreement from the landlords’ perspective. The landlord himself, property managers or online screening services are all an option.
Depending on how the landlord values specific information and wants to guarantee its authenticity, landlords are permitted to hire a verified tenant screening company to undertake a background check.
A background check is a legal ordeal involving both parties which requires a set procedure to be followed by the landlord to enact. The background check is the most thorough and authentic representation of a tenant and should be used if tenants need to be certain about specific details such as for conviction records.
As I have done here for tenant screening, I have posted an extensive rundown of everything you need to know about running background checks (HERE).
Conclusion – Why should you Screen tenants?
As a landlord, tenant screening is the most important action in ensuring that you give your business the best advantage to earn you a great stress-free income.
Take note of the above and be sure to apply it when you’re next looking for a tenant.