There are many things you have to always keep in mind when you get into real-estate investing. One of the most important things is that an empty property is always a loss. Maintaining occupancy is paramount. Key in the effort to maintain occupancy, is getting the right tenants. To do that, you must implement an accurate, thorough screening process into your business’ best practices.
The value of properly screening potential tenants is immeasurable. It’s not simply a measure to keep out riff-raff. Doing your due diligence to screen a prospective resident can make or break you in the rental industry for several reasons. Some of which are:
- Credit: Life happens and people’s credit score may fluctuate. But, there’s no getting around the fact that a low credit score, and/or an unstable credit history demonstrates a likely inability to stay current with rent payments.
- Criminal History: Again, life happens and some even advise to disallow even the smallest offense. Here is where you can have built-in protocols for what to allow and disallow. But, for the safety of your other tenants and the surrounding neighborhood, a criminal background check is a must. At least evaluate whom to lease to, with a criminal history, on a case by case basis.
- Consistency: Rental history is an absolute must. NO EXCEPTIONS! We’ve said once or twice in this article, but it bears repeating…life happens. Tenants lived somewhere before considering your property. Life. What should be of concern to you and looked into further is how many places they’ve lived and their rate of turn over. They could have excellent credit, and background is pure as the driven snow but every year—or even worse, shorter than a normal term of lease—they change addresses. Now, they could have valid reasons for every move they’ve made, but their reasons are not as important as the frequency with which life happened to them. In other words, if consistent long-term occupancy is your goal, then a prospective tenant that will be gone after one lease term is not the optimal candidate.
If you are new to investing, many things that we advise of, if not learned before you buy your property, will be learned over time. There are apps and software you can buy to aid in your screening of tenants. There are also companies, online or brick and mortar, which you can hire. Until you are up to speed with the ins and outs of rental property investing, a good rule of thumb is to ask those in the know. In this instance, that would be a realtor that specializes in property management.
