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Tenant Screening Solutions: DIY vs. Hiring a Property Manager vs. Online Software
When it comes to choosing tenants, most landlords recognize the importance of screening potential renters before accepting them. If you don’t take your time determining whether or not the tenants are right for you, you risk having a bad situation that could result in a lengthy, expensive eviction battle. Gathering as much information as possible about your potential tenants can mean the difference between having a harmonious living situation and a tumultuous one. There are multiple different approaches that landlords can take when screening tenants. Understanding how the different tenant screening solutions work, the steps required to follow through with each, and the potential benefits that each can offer will allow you to choose the best option for your rental units. Here is a step-by-step guide to the three main forms of tenant screenings: Do-it-Yourself, Hiring a Property Manager, and Using Online Tenant Screening Software. Each has its costs and benefits.
Do-It-Yourself
Running your own tenant screening is definitely possible, but it just may take you a bit more time. Of course, this means it will likely turn out to save you some money in the long run. Just be sure you know what you’re doing (and the amount of responsibility you’re taking on) before diving into it yourself. To give yourself an idea, this quick guide will give you an overview of the different aspects of a typical tenant screening and the steps required to screen your tenants yourself. If you follow these steps, you’ll have found the right tenant for your unit in no time.
1) Personality/Soft Skills
The first thing you will want to do is evaluate the potential tenant based on your first impression. You will want a tenant that is respectful and polite. Make sure they are the kind of person you will want to or, at the very least, be willing to interact with on a regular basis. Although simply having a conversation with them when you show them around the unit can easily be the first step in your evaluation, it makes more sense to have the first “meeting” over phone or email. You can let them know your baseline standards for a tenant upfront (minimum income, must have a clean background/good references, etc.) so you don’t waste your time with any tenants that won’t qualify. If they meet those standards, allow them to see the unit. And when you do see them in person, pay attention to how punctual they are, and if their clothes and car are clean and well kempt. This may give some insight into how well they will take care of your unit, and how likely they are to take care of things like paying rent on time.
2) Rental Application
Here, you will ask the potential tenants for most of the information you will need. You’ll need their full name, their current address, contact information, birthdate, and their social security number. You’ll also want details on their employment history, their landlord history, and their legal history. Finally, ask for their signature authorizing the release of their information when you run a credit report and background check on them. All of this information will help you make an informed decision, and is important to keep on file for legal purposes.
3) Credit Report/Background Check
A credit report can give you a whole host of information. Outside of whether or not the potential tenant has filed for bankruptcy, it can let you know if they have been late on any past bills, including car and student loans. It can also tell you if they have ever been convicted of a crime, evicted, or involved in a lawsuit. What’s more, it allows you to look at their overall credit history. This allows you to see how long the potential tenants have been financially active, how positive their financial situation has been over the years, and provide income verification. In order to run a credit report check, you’ll have to ask for certain information from the potential tenant on their application. The check requires the tenant’s name, address, and Social Security number. You will have to make sure that the tenants know you are running a credit check, and they will have to authorize you to do so, especially because they will likely have to pay the fee for the credit report check.
4) Reference Checks/Recommendations
Finally, your potential tenant should supply you with a few references, most likely including former landlords or employers. You should follow up with them and see what they have to say about the tenant. And believe what they tell you. You don’t want to deal with a troublesome tenant if you don’t have to, and even people who make the best first impressions aren’t always fantastic. If everything else about them checks out, but they have poor references, still think twice about letting them into your rental unit. Everyone deserves a second chance, but taking these types of gambles with your business is a bad move.
Hire a Property Manager
After all that, if it just seems like too much work to run a tenant screening on your own, consider hiring a private property manager to help you run the requisite background checks and give out the proper applications to your potential tenants. This person will be sure that all of the information you are collecting will be accurate and sufficient to determine if they would be a high-quality tenant. If you have a large number of rental units, or have money to spare when it comes to running your business, this may be a good option for you. Consider speaking to other landlords to see if they use a property manager, and if so, who they use. It can also help to look at review websites such as Yelp in order to determine whether or not any particular property manager is worth paying for. Also, don’t be afraid to ask to meet with them prior to hiring them. They will be more than willing to answer any questions that you may have about their services.
Generally, people seem to be moving away from hiring property managers in favor of maintaining total autonomy over their rental units. Because property managers can take relatively large cuts from your rent (oftentimes to the tune of 10% a month), there is a significant amount of your income that is lost. If you would prefer to collect that rent and spend it elsewhere, you should avoid hiring a property manager. If the security you feel from knowing that your finances are in order is worth the 10% cut, then hiring a property manager may be for you.
Using Online Tenant Screening Software
Online Tenant Screening Software, like the Rentalutions offers, gives you the best of both worlds. Less expensive than hiring a property manager, it still gives you some good guidance that can help you to effectively screen your tenants. It is easier than going it alone, but still helps you maintain your independence. For a small fee, plus having your potential tenants pay for their own background checks, you can take care of everything at once. It helps to make sure that everything was done thoroughly and completely. You’ll want to be sure to have all of the important information before deciding whether or not to accept a potential tenant, and online software can help you to determine what is most important. Additionally, when you use an online service, all of the information will be kept in one place. The likelihood of misplacing documents goes way down, and electronic copies of all important documents will be available at all times.
What’s more, once your business has moved online and you’ve begun using tenant screening software, it’s easy to transition to other online solutions for everything from lease drafting and signing to rent collection. Your tenants will already understand the way your do business, and it may be easier to transition to those types of online solutions if your tenants are familiar with the platform.
The Bottom Line
At the end of the day, it’s up to you to decide which option is best for your business. Depending on if you value your time or your money more, or whether you hope to strike a balance between both of them, one option might be significantly better than another. Still be sure to weigh all of your options equally, and don’t be swayed too much by what you see in online forums or what was given as advice from friends both inside and outside of the business. What may be ideal for one person or situation may not be ideal for another.
