Finding the perfect tenant can be a difficult task. Late rent, property damage, and unreliability make most landlords wonder if rentals were ever a good idea. Luckily, there are ways to prevent most tenant mistakes from ever happening.
Thorough tenant screening is the best way for a property manager to ensure they are renting to someone reliable. And yet, this vital step is frequently skipped entirely. When renting a property, these are five of the biggest mistakes that can lead to trouble.
1. Not running a thorough background check.
All too often, property managers are influenced by a hard-luck story. They meet a prospective tenant to show them the house, the tenant gives the manager a good spiel, and they rent the house because they feel sorry for them.
In reality, that should be a giant red flag. Run a background check for all tenants including a nationwide criminal search. If someone has committed theft, vandalism, or any kind of violent crime before, chances are they’ll do it again. It’s your job to make sure that doesn’t happen in one of your properties.
2. Compromising to fill a vacancy.
Your property has been vacant for quite a while. The mortgage payment is coming up. You’re starting to get anxious about that much needed income.
In this type of situation, a landlord might take the first tenant who “seems” reliable, without doing any checks. Don’t make that mistake. Putting an unreliable, potentially destructive, tenant in a property can cost a lot of time and money down the road, even if it seems like a good choice right now.
3. Failure to verify rental history.
Rental history will tell us where a tenant has been living for the past two years, and that’s huge asset for a property manager. One simple phone call to the building’s management company will tell the tale.
Do they owe their last landlord money? Did they lose their security deposit because they damaged the property? Did they pay rent on time? If someone had trouble paying $1500 for their previous apartment and your property is renting for $2000, that’s a big red flag.
No rental history tells another tale entirely. There are legitimate reasons why a person might not have had their name on a lease, but two adults who have been living with family is typically a red flag.
4. Not verifying employment history.
This is a crucial step because 99% of tenants will be using their employment to pay rent. The chances you’ll be renting to a trust-fund baby are pretty slim.
The employment history tells you a few important things:
- How long has the person had their current job? If it’s less than two years, ask where they were working before that. People with a shaky history will also try to fool you by telling you they are being transferred. Always ask for an official company letter to verify the transfer.
- How much money do they make? Do they make enough to cover rent? Generally, gross income should be three times the rent. That’s earned income, not including alimony, child support, or government aid.
- How far is their job from the rental property? This is especially important if a tenant is new to the area. A reminder that their job is 50 miles away from the property can avoid breaking the lease when they realize they hate the commute.
5. Failure to run a credit check.
A credit check will tell you everything you need to know about a prospective tenant. Are they up to date on all payments? Are they deep in credit card debt? Are their payments frequently late? A person might have an adequate income, but if they’re deep in credit card debt, they still might not be able to make the rent.
Bad credit also takes the power away from the property manager. If a tenant has a 500 credit score and doesn’t pay rent, why does he care if the landlord starts to enforce lease terms? They tenant has nothing to lose and the property manager has no leverage against him.
It all comes down to the tenant. Tenant turnover is costly. Tenant damage to your property is costly. Evictions are costly. And the only way you can choose the right tenant, and make your properties profitable, is with a thorough screening process.
