Tenant Screening 101: How to get good renters

Real estate, Money

The best way to find a good tenant is to retain the good tenant you already have. But you can’t always control how long a good tenant stays. So when you do lose one, here are a few useful best practices for tenant screening you can employ to find your next quality renter.

1) Create a Game Plan

Before you do anything, create a game plan for your property. This will force yourself to answer some key questions about your expectations and what kind of tenant you want.

  • How much rent can I charge? Price the property according to market value. Start a little bit higher; you can always negotiate down.
  • How much rent SHOULD I charge? Sometimes getting the most rent money out of a property actually costs you more in the long run. Good/long term tenants may not be able to afford rent increases.
  • What is the vacancy rate of the market? Knowing how tight the rental market is gives you an idea of how long it will take to find a good tenant, and how picky you can be.
  • What are the legal regulations around tenant screening in my region? Make sure you know what you can and cannot ask a potential tenant based on where you live, otherwise you could end up opening yourself up to legal liability.

Another hint: Don’t rush. Set a reasonable timeline where you are not pressured to accept the first tenant that applies. Many landlords want to minimize vacancy time and not lose the rental income. This kind of pressure only leads to brash tenant decisions. Remember: one month without rent is almost always better than a bad tenant.

2) Screen with Your Ad

The way you write your listing can make the difference between a good and bad tenant. Professional tenants are attracted to certain keywords like “Urgent” or “ASAP” and are able to identify inexperienced landlords by how they post their rental property.

  • Take Good Photos Clear, well-lit photos that show what the property is really like will save you time by helping tenants determine if the property is the right fit without having to view the property in person. Good photos also send a signal to tenants that the property is well cared for, and the landlord is professional.
  • Be Accurate and Upfront Let the tenant know if the property has a few quirks. You don’t want to land a tenant just to have them move out because something isn’t as described.
  • Use Professional Language Come across as a pro, even if this is your first rental property. Don’t include your life story in the ad. All they need to understand is that the property is available and you want to rent it out.
  • Explain Your Expectations for the Application Process Tell the tenant upfront you will be screening them (pulling a credit report, background check & letter of employment etc). This will stop most bad tenants in their tracks.
  • Don’t Negotiate in the Ad Set your price and stick to it. There will be a time to negotiate the price of rent or the inclusion of utilities but that time is not before you’ve met the tenant in person.

3) Screen Through a Phone Interview

When a tenant expresses interest in your ad, have them call you or set up a time for you to call them.

Before the call, make a list of key questions you want to ask. Try to get the tenant to talk about themselves. Bad tenants are more likely to oversell themselves with false information that you can’t verify later on. This helps you spot the red flags when you meet them and review their application information.

Other important tips:

  • Steer the Conversation – Make sure you don’t get off track during the call. Learn who the tenant is and to get them to reveal as much about themselves as possible.
  • Explain Your Expectations – Being direct with what is required will scare many of the high risk tenants off before they apply.
  • Don’t Negotiate Over the Phone – You’ll be able to negotiate after you know that the tenant is someone you want to rent to.
  • Let Them Do the Talking – Keep the focus on them. It’s time for you to gather intelligence on the tenant before you meet them in person.

4) Strategies for the Viewing

If possible, the best strategy with setting up viewings is to host an open house on a weeknight so that you can compare all the potential tenants at the same time. If your city has a high vacancy rate, then you probably need to be more flexible.

More viewing tips:

  • Don’t Sell, Don’t Negotiate – Let the tenant decide if the property is right for them. Answer their questions, but don’t force a sale and don’t negotiate. If they ask about price flexibility feel free to simply say “I’m willing to discuss negotiating terms for the right tenant.”
  • Ask Questions, Be Nosy – While the tenant is walking around the property, casually ask them about themselves, their work, roommates, how they plan to pay rent, etc. Get a sense of who they are and let them explain anything that doesn’t make sense to you.
  • Keep an Open Mind – Your gut is important, but be aware that your biases can lead to bad tenant decisions. Good tenants come in all ages, colors, shapes, and sizes. Don’t let your personal bias rule your business decisions.

5) Use a Great Rental Application

Make sure you’re not breaking any laws by asking questions that are considered illegal. Consult with an attorney or a professional property manager before risking a Fair Housing complaint.

Let the tenant know that you require them to complete the full application, this means no blanks if you’re still using a paper form. Online application forms like Naborly’s requires tenants to fill out all fields or note N/A to make sure their application is Fair Housing compliant.

6) The Screening Process

Your best plan may be to use a professional screening service to analyze the information the tenant provides. But if you decide to screen them yourself, here are some tips.

  • Establish a Screening Process and Stick to it – Your excitement about getting tenants is understandable, but be diligent through the whole process. Just because you like someone doesn’t mean you can skip their credit check, or proof of income documents.
  • Verify, Verify, Verify – The simplest place to start is to ask for government issue ID and a supporting piece of Identification.
  • Ignore Personal References – While references can help make a case for a tenant, your real goal should be to find why you should not rent to them. Come to your own conclusion based on the data, not on the opinion of someone you don’t know.
  • Trust Your Gut / Sleep On It – If something bothers you even a little bit, trust your gut. Sleep on the decision, and if you still are concerned the next day then reconsider renting to that tenant.

7) The Lease

Once you have someone you want to rent to, the final step is signing the lease—and if necessary, a bit of negotiating. The lease is designed to protect you and the tenant, but you can use it to mitigate some of the risk you haven’t been able to remove during your screening process, like unplanned property damage or unpaid rent. Other things to know:

  • Use a Professional – The lease is an important contract between you and your tenant and you want to make sure it’s well written and legally binding. It’s likely worth paying a little and having a paralegal or lawyer do it right.
  • Ask for Deposits – If you are legally allowed to ask for deposits, make sure you do it. Whether you ask for first and last month, or first month and a damage deposit, it will help mitigate risk. You might also want to consider creating a separate pet policy for your rental.
  • Require Renters Insurance – Make sure the tenant has an insurance policy in place protecting you from their actions, property damage, or any liability issues that may arise during the term of the lease. Have them provide you with proof of insurance, and ensure that the policy is being paid every few months.

Sorting out the bad tenants can be complicated. Try to keep your bias in check and follow a strict process for everyone. Don’t skip steps because of a good feeling or because you like one applicant more than the others. Do your due diligence, trust you gut, and take your time.