When preparing to rent out your property, there are several important steps to take, such as creating an application, finding suitable tenants, and finalizing a lease agreement. One crucial aspect of this process is screening potential tenants during the application stage.
In this informative article from Redfin, we will provide you with a detailed guide on how to effectively screen renters, starting from establishing application requirements to pre-screening tenants and verifying their information. Whether you are renting out a property in Austin or leasing a condo in Chicago, continue reading to learn how to effectively screen potential tenants.
1. Familiarize Yourself with Fair Housing Laws
Before screening any prospective tenants, it is essential to have a good understanding of Fair Housing laws. While you have the freedom to choose tenants that meet your criteria, it is crucial to adhere to local, state, and federal regulations. According to the Fair Housing Act, you cannot discriminate against tenants based on race, color, national origin, religion, sex, familial status, or disability.
Some states have additional protected classes and laws regarding housing discrimination. It is important to familiarize yourself with these laws to avoid inadvertently discriminating against potential tenants based on protected characteristics.
2. Establish Application Requirements
By setting clear application requirements, you can objectively assess potential tenants for your property. Here are some factors to consider when defining your qualifications.
Income
Setting income requirements is common practice to ensure that tenants can afford rent payments on time. Many landlords use a rent-to-income ratio to determine income thresholds for applicants. It is important to ensure that prospective tenants can comfortably cover rent expenses without stretching their budget too thin. Setting an income requirement that is disproportionate to the rental market may result in extended vacancy periods for your property.
Credit History and Score
Many landlords prefer tenants with a higher credit score, typically above 670. A higher credit score indicates a more reliable tenant who consistently pays bills on time. However, individuals with a lower credit score may still be qualified to rent your property. They may be in the process of building their credit or have outstanding debts, such as student loans.
You can review their credit history, ask clarifying questions, or request references if you are considering applicants with a lower credit score. Potential tenants may also have a positive rental history that demonstrates their ability to make timely payments, even with a lower credit score.
Previous Evictions
It is advisable to ask applicants to disclose any prior eviction history. If an eviction comes to light during the screening process, you can seek further information and contact previous landlords or property managers to understand the circumstances better.
Criminal History
Establish clear guidelines for evaluating criminal history. While certain convictions, like a DUI, may not warrant rejection, more serious offenses such as arson could be cause for concern. It is crucial to base any criteria for rejection on safety considerations and legal standards. Consulting with a legal professional can help clarify what constitutes a “dangerous criminal conviction” under the law.
3. Pre-Screen Potential Renters
Pre-screening renters involves providing essential information in the rental listing to help applicants make informed decisions before applying. Some details to include:
- Monthly rent
- Security deposit
- Application fee
- Background check
- Credit report fee (if applicable)
- References from previous landlords
- Smoking policies
- Pet policies and pet rent
- Any additional rules
Providing comprehensive information allows tenants to self-assess their eligibility for your rental property. For example, if a tenant has multiple pets and your property does not allow pets, they are less likely to apply, saving both parties time and effort.
4. Develop an Application Form
Using a standardized application form for all applicants promotes fairness and consistency in the tenant screening process. The application should request information such as current address, employment history, previous landlords, references, income details, debt obligations, and pet ownership status. Utilizing a template or online form builder can streamline the process and ensure uniformity. This information is valuable in identifying qualified tenants and adhering to Fair Housing laws.
5. Conduct a Credit Check
Running a credit check goes beyond assessing an applicant’s credit score. It reveals bankruptcies, late payments, and other financial challenges that may impact their ability to fulfill rental obligations. Additionally, a credit check can verify personal information such as addresses, employers, and financial history. You may also request a credit reference for further insight. Depending on the credit report findings, you can consider alternative options like a co-signer or increased security deposit if financial concerns arise.
6. Perform a Background Check
Conducting a thorough background check on potential tenants is a critical step in the screening process. This check uncovers criminal records and public information that can influence your decision. While certain criminal convictions may justify rejection, it is essential to evaluate each case individually and ensure compliance with legal requirements. Assessing criminal history based on safety considerations is paramount, and legal guidance can help navigate complex situations.
7. Verify Additional Information
In addition to credit and background checks, verifying supplementary details such as W-2 forms, pay stubs, and employer references is essential. Contacting current or previous landlords can provide insights into an applicant’s rental history and payment behavior. Personal references listed on the application can offer further validation of the applicant’s character and reliability.
8. Interview Potential Tenants and Ask Questions
While not mandatory, meeting with potential tenants allows for a deeper understanding of their suitability for your rental property. However, certain questions are off-limits to avoid violating Fair Housing laws. Consider asking:
- What is your planned move-in date?
- What is the reason for your move?
- How long do you intend to stay?
- How many occupants will reside in the property?
- Do you have pets?
- Are you a smoker?
- Have you experienced any prior evictions?
- How many parking spaces do you require?
Meeting applicants in person or engaging in phone conversations allows them to inquire about the property and clarify any concerns they may have.
9. Select Suitable Tenants
After gathering information on prospective tenants, it is crucial to evaluate each applicant objectively. While this task may seem daunting, adhering to specific guidelines can simplify the process.
Refer to the established requirements to identify tenants who align with your criteria. Avoid making decisions based on subjective factors, as this can lead to legal complications. Consider leasing to the first qualified applicant to streamline the selection process. For instance, if multiple applicants meet the criteria, opt for a “first-come, first-served” approach.
Establishing clear screening guidelines aids in maintaining an objective process. While finding the ideal tenant may take time, following a structured approach can facilitate the tenant screening process.