When it comes to property investment, rental income is the lifeblood that keeps everything running smoothly. Rental income is what makes a property self-sufficient by covering the operating expenses, taxes, and outstanding debt. It’s also a source of passive income for the investor and, therefore, it needs to be protected.
The best way of securing rental income is by implementing a thorough screening process. Tenant screening can help you identify some of the best tenants in the rental market who will pay the rent on time. In addition, it ensures you find tenants that will take good care of your property for the duration of their stay.
We here at T.E. Johnson & Sons have prepared a guide on what you need to know for an effective screening process. We also discuss the criteria you can apply in tenant selection to get high-quality, reliable tenants.
How to Screen Tenants
Tenant screening is a process that helps you find out as much as possible about the person you’re dealing with. To do this effectively, you need to come up with a checklist for your ideal candidate.
You should also make sure that your screening process reflects your goals and helps you single out the best candidate. This is a candidate that you can trust to keep your rental up to shape between maintenance inspections.
Some of the attributes you may want to consider in your ideal tenant include:
• Being able to afford the rent
• Having a job and a stable income
• A responsible character
• No criminal record whatsoever
Finding candidates that meet these requirements is essential for success in your screening process. This, in turn, protects your income and helps to safeguard your property’s condition.
Pre-Screening Tenants for Better Results
This involves forming an opinion on the applicant upon initial contact. Pre-screening can help you find out early if the person is committed to living on the property. First impressions play a major role in this stage, and it can help you decide whether the applicant will make a good tenant.
Pre-screening may include:
• Listing down your tenant requirements
• Coming up with important questions for the initial contact
• Meeting the candidate in person
Listing down your requirements informs the applicants on who is a qualified tenant. This can save you some time by reducing the initial number of applications. Asking questions and having a face-to-face with the applicants will give you a sense of the person’s character and help you decide if they are a good fit.
Steps to Reviewing Tenancy Applications
As you prepare your rental application forms, you need to make sure you’re collecting the right information. A good rental application form should include:
• The applicant’s name and contact information
• Their current residence as well as the landlord’s name and contacts
• Their residential history and the previous landlords’ names and contacts
• Their current and previous employers, salaries, length of employment and references
• Consent for credit and background checks
The information collected at this stage will be used for verifications later on. However, you should start by reviewing the current incomes of the applicants. This will inform you on whether the applicant can afford to pay the rent each month.
The general rule is that the applicant’s income should be a minimum of three times as much as the rent. You can still accept an applicant who earns less depending on their circumstances.
Verification of Income and Employment
It is always important to verify the applicants’ employment information and their references. You need to find out if the person is being honest about their level of income. This can potentially save you a lot of trouble in the future.
Their employment history could also provide some insight on the individual’s character. The references should provide a consistent story about the applicant’s personality. If the information checks out, you can move on to the next phase.
Verification of their Residential History
Another important step you need to take is to reach out to the applicant’s former landlords. This will give you an idea on how the applicant behaves as a tenant. You’ll get to know whether the person pays their rent on time and if they caused any damage to the previous properties.
In addition, you can find out the reason why the person moved out of the premises. You may want to look out for applicants that had constant conflicts with their neighbors. Such tenants are likely to stir up trouble with your current tenants.
As you verify the person’s residential history, it is recommended that you first inquire on the available rental units. Applicants can sometimes provide false information and using this tactic will help you know whether the reference is genuine. False references are a red flag and can be a basis of disqualification.
Conducting a Credit Analysis and Background Checks
A credit check will provide you with insight on the person’s financial situation. The ideal credit score for an applicant is a minimum of 680. You should also look out for applicants with outstanding debt as this may affect their ability to pay rent.
A background check involves finding out relevant details on the applicant such as previous evictions and verifying their social security number. You may also check on any possible criminal history and run the person’s name against the national sex offenders list. This due diligence will help you facilitate a safe environment for your tenants.
How to Accept or Turn Down an Applicant
Once you’ve successfully completed these steps, you can now decide on whether or not to accept the rental application. You can make a phone call or send an email to communicate your decision.
However, if you’re declining an application, it is recommended that you send them an email. This can be used as proof in case of any legal proceedings.
When turning down an application, it is not necessary to state the reason for your decision. Yet, if you turn down an applicant, make sure the reasons are in line with the Fair Housing Laws. Some examples of acceptable reasons according to the law include their references, credit report, and income.
A thorough screening process can prove effective in protecting your income and safeguarding your property’s condition. The above steps can help you find your ideal tenant and make property ownership a smooth journey.
Here at T.E. Johnson & Sons, we can help you identify some of the best tenants in the Winston-Salem rental market. With our vast experience in property management, we can help maximize your rental income and maintain your property in peak condition. Get in touch with us today for more information.