As a landlord, your role involves safeguarding your most invaluable assets – your properties. It is imperative to go above and beyond to seek out responsible, honest, and financially secure individuals who can proficiently manage rental payments during the tenant selection process.
Establishing a comprehensive screening procedure is pivotal for successful landlords. Conducting thorough tenant screenings is a potent means to mitigate risks associated with property management, including late payments, non-payment, tenant evictions, and damages. If you are new to rental property ownership, you might wonder, "How can I perform a background check on potential tenants?" In this blog, we’ll discuss how to find tenants and screen them.
For a quick overview of the key steps involved in effective tenant screening, take a look at the infographic below.
Table of Contents
The Importance of Screening Tenants
Dealing with troublesome tenants can create issues with neighbouring renters and lead to expensive evictions if they fail to meet their rental obligations. Tenant horror stories are everywhere, and many of these unfortunate situations could have been prevented if landlords had conducted comprehensive upfront screening of rental applicants. While some landlords might rely on their gut instincts, these feelings often fail to predict a tenant's future behaviour accurately. For small landlords aiming to establish a sustainable and reliable passive income stream, it becomes crucial to develop a meticulous tenant screening process encompassing credit reports, criminal background checks, and eviction histories.
Landlords may be tempted to skip tenant screening to avoid vacancy, but it can lead to costly problems. A fast and efficient tenant screening service can help. Let’s have a look at some other reasons for screening tenants.
Get to Know Your Applicant’s Financial Situation
Landlords need a full credit report to make informed decisions. According to a SmartMove survey, 79% of landlords disagreed with overlooking the credit report and relying solely on the credit score.
Certain credit report items can be red flags for timely rent payments. A thorough credit report reveals outstanding debt, credit applications, and charged-off credit cards, helping landlords gauge the applicant's financial standing.
Some applicants, especially younger renters, may lack extensive credit history. In such cases, additional safeguards like requiring a co-signer can protect landlords' interests.
Check On-time Payment Reliability
According to a TransUnion survey, 84% of landlords worry about payment problems with new tenants. A full credit report sheds light on the likelihood of on-time payments. Landlords can review open and closed accounts, payment history, and tenant-related collections.
Judgments from lawsuits filed by landlords or collection agencies for unpaid rent or damages may indicate potential payment issues. Contacting previous landlords and employers helps confirm an applicant's track record of on-time rent payments and stable employment. Requesting pay stubs verifies stated income.
Protect Your Property & Neighbourhood
Ensure your screening includes a criminal background check. Checking an applicant's criminal history is vital, as some convictions may pose risks to the property or neighbourhood. Evaluate criminal hits on a case-by-case basis to avoid renting to applicants who could jeopardise safety.
Avoid Future Evictions
Evicting a tenant is a costly and time-consuming process. Knowing an applicant's past eviction history helps avoid future eviction issues. Eviction reports offer detailed information, including tenant judgments for possession and money, unlawful detainers, tenant judgments for rent, and failure to pay rent.
Peace of Mind
A consistent tenant screening process with credit, criminal record, and eviction reports enhances the likelihood of securing reliable tenants. A complete background picture empowers landlords to make better-informed leasing choices, fostering peace of mind. Choosing a service like Houst saves time, energy, and money, providing faster and more reliable results.
A consistent process, including online tenant screening and reference checks, improves the chance of finding responsible, long-term tenants for your property.
Understand & Comply With Fair Housing Laws
Knowing and complying with fair housing laws is important if you're a landlord or property manager. These laws protect tenants from discrimination based on race, colour, national origin, religion, sex, family status, or disability. Understanding and complying with these regulations can foster a fair and inclusive rental environment while avoiding legal troubles. Let’s have a look at fair housing laws and regulations that every landlord in the UK should know:
Key Provisions and Responsibilities
UK landlords must treat all potential tenants fairly and equally throughout the rental process. Discrimination based on personal characteristics is strictly prohibited from advertising the property to selecting tenants and managing the tenancy.
Landlords must ensure that all property advertisements and listings adhere to anti-discrimination laws. Focus on highlighting property features rather than emphasising the characteristics of prospective tenants.
Unbiased Tenant Selection
Tenant selection should be solely based on objective criteria, including rental history, creditworthiness, employment, and references. Avoid any discriminatory practices targeting or excluding specific individuals or groups.
Landlords have a responsibility to make reasonable adjustments to accommodate tenants with disabilities. This may include providing wheelchair ramps or permitting assistance animals, as long as these accommodations do not impose undue hardship.
Prevent Harassment and Retaliation
Tenants who assert their rights under fair housing laws, file complaints, or cooperate in investigations should not be harassed or retaliated against. It is important to maintain a respectful and harassment-free environment for all tenants.
Establish Clear Anti-Discrimination Policies
Create and implement comprehensive anti-discrimination policies that align with fair housing laws. Train property management staff and personnel on these principles, educating them on recognising and avoiding discriminatory practices. Regularly review and update policies to stay compliant with evolving laws.
Document and Keep Records
Detailed and accurate record-keeping is essential to demonstrate fair housing compliance. Maintain records of rental applications, correspondence, tenant selection criteria, and any reasonable accommodation requests received and granted. These records serve as vital evidence of fair treatment in disputes or complaints.
Steps for Tenant Screening
With the application process shifting towards digital platforms, rental fraud has surged up to 30%. Allowing your tenant screening process to be vulnerable to fraud can expose you to increased financial risks. That's why it's critical to master the art of proper tenant screening. Let’s see how to find tenants through the tenant screening process:
Run a Credit Report & Background Check
When landlords need to check a tenant's credit and background, they should remember that evictions can be expensive and time-consuming. According to TransUnion, evictions can average from $3,500 to $10,000 and take 3-4 weeks to complete. Landlords should also consider that tenant turnover can be a factor.
Setting up a free account on a reliable platform allows you to invite potential tenants for background checks. To run a tenant background check, you need:
- Full name, contact details, date of birth, license number, Social Security number, current and previous addresses
- Employment and income verification
Should any potential tenants fail to provide the requested details or withhold information, you can use this as a filtering criterion to make informed decisions about the right tenants for your property. However, be prepared to address any questions about utilising the collected information, as adherence to legal guidelines is paramount.
Verify Income & Employment
A survey conducted by TransUnion revealed that 84% of landlords ranked payment problems as their top concern. Nonpayment can lead to eviction and costs as high as $10,000 in legal fees and court expenses. To reduce this risk, find tenant with a stable income who can comfortably afford rent. One way to achieve this is by verifying income and employment.
This ratio ensures the tenant has sufficient financial resources to handle their monthly rental payment, even during financially challenging times.
Furthermore, a reliable tenant should possess positive references for personal, landlord, and employment history. These references verify the accuracy of the information provided on their application, attest to their responsible behaviour at previous rentals, and confirm their current employment status. Engaging with an employer on a company line can provide added assurance, and requesting current pay stubs can further solidify their financial stability.
Check Previous Addresses
When conducting tenant screening, landlords and property managers often check the previous addresses of prospective tenants. This process is crucial as it provides valuable insights into the tenant's rental history and behaviour. By checking previous addresses, landlords can learn how well the applicant maintained previous rental properties, whether they paid rent on time, and how they interacted with previous landlords.
To check previous addresses, landlords typically ask applicants to list their past residences for a designated number of years. The information collected can then be used to contact previous landlords or property management companies to obtain references and verify the tenant's rental history.
As part of the tenant screening process, requesting and checking landlord references is crucial for landlords and property managers. Landlord references provide valuable insights into a prospective tenant's rental history, behaviour, and reliability as a renter.
Here's why landlord references are essential:
Landlord references allow landlords to understand how the applicant has behaved as a tenant. Information about timely rent payments, property maintenance, and adherence to lease terms can be obtained from previous landlords.
Checking landlord references helps assess the tenant's reliability and whether they can be trusted to fulfil their rental obligations, including paying rent on time and taking care of the property.
Previous landlords can provide feedback on the tenant's conduct and interactions with neighbours, ensuring they will be a good fit for the community.
Landlord references can reveal any past issues with the tenant, such as late payments, property damage, or breaches of lease agreements. This information helps landlords avoid potential problem tenants.
Verification of Information
Confirming applicant details (tenancy duration, rental amount) helps ensure truthfulness.
Checking personal, landlord, and employment history reference is critical to tenant screening. These references provide valuable information that helps landlords assess the applicant's reliability, rental history, and financial capability to cover rental payments. Here are some important points to consider when requesting and verifying these references:
Personal references can give insights into the applicant's character, responsibility, and ability to maintain positive relationships. Friends or colleagues may be suitable as personal references.
Employment History Reference
Verifying employment history ensures that the tenant is currently employed and can afford the rent. Requesting current pay stubs can further support this verification. Ask for reference letters to be on official company letterhead or sent through an official company email address to ensure authenticity.
Use Official Contact Information
When conducting a reference check over the phone, use the company's main switchboard to reach the reference rather than relying solely on the contact information provided by the tenant. This helps ensure that you speak to the right person and get accurate information.
When selecting a tenant, it's important to consider whether they have an eviction history. Unlike those who haven't faced such issues, this factor should be considered. Previous eviction history should be considered when find tenant as a landlord. It's important to pay attention to warning signs from your property manager, as they can be a significant factor in avoiding eviction. Ignoring these signs can lead to costly evictions, costing up to $3,500 per unit and taking a long time to resolve.
To avoid headaches and financial losses, do thorough tenant screenings. Checking their eviction history can save you from future troubles. Remember, preventing problems upfront is better than dealing with them later.
For new tenants, formalise move-in dates, duration of tenancy, and monthly rent amount. First-time landlords can refer to this lease agreement guide. A lease agreement is a written contract outlining the rental arrangement's terms and conditions. It is a legal document protecting both the landlord and the tenant. Let’s have a look at what should include in your lease agreement:
Components to Include in Lease Agreement
When creating a lease agreement, you should include some essential elements to protect yourself and avoid potential tenant conflicts. Here's a detailed list of what you might consider including in your lease:
- Parties to the Agreement: The rental unit's section should contain the contact information of all parties involved, including the landlord, co-lessors (if any), and all tenants residing there.
- Description of the Rental Unit: Provide a legal and complete description of the property, including its full address, parking space details, and any included storage space.
- Term of the Tenancy: Clearly state the tenancy's start date, the length of the agreement, and what happens when it ends. Specify if it automatically continues month-to-month or if the tenant needs to renew for another term. Also, outline the process for ending the tenancy, either by the landlord or the tenant.
- Rent: Rent is due on the first of the month and is $1,500, including base rent, parking, and shared utilities. Pay to the landlord, landlord's name. Mentioned payment methods and accept online payments. Include any prorated amount and specify applicable rent discounts and late fees.
- Services and Utilities: Specify what services and utilities are included or excluded from the rental unit. For example, clarify whether heat and hot water are included but electricity, laundry, or parking are not.
- Deposits: Outline tenant deposits, including how they're used, interest, and refund. Comply with state and local laws.
- Smoking: Clearly state where smoking is permitted and prohibited, along with penalties for breaking the rules.
- Insurance: Specify the minimum required insurance coverage for the tenant and if they need to provide proof of insurance. Note that you should have your own landlord insurance, which doesn't have to be detailed in the lease.
- Changes to the Rental Unit: Describe what changes the tenant can make to the property without permission. For example, you may allow them to hang pictures and window coverings but prohibit major alterations without approval.
- Maintenance and Repairs: Clearly define your property maintenance responsibilities and comply with health and safety standards. State that the tenant is accountable for any damages caused by them or their guests.
- Assignment and Subletting: Specify whether the tenant can assign the lease or sublet the unit and under what conditions. Include any relevant fees that may apply.
- Additional Terms: Detail any other specific terms you wish to include, such as a pet policy or rules for common areas. Your insurance company might also require adding certain terms, like a prohibition on growing cannabis on the property.
- Changes to the Agreement: Provide rules for making changes to the lease agreement, stating that any modifications require mutual agreement.
- Signatures: Leave space for all parties to sign and date the lease, including any witnesses required.
How to Make a Lease Agreement?
Creating a lease agreement gives you the power to shape it just how you want. Whether you prefer a straightforward or more intricate document depends on what suits you best. The most common lease agreement involves a formal document signed by both landlord and tenant.
If you feel confident, you can take charge and write the lease yourself. Type it up on your computer or even go old-school and pen it by hand. There are handy online services with free or affordable templates to get you started smoothly.
However, remember that the lease is your ultimate defence against potentially troublesome tenants. Since you're investing considerable time and money, safeguarding yourself and your property is crucial.
For top-notch results, consider enlisting the expertise of a real estate lawyer to craft the lease agreement for you. With their knowledge, they can ensure the lease adheres to local and state laws and it's skilfully worded to be enforceable when needed. A lawyer can be your guardian angel, providing protection and peace of mind for your rental venture.
Breaking a Lease Agreement - Understanding Your Options as a Landlord
You can only break a lease with a good reason as a landlord. But there are ways to do it if you need to.
Before finalising the lease, include provisions outlining how and when changes or termination can occur.
After the initial lease term, give 30 days' notice to end a month-to-month tenancy.
Review your lease agreement for any clauses that allow changes upon mutual agreement. Engage with your tenant to discuss possibly ending the lease early. With good communication, you may convince them to agree to such changes.
Cash for Keys
You may want to offer a "cash for keys" agreement to urge the tenant to move out sooner, if necessary. Consult a real estate attorney to ensure legal matters are handled correctly.
Tools to Assist With Screening Tenants
Renting out your property indeed comes with significant responsibilities. As a landlord, finding a reliable tenant who will respect you and your property is essential. Thanks to tenant tracking and screening tools, you now have the means to gather comprehensive information about potential tenants.
For many landlords, especially those venturing into renting out their first property, expenses can be a concern. While preparing the property for tenancy requires various improvements, allocating extra funds for tenant screening may not seem appealing.
Fortunately, Rentberry offers a compelling solution; it's free for landlords to use! With Rentberry, you can access top-notch background checks without spending a penny. This feature is incredibly powerful, providing comprehensive tenant screening tools without financial burden.
Discovering the right tenant for your property has never been simpler with Rentberry's free background check service. This hassle-free and automated process taps into state and national databases to provide an in-depth report encompassing criminal history, driving and civil records, and any other relevant information. There's no need to worry about costs, as Rentberry covers it all. Just list your property on their website, and they'll take care of the rest, swiftly gathering tenant details and generating a comprehensive background report. With such a seamless and immediate process, Rentberry truly excels in offering top-notch tenant screening services at no charge.
Alongside the background check, Rentberry offers a credit check service that is equally free and efficient. You can access a credit report that includes rental history, employment background, and creditworthiness evaluation by simply collecting tenant details.
Rentberry doesn't just stop at providing free tenant screening services; it also comes with a plethora of benefits:
- Multi-Platform Accessibility: Enjoy the convenience of using Rentberry on iOS, Android, or as a web app, catering to the needs of most users.
- Excellent Customer Support: Rave reviews for Rentberry's 24/7 customer support ensure you'll always have a reliable team backing you up. They even offer chat support for those who prefer it.
- Free Tenant Screening: DIY landlords will love obtaining top-notch tenant screening services at no cost.
While Rentberry offers fantastic background and credit check services, it's worth noting that there's no free trial for their paid offerings. However, since we're solely focusing on the background and credit checks in this article, it's a minor consideration.
Rentberry's Additional Services
Rentberry doesn't just excel in tenant screening; it goes the extra mile by providing rent collection and negotiation services. Simplifying the life of landlords, all you need to do is list your rental on their platform, and they take care of the rest. With Rentberry, managing your rental property becomes a breeze.
If you're a landlord looking to access crucial background information about potential tenants without straining your budget, Rentme has got you covered. With Rentme's tenant screening services offered completely free, you can now make informed decisions without breaking the bank.
Unlike Rentberry, which offers free background and credit checks, Rentme takes it further by providing all its services for landlords without cost. This remarkable offering presents an excellent opportunity for landlords like you to delve into property management and gain valuable experience using the right tool.
Rentme's free background check service is a game-changer when making informed decisions about potential tenants. By providing quick access to essential information from state and nationwide databases, Rentme equips landlords with criminal and eviction reports to evaluate tenant compatibility efficiently. Rentme conveniently combines background and credit checks into a single report, saving landlords valuable time and effort.
Rentme goes above and beyond in its credit check service, offering extensive details about tenants. From reported addresses and employment history to warning flags for potential identity fraud, outstanding tradelines, collection history, and more. Additionally, Rentme provides landlords with a Resident Score, their own assessment of tenant acceptability. With all this comprehensive data, landlords can easily make rental decisions.
Rentme ensures a seamless experience for landlords and tenants. To access the free tenant screening service, landlords only need to create an account, list their property, and invite potential tenants to apply. Rentme then collects tenant details in real-time, streamlining the entire process.
- No-Cost Convenience: Rentme offers a multitude of services entirely free to landlords.
- Excellent Customer Support: With 24/7 assistance and chat options, Rentme ensures landlords always have reliable support.
- Tenant-Friendly Approach: Rentme makes it easy for tenants to apply to multiple properties with just a nominal fee, providing landlords with a wider pool of potential tenants.
Rentme's services are primarily accessible through the web, which may be a drawback for landlords seeking mobile property management options.
Rentme's Extra Offerings
Rentme excels not only in tenant screening but also in comprehensive property management services. From online rent collection to property marketing and maintenance request resolution, Rentme provides a complete package of solutions, all for free. For landlords seeking a well-rounded property management experience, Rentme stands out as an excellent choice.
TransUnion's SmartMove stands out with its clear advantage - being backed by a credit union instils trust in tenants and landlords alike. Tenants feel more confident and willing to go through the process, knowing their information is safe with TransUnion, a company with vast experience in tenant screening services.
SmartMove offers three different packages to cater to landlords' needs:
SmartCheck Basic - $25.00
- Credit-Based ResidentScore™
- National criminal background report
- This essential service provides a simple score to determine tenant suitability and a criminal background check sourced from national databases for enhanced accuracy.
SmartCheck Plus - $38.00
- Credit-Based ResidentScore™
- National criminal background report
- Full credit report
- National eviction report
- SmartCheck Plus offers in-depth credit history and instant results, providing valuable insights into a tenant's financial background and eviction history.
SmartCheck Premium - $40.00
- Credit-Based ResidentScore™
- National criminal background report
- Full credit report
- National eviction report
- Income insights
- The SmartCheck Premium package includes everything in SmartCheck Plus and goes a step further by offering income insights. This feature streamlines the tenant screening process by eliminating the need to verify work history or request pay stubs, making it quick and hassle-free.
- Accuracy: Working directly with TransUnion ensures more accurate reports.
- Detailed Information: The Income Insights feature offers valuable opt-ins that enhance the tenant screening outcome.
- Tenant Confidence: The association with a credit bureau puts tenants at ease, resulting in smoother tenant screenings.
- High Cost: SmartMove's services can be quite expensive, making it less attractive for some landlords.
- No Free Trial: Lack of free trials might deter potential users who want to test the service before committing.
- Limited Mobile Access: SmartMove is only available on the web, lacking dedicated apps for mobile convenience.
TransUnion concentrates on providing excellent insight and effective tenant screening services without delving into other property management offerings.
RentPrep offers more than just a basic tenant background check, providing optional add-ons to enhance your tenant screening experience.
Basic Tenant Background Check - $18.95
The basic tenant background check includes SSN verification/address history, nationwide evictions, bankruptcies, judgment and liens checks. These comprehensive reports give landlords a thorough understanding of potential tenants.
- Nationwide Criminal & Sex Offender Search - $4.00
- Credit Decision Report - $9.95
- Income Verification - $10.00
The credit decision report is a standout feature, simplifying tenant screening by providing a clear yes-or-no result based on tenant details. This report also explains the reasons for acceptance or rejection, such as previous evictions, ensuring landlords make well-informed decisions.
Tenant Credit Check - $38.00
RentPrep's tenant credit check goes beyond the basic background check, encompassing a full credit report with ResidentScore, SSN verification/address history, nationwide criminal & sex offender search, nationwide evictions, bankruptcies, and rental background check. It's a comprehensive package designed to provide landlords with all the necessary insights into potential tenants.
Pros of RentPrep
- High Accuracy: RentPrep manually reviews reports to ensure accuracy, reducing the chance of missing out on great tenants due to technical issues.
- Detailed Reports: RentPrep offers a variety of report options, ranging from simple 'accepted or declined' tags to detailed tenant assessments.
- Quick Service: Despite manual reviews, RentPrep delivers reports swiftly, often within an hour of data verification by professional screeners.
- Excellent Customer Service: RentPrep's great customer reviews highlight their prompt and helpful responses to inquiries.
Cons of RentPrep
- Costly: RentPrep's top-tier tenant screening services come at a premium price, potentially deterring first-time landlords.
- Web-Only Access: RentPrep lacks dedicated mobile apps for convenient access.
Make Houst Your Perfect Rental Management Partner
Houst is the ultimate choice when finding the ideal rental management company. With Houst, you'll discover a seamless experience tailored to your unique needs as a landlord. Their powerful tenant screening tools ensure you welcome trustworthy tenants, putting your mind at ease. But Houst doesn't stop there; they excel in managing your property with utmost care and dedication. They handle everything from listing your property on top rental websites to handling inquiries and contract management.
Houst's commitment to creating a compelling Airbnb listing, impeccable maintenance and complete cleaning of your rental house, always ready for new tenants. Count on Houst's expertise to optimise your rental income with competitive pricing strategies. No matter if you're a seasoned landlord or a first-time investor, Houst's personalised services cater to your individual preferences.
Frequently Asked Questions (FAQs)
How can I effectively advertise my rental property to attract potential tenants?
Effectively advertising your rental property is crucial to attracting potential tenants and finding the right match for your property. Here are some tips:
- Do professional photography to increase your bookings. Consider including a video tour to give potential tenants a comprehensive view of the space.
- Provide a thorough description of your property, including key features, amenities, and nearby attractions (e.g., schools, parks, public transport).
- Set a competitive rental price based on market research to attract potential tenants. Overpricing may deter applicants while underpricing might raise concerns about the property's condition.
- Use popular online rental listing platforms like Airbnb, VRBO, or local classifieds. These platforms reach a wide audience and increase your property's visibility.
- Promote your rental property on your social media accounts.
- If you have positive reviews from previous tenants, include them in your listing to build trust and credibility.
- Clearly outline your tenant screening process in the listing to let potential tenants know what to expect.
- Consider offering flexible lease terms, such as month-to-month or short-term leases, to attract a wider range of tenants with different needs.
- If you provide exceptional property maintenance or have a property management company, mention it in the listing to attract tenants looking for hassle-free living.
How should I handle security deposits & what are the legal requirements?
In an assured short-hold tenancy, the landlord must legally protect the tenant's deposit in a government-approved tenancy deposit scheme (TDP). This measure ensures that the tenant's money is safeguarded throughout the tenancy and guarantees a fair deposit return at the lease's end.
Landlords must protect the tenant's deposit in a TDP within 30 days of receiving it. Tenancy deposit schemes must be government-approved and operated by authorised organisations. When the tenancy ends, the landlord must return the deposit to the tenant within a specified timeframe, typically 10 to 30 days.
How can I build a good relationship with my new tenants?
Building a good relationship with your tenants is key to a smooth landlord-tenant experience. Here are some tips:
- Communicate clearly and transparently. Respond promptly to inquiries and address concerns.
- Respect tenants' privacy. Give notice before entering.
- Be professional and friendly to make tenants feel comfortable.
- Outline expectations and rules in the lease agreement, including rent payment schedules, maintenance responsibilities, and property rules.
- Thoughtful gestures like welcome packages and holiday cards make tenants feel valued.
- Respect tenants' boundaries and fulfil your landlord's duties.
- Conduct regular check-ins with tenants to address concerns and feedback.
- Be flexible with lease terms and tenant needs.
- Follow the law and treat tenants fairly.