You cannot predict the future. However, as an independent landlord trying to discover excellent tenants, you must perform your own tenant screening. Every potential tenant you speak with has a unique situation and narrative to share. It’s up to you to collect the proper documentation, ask the necessary questions, and research someone’s background to clear up any ambiguities.
Losing tens of thousands of dollars due to eviction and rent arrears might completely ruin your rental business. It’s crucial to be aware of the warning indications of non-payment in rental applicants and to carefully vet every prospective renter using a trustworthy agency like SmartMove in order to safeguard your livelihood.
Watch out for these five tenant warning signs no matter who you decide to rent to. Without due investigation and thorough background checks, you can find yourself in a situation where your finances are in dire need of improvement.
1. Previous Evictions
The Economist estimates that the U.S. receives at least 1 million evictions every year. Although individual circumstances and backgrounds can differ, a prior eviction is the best indicator of a potential future one. In actuality, renters with a history of eviction have three times as many rental-related collection records as those without such a history. With those figures, it makes sense that independent landlords’ greatest concern, according to a recent SmartMove study, is nonpayment of rent.
You’re putting yourself at unnecessary risk if you don’t look into a renter’s eviction history. Start with thorough rental applicant screening to help safeguard yourself from the start.
Every deep-dive past eviction check from SmartMove also includes a proprietary ResidentScore, which is more useful for leasing choices than a typical credit score because it is tailored particularly for renters. Using SmartMove to screen your rental applicant provides you a 15% greater chance of anticipating if you’ll need to evict them at some point in the future, according to TransUnion statistics.
2. Not Enough Income
It’s likely that your tenant will have trouble paying the rent if they don’t make enough money. However, how much should you really charge? Two key duties are involved in locating the ideal rental location:
A. Determine your ideal rental price
Setting a bad rental rate can ruin your investment in real estate. If it’s too high, you run the danger of having more empty units. If you set your prices too low, your profits will plummet. Although rents are already increasing across most of the nation, raising them may not necessarily be the best course of action for you.
It’s crucial for landlords to know how much to charge for rent by examining comparable properties in the neighborhood, assessing the facilities in your unit, and researching average income in the neighborhood.
B. Confirm the Renter’s Income Is Sufficient
The key to a successful rental business is finding the right mix of renters at the right pricing. Once you’ve decided on a rental fee, you must make sure the prospective tenant can afford it both now and in the future. Make sure the renter has an income of 2.5 to 3 times or more than what you are asking for in rent.
Paystubs, tax returns, and letters from the prospective renter’s company are just a few of the ways to confirm the income of a tenant. However, exercise caution when using any papers supplied directly by the applicant because documents might be falsified.
Through a screening service like SmartMove, you can help prevent fraud and provide hard facts to support tenant-supplied documents. For instance, an Income Insights report analyzes the financial stability of your rental applicant and informs you of whether you should request further income documentation from your potential tenants.
3. A Criminal Record
In addition to putting you at risk legally, failing to investigate a renter’s relevant criminal history before signing a lease may end up hurting your property, other tenants, and the neighborhood as a whole.
Data shows that one in five tenants who were checked had a criminal record found during their online background check. With such a high percentage of favorable outcomes, it is essential to check every renter in order to learn more about their background.
When you are interviewing potential tenants, evidence of a criminal record may seem alarming. However, not all arrests or convictions are indicative of a person’s potential to be a fantastic, trustworthy tenant. If you are unsure, it is best to speak with the applicant to learn more about how their prior experiences might truly affect the future viability of your rental property.
How to Check the Criminal History of a Renter
Although it may be tempting, depending on your state, searching your applicant’s name on Google, social media sites, or a public records finder could put you at risk of legal action. For instance, it is prohibited in California to check criminal records using a person’s driver’s license or date of birth.
Additionally, tenant screening reports like criminal background or tenant credit checks can include data protected by the federal Fair Credit Reporting Act (FCRA). This means that only certain individuals are legally allowed to access protected data—and only under specific circumstances.
Additionally, information covered by the federal Fair Credit Reporting Act (FCRA) may be included in tenant screening reports such as criminal history or tenant credit checks. This indicates that only particular people—and only in certain situations—are legally permitted to access protected data.
Use a reputable, FCRA-compliant rental background check provider like SmartMove instead of attempting self-performed tenant screening and running the risk of pricey, stressful legal trouble.
4. Bad References
It can be enlightening to consider how a potential tenant has behaved in the past in order to predict how they could behave going forward. You risk failing to protect your property and money by failing to investigate the references of the rental applicant.
When you ask your renter’s former landlords for an honest opinion, they may point up additional issues that online background checks, credit reports, or other tenant screening tools might miss. While there are some questions that you may not be able to ask about potential tenants legally, asking the right questions enables landlords to examine renter payment history, security deposit amounts, rental agreements, and whether a lease was breached.
5. Refuses to Complete a Rental Application
One of the most important pieces of information to obtain from any prospective tenant is this last cautionary sign. Rental applications include vital personal data that is necessary for landlord-tenant relationships and can be used to confirm an applicant is who they claim to be.
To help you find great renters, be aware of the questions you should ask on your rental application. Your application must at the very least contain the following:
- Information on each potential tenant in the unit, including contact information
- Information on employment, earnings, and credit
- Contact information for the management, dates, and any evictions related to the rental history
- relevant criminal history
- Information about dogs and smoking habits
If your prospective tenant submits an incomplete application or offers justifications for skipping the procedure entirely, it could be a sign of ulterior motives. The majority of qualified tenants are aware that filling out an application is a necessary step in the rental process and are eager to provide personal information to advance in the selection stage.
A candidate who tries to get around efforts to check their references, job, and credit could be concealing something that could eliminate them from consideration. Obtaining a thorough rental application and doing online background checks with SmartMove can assist you in selecting the ideal tenants for your specific rental property.