The quality of your tenants can either make or break your property rental business, so it pays to set up a screening process and follow it consistently. In the same way you wouldn’t want to hire someone for a job without evaluating their qualifications, temperament, and ability to meet deadlines, you wouldn’t want to rent to someone who has a history of not meeting their financial obligations or causing trouble.
There are several key things you can do to drastically reduce your chances of renting your income property to an unreliable tenant. Although tenant screening can be a time-consuming process, it is vital to know something about an applicant’s background, employment situation, and past payment history. Here are a few tips to help get you started.
- Have them fill out a detailed application. Rental applications can provide a lot of valuable information, including reasons for moving, the number of planned occupants, pet ownership, recent employment history, income, and references. Names and contact information of past landlords is especially useful, because they can answer questions about tenant reliability, whether rent was paid on time, and the move-out condition of the rental unit. The ultimate “red flag” would be a history of evictions. Sometimes there are extenuating circumstances, but more often than not, evictions are a sign of trouble ahead!
- Verifying their income: This step can often be as simple as having them provide recent pay stubs. Income and employment longevity are strong indications of rent-paying ability.
- Running a credit check can give you a pretty clear snapshot of the applicant’s willingness to live up to their financial obligations. Although there is room for flexibility, tenants with a credit score of roughly 700 or above are considered good credit risks. According to the credit-reporting agency Experian, most consumers have credit scores between 600 and 750. (The other primary sources of consumer credit reports are Equifax and TransUnion.)
- Background checks provide valuable information about arrests, pending criminal cases, and prison records. While you may choose to overlook certain minor past offenses, it is advisable to proceed with caution when evaluating prospective tenants with criminal histories.
Cautionary Notes and Tenant Screening Assistance
There are many things to consider when approving or denying tenant applications, but one is the federal Fair Housing Act. The main thing to remember is that it is illegal to discriminate in the sale or rental of housing. The U.S. Department of Housing and Urban Development says, “The Fair Housing Act prohibits this discrimination because of race, color, national origin, religion, sex, familial status, and disability.” Using the same application form for all prospective tenants is one way to comply.
If you’re feeling any hesitancy about doing your own tenant screening, contact us at PMI Miami Dade. Whether you need assistance with rent collection, property maintenance, marketing, or tenant screening, we have the resources, expertise, and service commitment to make sure your rental business runs smoothly. Give us a call to learn more about our Miami-Dade property management services.