Did you know that about 11 million Americans are behind on their rent?
If you own a rental property, you know how challenging it can be to find reliable tenants that will pay their rent on time and destroy your property. So while you might want to find a tenant that makes enough money, you also want someone with a good moral character.
If you’re in the process of looking for new tenants, you came to the right place. Read on to learn how to find and vet new tenants.
1. Establish Guidelines
Before you can find new tenants for your rental property, you must set standards for the type of tenant you want to attract. In addition, it’s important you only screen the tenants that meet the minimum requirements.
The basic things you need to look at include income, credit history, evictions, professional references, and criminal history.
For example, you should look for tenants’ income to be 3x their monthly payment when it comes to income. You must have the certainty the tenant will be able to pay rent.
Because evicting a tenant can be quite expensive and time-consuming, you should look for candidates without evictions on record. Then, once you set your standards, you can start accepting tenant applications.
2. Have a Tenant Application
You should prepare a tenant application to collect the essential information you need to make a decision.
The tenant application will help you determine who is a great candidate and who is not. You will collect their name, current address, social security number, employment status, and references in the application.
Ensure you also collect other important information that will help you determine who will potentially live in the building.
If you have a multi-bedroom unit, you should ask the number of tenants who will occupy the unit. Keep in mind, it’s illegal to discriminate against a tenant due to household size, but you’re allowed to ask.
You should also ask the tenants if they have any pets, and the breed, size, and number.
3. Do a Background & Credit Check
Many landlords choose to run a credit check on potential tenants to check for negative information that could disqualify them from renting. However, if you plan to run a credit check on potential tenants, you need to learn about the Fair Credit Reporting Act (FCRA) regulations.
If a potential tenant has a low credit score, but all of their information checks out, you can still approve them. When a tenant has a low credit score, you can ask for a cosigner or a larger deposit.
On top of running a credit check, you should also run a background check to ensure the potential tenant doesn’t have any prior evictions, criminal records, etc.
From time to time, you will encounter a negative result on a background check. So naturally, you must handle negative results correctly, so you don’t have a discrimination complaint on your hands.
You should discuss with the potential tenant the background check results and allow them to explain the details of the situation. For example, if they were incarcerated 10 years ago, it doesn’t mean you should automatically deny their application.
Ask them about their circumstances, what led them there, and their efforts towards rehabilitation. Then, you can choose to request additional references and talk to former employers, landlords, or other professional references.
4. Contact Their Previous Landlords
An important step when choosing a tenant is to contact their previous landlords.
Talking to their former landlords will help you gain insight on how they were as a tenant. Write down a list of questions you will want to ask the former landlords.
Did they pay the rent on time? Did you ever receive complaints from the neighbors? Did they cause significant damage to the property?
Did you give them their security back? And one of the most important questions to ask is whether or not they would rent to this tenant again.
5. Interview Potential Tenants
If you receive several applications and you have to choose a tenant, interviewing them will ensure you find the best match. During the interview, you should go over the application details to verify their accuracy and ask follow-up questions.
For example, if you noticed any gaps in their employment, this will be the time to ask them.
You should also ask them questions that will help you get to know them better as a person.
Do you smoke? Are you willing to smoke outdoors only?
Do you have any pets or plan on getting any pets in the future? Can you tell me what your workday is like? Do you plan on having a lot of overnight guests?
As you conduct your interview with the tenant, you must do it without violating any housing laws. For example, you should never ask potential tenants questions about their religion, sexual orientation, disabilities, ethnicity, familial status, etc.
6. Verify Their Employment & Income
It’s important you also verify their employment and income to ensure they will pay rent. To ensure your tenant will pay for their rent, you can use the rule of three, which means they should make at least three times the rent amount.
The tenants should provide you with at least a month’s worth of paystubs or a letter from the employer that says how much they make in a month.
Verifying their employment status is also key, so feel free to contact their job to verify their job title, length of employment and ask any other questions.
7. Accept and Reject Tenants
Once you have collected and verified all of the information on the tenants, it’s time you make a decision. While not all of the candidates will fit all of the boxes, you must make a judgment call and trust your gut.
However, don’t try to give a tenant a chance solely based on their character if they don’t meet the basic income requirements.
Are You Ready to Your Tenants?
Now that you know how to find reliable tenants, you’re ready to rent your properties.
If you want to find the right tenant, don’t forget to set requirements, create a tenant application, do a background check, and interview potential tenants.
Not sure how to find the right tenants? Hiring a property manager might be the answer to your problems.
Contact us for more information on our property management services.