If you have ever read or witnessed exasperating tenant horror stories, then you know conducting tenant background checks is absolutely crucial. If you’re new to rental property investments and being a landlord, you may not be fully aware of what could happen.
A lot of landlords overlook the importance of running a tenant background check. Moreover, only about 16% of landlords conduct criminal background checks on their tenants. Between tenants admitting they never disclosed their pets to the landlord and admitting they would treat the property better if it were their own, you need to be wary of the people you lease your property to.
So, what is a tenant background check, and what makes it so important? Keep reading to find out everything you need to know about tenant background checks and how to go about it.
What Is a Tenant Background Check?
Technically, a rental background check is an in-depth tenant screening process. This is essentially one of the most important aspects of finding qualified tenants. Every applicant who fills out rental applications should undergo the screening process.
Every landlord may have their own tenant screening criteria. Still, the process should involve a credit check, employment verification, and a criminal background check. You can go further and conduct a short interview as well.
Check previous landlord references, employer references, and get an eviction history report. Before you conduct a tenant screening process, it’s imperative for you to understand the Fair Housing Laws. Familiarize yourself with both federal and state-specific regulations.
These prevent discrimination and serve as a guide for choosing tenants. It’s against the law for you to refuse tenants based on national origin, sex, religion, family status, disability, color, or race.
What Makes a Tenant Background Check So Important?
As a landlord, you want more than anything to avoid bad tenants who make trouble, trash the apartment, and refuse to pay rent. Finding out as much as you can about the applicants is the best way to avoid problematic tenants.
If you want to maintain a positive ROI on your investment property, you need tenants who will pay rent on time. Tenant screening will help you avoid spending thousands of dollars in property damages, unpaid rent, and frustrating eviction processes. Read on to find out what’s included in a tenant background check.
What Should You Include in a Tenant Screening
Now that you know tenant screening is important to avoid problematic tenants, what should you include in your background check? We’re going to highlight some of the most important aspects though you don’t have to follow each and every one. Feel free to pick any option, though the more information you can get, the better.
A Criminal Background Check
One in three people has a criminal record in the US, accounting for about 70 million citizens. This means conducting a criminal background check is understandable.
A criminal background check will pull up information from the FBI’s most wanted and state felony registries. Information from local sex offender registries, homeland security, and the drug enforcement administration.
Now, on the whole, having a policy that prohibits renting to people with criminal histories is considered discriminatory. However, with this information, it’ll be easy for you to see the red flags and avoid people who may jeopardize the safety of other tenants.
When scrutinizing the criminal records, consider the type and severity of the offense and how long it has been since the crime was committed.
A Credit Report
A tenant credit report will reveal whether a potential tenant is fiscally responsible and pay the bill on time. The credit report background check will not give you the exact credit score.
However, you can see whether they’re bankrupt, their loan amounts, and accounts in collection. You’ll also have access to their suits and know whether the renter ended up in landlord-tenant court for failure to pay rent.
References From Previous Landlords
While this is not generally a requirement, it’s always a good idea to call previous landlords to verify the information. Ask potential tenants for the landlord’s contact information and give them a call. Generally, you want to ask questions regarding the tenants’ rental history, any red flags, and why they left.
Did they take care of the property? Did they leave the house in good condition? Do they pay their rent on bills on time, or are they problematic tenants?
In general, it’s critical for you to get proof of income before you accept a potential tenant. As a landlord, you are well within your rights to know that the tenant’s income is enough to pay the amount you charge in rent. Collecting unemployment pay stubs is one of the best ways to obtain this information.
Typically you can ask potential tenants to give you pay stubs that date about three months back. If the tenant is self-employed or a freelancer, you can request to have the recent tax returns instead. If you have any doubts, you can always call their employer to verify the employment.
One of the most vital reports you can get about a potential tenant is the eviction history. Even worse than a bad credit score, a tenant’s eviction history can tell you a lot about the kind of people they are. In the landlord industry, you’ll find something known as “professional tenants.”
These are tenants who know everything about the eviction process and take advantage of this knowledge. They’ll do everything in their power to avoid paying rent and take you to court when necessary. They’ll possibly trash your house on their way out when they eventually have to leave.
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How To Go About the Tenant Background Check
While you may feel like you can do this on your own, conducting tenant background checks on all potential tenants may seem like too much work.
In this case, consider hiring a property manager who will make the tenant screening process easy. Property managers already know the ins and outs of tenant screening and how to acquire the right information.
Alternatively, you can use a tenant screening service instead. A tenant screening service will gather all information for your prospective tenants through online applications. They’ll complete all tenant background checks for you and hand over the final documents for your decision.
Tenant Background Check: Everything You Need To Know
Conducting a tenant background check is a very crucial part of renting properties. That said, it can be an utterly intricate process, so consider hiring a property manager or a tenant screening service.
Beyond that, please check out our blog section for more informative posts.