New tenant screening will keep your property profitable
One of the first and most fundamental steps in property management is the tenant screening process. After all, finding a reliable, consistent paying tenant that will stay with you long-term is the best outcome that you can possibly hope for. There are a few main areas to look at when searching for the best tenant: Credit, Background, Income, and Character.
A prospective tenant’s credit and background will give you a good indicator of their ability and willingness to pay. You should definitely look to set a score threshold that you consider to be the minimum acceptable. For example, perhaps you will only rent to tenants with a score of 600 or better. When you go to measure their credit score against your requirements, however, remember that this is just a number. And since this number very well may not paint the full picture of your prospective tenant, you definitely want to make sure that you are examining other factors as well. Also, be on the lookout for events that might have brought down the prospect’s score. Was it one or two significant happenings (like a corporate bankruptcy or a major emergency medical expense)? Or does it seem like they habitually pay most things late? Most landlords would consider the latter to be a surer sign of an unreliable tenant.
You might want to contemplate requiring tenants to have a gross monthly income of at least three times their rent amount. This will help make sure that if unforeseen circumstances do occur, they will likely still be able to afford to pay you. Evaluating their job history can be a great indicator of a future tenant’s reliability, so check to see if they have been employed in the same line of business for long time, if they work for a government agency, or if they have a tendency to jump around from one employer to another.
When you screen for character, you are trying to find out if this is someone with a criminal background. If the prospective tenant has been convicted of a felony or a misdemeanor, you’ll then need to determine if you still want to approve the rental. Set a policy and think about what can of worms might open up from renting to them. The very last thing you want is a tenant that causes issues for your other tenants. Not only might they cost you potential income on their own, but if they also drive away your other tenants, then they are going to become an exponentially more expensive problem in a hurry.