Screening potential long-term tenants is crucial for real estate investors for several reasons. One is to ensure financial stability. Good tenants pay rent on time, without fail, providing landlords with a steady stream of income. This ensures you can meet your financial obligations and save for future investments. Another is you want to find reliable tenants who will take good care of your properties, causing fewer damages and disturbances. Good tenants take better care of the property they are renting, meaning they are less likely to cause damages or make excessive demands for repairs.
The following is my own personal 4-step screening process for long-term tenants:
1. Have them answer the critical screening questions, including:
Have you ever been convicted of a crime?
Have you ever been evicted?
Have you ever filed for bankruptcy?
If they pass the screening questions, then they get the application that Brian created.
2. Application and background check
They fill out the application and then have a background check conducted that they pay for. It comes directly to Brian, so in your case, have them come directly to you.
3. Verification process
As a lawyer, one of my mottos is: trust but verify.
Verify everything they told you in the application, which includes:
Income and employment. Ask for pay stubs, ask for the supervisor’s name and verify with the employer that they are actually working there.
Get a copy of their driver’s license
Verify their current rental situation with their current landlord to make sure they’re not in the process of being evicted since that won’t show up on a current background check.
4. Send them a lease
Require they apply for security deposit insurance.
Require they get renters insurance.
Good renters are also more likely to renew their lease, saving landlords the time and expense of finding new tenants.
By following this 4-step screening process, you can save yourself untold time and money by finding the right long-term tenants right at the start. Whether you’re fairly new at real estate investing or you’re just thinking about taking the leap, these tips will help you make the best decisions the easy way.
This article was originally published on The Wall Street Times.