Busting Common Tenant Screening Myths

Mon, 16 Aug 2021 10:30:00 -0500

Renting out properties can be a tough job. From having to interview tenants, provide maintenance, manage accounts, and solve tenant problems, the list goes on. Whether it is noise complaints, damaging items, or constantly being notified about minor problems, these tenants can be a nightmare to deal with.

To avoid this, a good screening process should be implemented for all incoming tenants. This way you will be able to weed out those that have the potential to cause trouble in the future. As a landlord, a part of responsibility lies in selecting the best tenants for your property.

By doing this, you will be able to save yourself additional costs as well that come from damaged property, eviction fees, and lost rent. On average, a landlord would screen at least two applicants per vacancy before making a decision.

With so many myths about tenant screening it can be difficult to know the right from the wrong. In this post, we will be debunking some of the more common ones.

The top 4 common tenant screening myths

1. Only rent matters, nothing else

Can the tenant afford the rent on a monthly basis? Yes, this is the base criteria to determine a potential tenant and you should be running background checks, credit checks, and asking about their employment status during the initial interview.

However, there are other factors to consider that can affect both you and the other tenants in the property. It’s important that every tenant follows the rules set within your property so that problems don’t arise in the future. For this purpose, a basic screening checklist will go a long way in helping you find only the best tenants.

2. A high credit score means they are going to be a good tenant

Higher credit scores do not always translate to on-time payments, and in the same way, a low credit score does not mean that the renter will not make payments on time. Think about students, or new immigrants, or other young people who haven’t had a chance to build a good credit score yet. Don’t disqualify anyone with a low credit score. They might turn out to be a great tenant down the line

Ideally, you should request a complete credit report yourself about any potential tenants rather than allow them to hand you one of their own. While unlikely, people do use old or fake credit reports to fool landlords into renting out to them.

To automate the process of getting credit reports for each potential tenant, you can use the MRI Real Estate Software. There are on-staff investigators that will look into background and credit checks for all interviewees, saving you both time and money in the process.

3. The tenant screening cost should be covered by the property manager

Many property managers refuse to conduct tenant screenings because they believe the cost of the screening will come out of their own pockets. However, this isn’t true as landlords are able to charge the cost of the reports to the applicant as a rental application fee.

The typical application fee can cost anywhere between $25 - $75 (in the US) depending on where the property is located. Also, some points to be noted are:

Landlords cannot make a profit from these fees. They need to charge exactly the fee required for the report from the applicant.

Applicants can only be charged for screening if they are given written notice of what the screening will cover and reasons why their application could be denied.

The fee will have to be returned to the applicant if the application is rejected before the reports are run.

4. Any person without a social security number should be rejected immediately

To request a credit report, you need a social security number. However, don’t turn down an applicant if they are not able to give you one. There are people who don’t have one but still reside in the country:

Foreign employees on a work visa
Foreign students
People staying in the country for a few months

Instead, you should ask for an Individual Taxpayer Identification Number (ITIN) or any other valid form of identification which can also be used to request credit reports. Simply rejecting anyone without a social security number could lose you a good tenant.

5. It's better to have any renter rather than a vacant property

Having a small pool of applicants can be worrisome and you might be tempted to fill the vacancy as quickly as possible. However, you need to consider the implications of having a problematic tenant.

A vacancy for a few months will mean potentially lower rent payments each month, but it comes with no extra cost to you. Whereas, if you are forced to evict a bad tenant, you will have to pay over $3,000 on average (in the US).

The costs include:

Lost rent payments – The eviction process can take anywhere between 1 – 3 months to finalize. You will lose out on these payments if the tenant decides not to pay.
Complaint filing costs
Notice to the police
Miscellaneous fees
Attorney fees

Property clearance fees
Storage fees

6. Only one tenant reference is satisfactory

To gain further insight into a tenant’s background, it is recommended to contact their references. However, simply checking with one reference is not enough as the information provided cannot be 100% verified. Ideally, you should contact both their past employers and landlords to get the full picture.

The employer can tell you about the tenant’s behavior and personality at work, as well as any past problems (if any) they were involved in. The landlord can tell you about their rental payments and behavior around neighbors.

To help with this, Assetsoft can help you find automated solutions to screen all your applicants before you decide. With software such as Yardi and MRI, you can select low-risk and easy-to-manage tenants easily. To know more, talk to us today.

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