Selecting the right tenant is the single most important thing you can do in managing your property. Good tenants pay their rent on time, respect your rules, and take care of your property. Choosing the wrong tenant can cost you money, drive out your good residents, and even ruin your property.

While we all know the importance of good tenant screening, few owners give it the focus it deserves. What is considered good screening and what should we do today? Many owners feel they are screening because they now run a credit report on their applicants and if a decent credit score comes back, or if the computer gives them a ‘green light’, they accept the applicant. While doing that is better than doing nothing, there are many ways bad tenants will get through this basic screen. For example, someone might pay their Visa bill on time, but not pay your rent on time. Or perhaps financial issues are not the problem. After all, drug dealers handle lots of cash, and payment of rent isn’t usually the issue. There is also a lot of rental application fraud these days.
Set Policies and Standards in Advance

The time to figure out how you will determine whether someone is a good applicant or a bad applicant is before you start taking applications. Create written criteria for how you will evaluate prospects. These do not have to be published and distributed, but will help you stay objective when reviewing rental applications. If nothing else, it will help protect you should you get a fair housing claim.

Some of these criteria can be as simple as a rent to income ratio or minimum credit score. You can assign different point weights to different areas, such as stability of tenancy, length of time at their current job, liquidity, etc. A resident who tends to live at their rentals for several years, has a stable job, and lots of cash in the bank is less likely to get into trouble than someone with a thin rental history, a new job, and barely enough money for the security deposit – even if both have similar credit scores.

You can also set certain procedures, such as you will not accept an applicant if you cannot obtain a positive reference from a previous landlord. Of course, the best way to show you have policies and standards is to make them visible. Having written criteria tends to scare away a percentage of the scammers, who know they won’t qualify. You can allow for credit blemishes – few people have perfect credit. Certainly if your property is in a lower income area, your standards need to be different than if you were renting in Piedmont.

Always run an unlawful detainer check (preferably one that shows all filings and not just completed evictions) and it may make sense to run a criminal background check as a standard practice as well. Remember, the cheapest credit report is not the best. Spend a little extra and get the information you need. Saving $10 at this point is being penny wise and pound foolish.
Talk to Prospects

If you are the one showing the unit, ask questions of your potential applicants. Questions such as:

How many people will be staying at the property?
What kind of pets do you have (This is better than asking them whether or not they have pets)?
Why are you moving (Do they speak poorly of their former landlord? Do they talk about a mold problem?)?
How long are you planning to stay? Since turnover is your largest expense, long term is usually preferred.
When I contact your previous landlord/management, what will they say about you? Listen carefully to what they say.

You will want to make mental notes of what they say (or, if you get a chance, write them down). Compare this to what you see on the rental application when it is returned.
The Rental Application

Your rental application is one of the best tools you have to screen tenants. Yes, it needs to contain the basic information like name, date of birth, social security number, etc. but it should also ask questions that help you determine whether or not this applicant will be a suitable tenant for your rental.

You want some behavioral based questions on the application. Some of these will be similar to the questions asked in your tour. Others might include:

Is there anyone living with you now who will not be living with you at this property?
Have you ever been asked to move?

Include an “Other Comments and Explanations” section on the application. This section can be used by the applicant to detail some items. You will also sometimes get rants about prior landlords. Proceed with caution.

Let the applicant know that his or her application will be considered along with others. Advise them that it is very important to fill out the application as completely as possible. Inform them that they need to turn the application in as quickly as possible to avoid the risk of losing the rental to competing prospects.

Make sure your application has a spot where the applicant certifies that the application is true and correct and if misrepresented, they will be disqualified.

When you receive the application back, do a quick review.

Make sure all items are filled out.
Make sure the applicant’s handwriting is legible. Clarify any portions you can’t decipher.
Verify the information on the application by comparing it with information on the driver’s license or other documents. Look for inconsistencies or ‘red flags’.

Screening Post Application

Read and analyze the information you receive. The object of screening is not to get completed forms. The object is to use that data to determine whether or not that prospect will make a good tenant in one of your rentals.

As you look the application over, does the information seem to make sense. When verifying residency or employment, see if you can find phone numbers online and whether or not they match what you were given. You can do searches on Facebook by email address. You can review buildings on Google Earth.

Have a checklist to give points based on answers. This will help protect you if an applicant claims discrimination. Remember, you are looking for more than ability to pay. Other problems that can come up include unauthorized occupants, drugs, nuisance, and other non-financial data. While these are the hardest items to verify, it is critical you at least attempt to get prior landlord verification.

Some items you can ask prior landlords

Confirm that the prospective tenant did live at that address and confirm dates and rental amounts
Ask if the manager/owner knows why they left
Ask whether they gave proper 30 day notice of intent to vacate
Was the security deposit returned in full?
Were any 3 day or 30 day notices ever served to the tenants during their tenancy?
Would you rent to them again?

Don’t assume everything on the application is true unless you have verified it. Beware of information that is impossible to verify. Also, in evaluating the application, always ask the question – if something went wrong, how likely will we be able to get paid?
Talk to Prospects II

Modern technology has made it possible to attract and screen tenants without ever meeting them. This is not necessarily a good thing.

Whether or not you are the one showing the apartment where you can actually meet the prospect, you can call them up while reviewing their application and ask a few questions. This person is going to be occupying a portion of your personal wealth. You should at least get a sense of them. You can use the opportunity to review certain items on their application and get some explanations or answers to questions.

Talking to them also gives you a chance to re-sell the benefits of your unit. Use the phone. It is a powerful screening tool. Take good notes. If it is not written down, it never happened. Taking good notes will help protect you later, should someone claim discrimination in how you selected them.
Send the Message that you are a Professional

Send the message that you are an active property owner or manager. Communicate your commitment to do a thorough and complete screening on all your applicants.

The importance of proper tenant screening cannot be over emphasized. Done properly, it is your single best tool to ensure that your properties will be more profitable, have lower expenses, and that your life will be easier.