How to Screen Tenants

Let’s face it, finding tenants is a pain in the (insert anatomy of choice). But the more effort you put into screening tenants, the better tenant you’ll find, and the time invested will pay for itself many times over by preventing headaches and costs later on.

First and foremost, it bears reiterating that better houses attract better tenants. This includes both the neighborhood and the condition and appeal of the house itself, so do everything you can maximize both when you make investment decisions.

Once you’ve done all you can to make the house attractive to quality tenants, you need to let the world know that it’s available. For some properties, a free ad on Craigslist or Roommates.com is enough, but keep in mind that internet advertising reaches mostly younger, middle & upper class tenants. If internet advertising is insufficient, you can pay for an ad in the local newspaper or other publication.

Once the phone starts ringing, you’ll want to take a rental application, and make sure you gather enough information to pull their credit reports (social security numbers, birthdays, and addresses are a must). You’ll also want their income and employment information, along with the name and number of their supervisor or human resources department so you can verify, and the name and phone number of their landlord to check their rental history.

Instead of meeting each prospective tenant individually, hold an open house one afternoon (usually on a weekend, since you want tenants who are at work during the week!), to prevent no-shows from wasting your time. Charge them all an application fee of roughly $20, which both pays for the credit reports and weeds out a lot of the bad apples.

It’s critical that you meet the rental applicants in person, and you ask them as much as possible about their personal lives, their jobs, their families, and whatever else helps give you a sense of what kind of people they are. Beyond the obvious information you learn, you’ll develop a gut feeling for how honest and conscientious they are, which will prove uncannily accurate.

Pull their credit, call their landlords, verify their employment and income, find out how many children they have and how old they are, find out about pets. If they look promising, go out and meet them at their home, with as little notice as possible, to see exactly how they live (and to see if they lied about pets, family members, etc.). Finally, look up their legal history, to see if they have a history of litigation. Some people love to sue, and these are not people you want to know in any capacity.

After you and a tenant agree on rent, term, security deposit, pets, etc., you’ll need a strong rental agreement and rental disclosures that adhere to state and local laws. This is critical, because otherwise you open yourself up to a host of legal problems, such as litigation or the inability to evict.

It’s not so bad as it sounds, and there are plenty of resources available to nascent landlords. Check out some landlord websites and learn as much as you can, and prepare for passive income!