As a landlord since 2007, I learned firsthand how to screen tenants properly myself to ensure I get the right people in my owned rental unit. Whether a condo or detached house (I’ve rented out both) it is important to do the legwork up front to find the best and most trustworthy tenants to rent your single biggest investment.
Understand your local tenancy laws and stay within the law but also use your gut and common sense when picking a tenant. Meet personally with each prospective renter and ensure reference, income and credit checks are done to verify information in addition to confirming employment records are accurate. Don’t cut corners or give the benefit of the doubt as people can lie or embellish.
I’ve managed condo and house rentals on my own and have also worked with a property management firm to rent out the same house multiple times so I have experience with both situations.
How To Screen Tenants Properly
Understand Your Local Laws
Your local laws will dictate what you can and can’t reasonably do or ask prospective tenants for. I don’t reinvent the wheel: I use the government produced applications and forms to stay within the law. I have a lawyer I’ve used to buy and sell several properties and I deal directly with his assistant. She has helped me do legal credit checks on people before I agree to rent the property.
While some tenants come with their own credit checks that might be weeks or months old, I prefer to pay for this check myself to ensure they’re legit and current. Learn how to read and interpret credit checks. I like working with my lawyer’s assistant because she tells me over the phone how to interpret each credit check, giving me her opinion based on the facts after I’ve told her my opinion for each applicant.
Obtain Required Information
I ask for the completed government rental application in full, an employment letter from their current employer and names of former landlords if any. The government approved application includes a great deal of information including past recent addresses, proof of income, savings, automobiles owned, loans outstanding and other things to paint a better picture of the prospective tenant.
Again, your local laws may dictate what you can and can’t ask for. Check locally and get everything you are allowed to request. Look for gaps in employment, frequent job changes and other things that could indicate a problem down the line.
Meet Each Prospective Tenant
This might be difficult during COVID-19 times but I’ve never once signed a rental contract without meeting the tenant except in the cases where the work was handle by the property management company. You can learn so much when you meet a person face to face in terms of how they answer your questions, questions they have (or don’t have) for you and their demeanor.
This is your property. Can you see yourself turning the keys of your home or condo over to this person? Regardless of where you live and your local tenancy laws, it’s usually harder to get rid of a bad tenant than find a a good one.
Ask The Tough Questions
Again, your local laws will dictate what you can and can’t ask and some questions (race, religion, etc) are off limits but you can still ask questions that you need to know the answer to like:
- Why are you looking for a new place to live? Listen to their response and look for red flags.
- Why did you leave your last place of residence? Again, you’re looking for red flags especially people who jump around from place to place.
- Have you ever been evicted? Very important if they say yes. Why were you evicted? Sometimes it could be a legitimate reason ie. the landlord wanted to move in to the unit, the unit was sold to a new owner.
- When would you move in? I’ve had some prospective tenants who can move in next week and others who want to move in 2 months or longer. If your current tenant leaves earlier, your unit might be empty which means you’re losing rent money and you may legally have an issue with your home insurance company if they consider it vacant or unoccupied.
- How many people will be living in the unit? Will they be listed on the lease? This is especially important if you live in a condo that may have specific rules on this matter ie. giving out fob security cards to enter the building. You may be held liable if a person not on the lease causes trouble while living there.
- Do you foresee anything interrupting your ability to pay the rent? Of course most people would suffer if they lost their job but if your prospective tenants mentions something else, it might be a red flag.
- Will you agree to do a credit check and background check (whatever the local law provides)? If not, that is usually a red flag.
- Do you have any pets? You may not be able to legally prevent them from having a pet but if you live in a condo or apartment, the building may have rules that you and prospective tenants must adhere to.
- Do you have any questions for me? If they ask you questions, that will help you learn more about them and what concerns them.
Make a list of standard questions and ask each prospective tenant the same ones so that you can properly compare candidates.
Use The Internet
People overshare everything these days. Check each applicant’s social media accounts which you can find yourself by searching online. I don’t have Facebook but my wife does so I can check there and you can check Instagram and Twitter and other ones yourself without an account. I always look to see if prospective tenants have LinkedIn too to confirm their work history matches what I’m being told.
This is all public information that they provided themselves. Why not check it out? If they’re smart, they’ll be checking you out online, too.
Consider Using A Property Management Company
If all this work is too much and you’re afraid you won’t ask the right questions, consider using a rental management company. You have to pay them – they often charge 1 – 2 months rent up front to place the tenant and a monthly fee to maintain the property – but it could be worth it for a few reasons.
- They have experience finding and placing people in rental properties. It’s what they do.
- They know what questions to ask, what forms to fill out and they do the heavy lifting by doing the credit and reference checks, etc.
- They are sometimes licensed real estate agents who have focused on this sector so they (should) know the local real estate market and laws.
- They’re a business so if something goes wrong during the tenancy you may have a legal avenue to pursue if they were delinquent in their service that they charged you for, especially if they are a licensed real estate agent.
What I Learned As A Landlord
COVID-19 has thrown a fly in the ointment so to speak for many businesses that require face to face interaction and finding a tenant is one of them. I’ve always met personally at the unit I’m renting and have had very good success so far. I don’t want to jinx things so I’ll leave it at that. In all seriousness though, meeting prospective tenants in person only makes sense for both parties.
I also learned to trust my gut. If something doesn’t look good in the credit check, it isn’t good. Facts don’t lie. When people tell you who they are, believe them.
You also quickly become familiar with laws and what you can and can’t ask for. In my home area, I can’t prevent a tenant from having pets. But the condo I rent does have rules limiting the size of pets so I’m covered. But for my detached home, I can’t tell them they can’t have a pet as it’s not allowed by law.
I also can’t ask for a cleaning deposit or damage deposit. That’s not allowed either. Maybe it is allowed in your local area and it can help protect you. Utilize what your local laws allow.
You might think that if you add these extra charges, you’ll reduce the number of potential renters interested in your property. Sure, that’s possible especially during an economy where rents are falling, vacancy is high, etc. Use common sense. But think about this:
Do you really want to worry about losing a potential tenant whose main concern is paying a (for example) $200 refundable cleaning deposit up front?
Fun fact: In some countries like Germany, a rental security deposit is not only allowed, it’s standard. 3 months rent (!) must be paid by the tenant up front into a special account with their bank that they can’t touch. When the lease ends, the money is refunded or used to fix damages that were deemed to be caused by the tenant. And tenants still have to pay first and last month’s rent upon signing the lease on top of that. German renters also typically pay the property taxes for the property they rent!
What I Learned Working With A Property Management Firm
Property management firms will generally:
- Help you find and screen tenants and present them to you for consideration.
- Will help you decide which ones are the best candidates.
- Do all the background checks, will ask the right questions and do the confirmation of all information.
- Will manage the ongoing relationship with the tenant once the lease is signed ie. If there is a repair to be done or an issue to be addressed, they will handle it on your behalf.
- Offer other services like inspection of the property every year to ensure it is being maintained by the tenant, possible tax remittances to the government on your behalf if required, and things of that nature.
- Offer advice or point you in the direction of legal advice should the need arise.
- Help to ensure you are up to date with local laws regarding smoke detectors and other safety-related items you must have in place.
- Offer other paid services like rent guarantees where insurance effectively covers you if the tenant stops paying rent.
There may be a benefit to having a property management company acting on your behalf because they represent you as an intermediary who knows the laws and the local rental market, things that can help you find the correct person to rent your property.
They can also provide the professionalism and consistency that you may not be able to provide. They will ask each prospective tenant the same questions and request the exact same information so you can compare apples to apples.
Things To Watch Out For
When screening applicants, be careful about prospective tenants who:
- Offer to pay cash in advance for multiple months of rent. It sounds tempting but this practice is often associated with real estate fraud where a person takes possession of your home as a renter and then sells your property without your knowledge by pretending to be the owner. Title fraud is a major problem in many countries.
- Repeatedly refuse or come up with excuses as to why they can’t provide certain pertinent information that others freely provide to you.
- Give you information (eg. credit check) that is in the name of other people like a parent. Why don’t they give you their own?
- Give you information that clearly shows a possible inability to pay rent in the near future ie. a credit check showing past defaults on loans or monthly payments. If they give you the information, you’re allowed to consider it.
- Won’t answer questions about why they left their last place of residence.
- Have a track record of signing a lease, moving in and not paying rent, staying rent free until they get kicked out and then moving to a new place. Do an online search and see how prevalent this is. It’s very common.
Screening Candidates Remotely
Sometimes you might be considering a tenant who does not live locally and can’t be met face to face. COVID-19 made it particularly difficult to safely (and even legally during lock downs) physically meet with people face to face.
What to do?
If you’re going to consider remote candidates or can’t otherwise meet with them, do the next best thing: Use technology. Zoom, Skype, Facetime. Whatever technology enables you and your potential renters to see and hear each other at the same time.
When you can’t do the best thing, do the next best thing. Visually seeing and hearing people is so much better than just trading emails or texts and this is certainly the case when looking for a person to live in your property.
Summary
- Trust your gut. If someone sounds too good to be true, they probably are.
- It’s harder to get rid of a bad tenant than find a a good one. Do the legwork up front to avoid the bad tenants.
- If you don’t feel comfortable screening tenants yourself or have had a problem doing so in the past, consider paying a rental management company to do it for you.
- Some rental management companies can be hired just to find a tenant if you don’t want to pay them to actually manage the relationship moving forward and want to do that part yourself.
- Use the Internet: Google each applicant’s name, check their social media including for their LinkedIn profile and work history. You’d be amazed at what you might find. Some people rent places, skip paying rent and stay in the house until they kicked out, and then find a new place to rent and do the same thing. This is in the public domain so you can consider it.