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Updated over 4 years ago, 08/02/2020
Best ways to do Background and Credit Check on new tenants.
Hi everbody,
my husband and I are just starting in Real Estate business. Our 1st tenants we have inherited as we purchased our 1st investment property over a year ago. In 2 days we are closing on our 2nd investment property and I did all due diligence in listing and marketing the property, communicating with all interested people and selecting potential tenants. I've scheduled individual showings of the property the next day after the closing to 7 different prospective tenants that we've selected.
This is our first experience having to find new tenants. My husband has a full-time job, so I am managing all this process by myself and since I am not familiar with the protocol on how to screen tenants properly and what steps I should take and in which order, I'd like to ask if anyone can help. Should I first find 1 tenant that we would consider to rent our property to and run their credit and background check, previously collecting the application fee (also, what's the right amount?) or to do things in a different order? Our lawyer advised that once we collected the application fee from them and their background and credit check came back good, then we have to rent the property to them by law.
Anyone can give any advise? I read a lot of forums on here where it is advised tenants to go to different websites to do their background and credit check because of the fact that only they can answer those security questions. Is that right? Or there is a way where I can run a background and credit check on them myself?
All your advice is most welcome :)
Kate and Jeff
Hey Kate. Congrats on buying your first (and second) rental! There's a few things you can do.
There are services like cozy.co where the tenant pays the application fee directly to cozy and goes through the screening process. I'm not too familiar with how cozy works, but I believe that you get a copy of the applicant's credit report. I'm also not sure how much control you have over specific criteria. Someone else probably can shed light on that.
A local PM company might be able to screen them for you for a fee. The con here is that the PM company won't be able to share certain details with you, so you'd want to thoroughly vet their criteria.
There's also services like Transunion SmartMove (there are a few Transunion reps that pop in and out of the forums here) that you can use to screen https://www.mysmartmove.com/
Thank you, Alex!! It's so exciting! Our 1st tenants turned out to be very good, we collect direct deposit from them which works excellent for us. Thank you for your suggestions. Sounds like mysmartmove.com may be the way to go. When you choose a tenant, how do you usually word it for all other interested and qualified applicants that you chose 1 tenant and you go with them? It's not necessarily that others do not qualify, we have a lot of qualified perspective tenants, it's that we only have 1 property (1 house) to rent to them. What do you say to the rest of the qualified applicants that you won't run their credit and background check because you already chose another tenant?
@Kate K. Yes, going through a third party to run a background check and credit report is both the legal, smart and financially smart move to do. If you use an online software or program as a landlord, which is usually free to you, in your rental application you can require a background check and the applicant will pay that fee - usually $35-45 depending on what you want. TransUnion does have a great system and are very trustworthy - also, it will depend by state what is allowed to be shown on their background checks etc. Furthermore, you don't want to have the responsibility of collecting an applicant's SSN and then keeping it - they probably wouldn't trust you and it's a liability for you and could come back to be a legality program - you never know what could happen. I think your lawyer is misinformed - because a tenant chooses to pay for a background check themselves without signing anything on your part, you won't be legally obligated to choose them over another applicant who has done the exact same thing. They choose to pay the fee and the money isn't going to you, it will be to TransUnion or whatever the third party is - if they don't want to pay then they won't get screening and you don't have to accept their application. Hopefully, this is helpful, but I would double check with your state's laws - if there is anyone on BP from Illinois who knows that would be good to!
Hey @Kate K. -- congrats to you and your husband, sounds like things are moving along quickly!
There are a variety of online tenant screening options that can help to make your tenant screening process 100% easier and faster! If you're planning to screen your prospective tenants yourself, I highly suggest that you conduct a thorough screening, which would include a background and criminal check, credit check, eviction history check, and income check.
Feel free to connect if you'd like more in-depth information on service recommendations.
Best of luck!
Sam Decker
Members of Illinois REIA have access to Rent Perfect. A national credit, eviction and criminal history screening service. Rent Perfect does a soft pull which does not impact the applicants credit score.
That takes care of the knowns. The other thing is, whenever possible go see where they live now. Pigs are Pigs and the only thing you would be changing is their sty.
Originally posted by @Kate K.:
Thank you, Alex!! It's so exciting! Our 1st tenants turned out to be very good, we collect direct deposit from them which works excellent for us. Thank you for your suggestions. Sounds like mysmartmove.com may be the way to go. When you choose a tenant, how do you usually word it for all other interested and qualified applicants that you chose 1 tenant and you go with them? It's not necessarily that others do not qualify, we have a lot of qualified perspective tenants, it's that we only have 1 property (1 house) to rent to them. What do you say to the rest of the qualified applicants that you won't run their credit and background check because you already chose another tenant?
We refer people to other listings that they'd be approved for based on how much they make. If it doesn't work out for them for one house, we try to make it work for another! If they don't find anything, we would refund their application fees (as long as they were approved) upon request.
Thank you everybody for your input and for sharing your thoughts and opinions!
I used . smart move and loved it, easy to read, easy to handle, very trustworthy, quick
@Kate Koeller
Rentprep
So I used SmartMove. Seems like it works good. I don't have anything to compare it with, but it gives some information on potential tenant's payment history and if there isn'y any criminal records, it just shows "0". I am not sure why it shows in income insights that applicant may make 5k or more less than they claimed. I will find out today when I will look through the W-2s and paystubs that they have sent me today. Thank you for your advice!
Hi, all! It's been over a year since I posted my question, I learned to advertise our property, interview, screen and choose the right tenants for our property. So I now wanted to share our experience, that thanks to all your suggestions and to BiggerPockets I've screened of an overwhelming amount of interested perspective tenants, I've interviewed them all, screened and chosen the best ones that are renting from us since last May (for a year and 3 month at this time). Thank you, thank you, all for helpful tips and suggestions! Ask away if you yourself would have any questions to us :)
