Problem Tenants? Screening is the Solution

It's no secret that the cost of homeownership is on the rise and more Americans are choosing to rent. In fact, the percentage of Americans renting rather than buying their homes has increased five percent (from 36.1 to 41.1 percent) in the last ten years alone according to a recent Trulia research report. While seemingly a boon for aspiring property managers and rental landlords, the population entering the rental market also comes with unique risks.

With the long-term trend toward renting and away from homeownership in residential markets, the number of unqualified tenants applying for rentals has never been higher. One of the greatest fears for any landlord is losing money to problem tenants, a risk that will continue to be accentuated based on current market dynamics.

More than any other cohort, the percentage of millennials in the rental market increased by 10% over the same period, more than double any other generation. With limited credit history and relatively low savings, it's no wonder that one in five renters are unable to pay rent.

With eviction law overwhelmingly favorable to tenants and processes often exceeding $10,000 in legal cost, screening for the best tenants should become more, not less stringent. As the end of the current cycle approaches, landlords should be increasingly judicious in evaluating their prospective tenants when marketing rental listings.

Technology will be critical to a landlord's ability to expand their applicant pools and make the best, most informed tenant selection decision. The future of screening will be mobile, ensuring foot traffic from a viewing translates into applications received. It will also leverage the latest financial technology to remove paper from the process and yield a confident indication about a tenant's ability to pay rent in a timely manner, regardless of how robust an individual's credit history is.

Landlords only have one chance to make the right decision about approving a tenant and poor screening makes for poor lease outcomes. Arming yourself with the right screening tool will go a long way to ensuring your bottom line is not impacted by problem tenants.