How to Screen a Tenant

If you get nothing else right in your rental business, you should learn how to find and screen the right tenant.

Do it yourself landlords frequently rely on gut feel when deciding whether to lease to an applicant - not to mention this may subject you to a Fair Housing violation.  While that may work for someone who has been in the business 15 years - those of you who are just getting into the business should avoid this inconsistent and subjective practice.

I think there are two common reasons new landlords do this.

The first, is they are willing to listen to a story from a potential tenant.  The "reason" their old landlord is a shoe and why they need to move this weekend.  The money now is just too tempting for the newbie investor.  

The second reason is that new landlords find it difficult to find a reliable source to underwrite or screen their applicants because they don't have the volume of a traditional property manager or sizable landlord.

My advice, give up the short term pain (one extra week on the market or a little bit of time finding a screening source) for the long term well being of knowing you are getting the right tenant in your home.

So, what should you look at when screening a tenant?  Let's take a look.

1. Credit Score - It blows my mind when landlords and investors don't use credit score as an indicator of whether a tenant will pay the rent or not.  You have 3 enormous companies that spend all their time figuring out how creditworthy an individual is and reduce it to an algorithm and a number that huge financial decisions are made off of by very smart companies, and we choose to say that this doesn't work for me.  The whole point of a credit score is to tell you whether the person pays his/her bills!  Use it.

2. Income - I think everyone will agree that someone has to have the money to pay for a home.  Unlike credit, few people disagree with this one.  The only bit I would add here is to verify the income.  Don't rely on what someone says is their income, but make sure you verify it with paystubs or income tax returns.

3. Criminal Background - A lot has been made of this lately so I won't bring the argument to this blog post.  However, if someone committed a violent felony 2 years ago, you don't want them in your home.  We've decided that if we feel like the person poses a risk to the home or their neighborhood, we don't want to rent to them.  And yes, a criminal background check will reveal this.

4. Previous Landlords - This was has become easier and easier to fake, but if you can call a previous landlord or at least ask them the question, "Would you rent to this person again?"  It sure COULD make your life easier.

These are the top 4 I think you should look into when you decide whether you are going to lease to someone?  

I'm interested to know, is there anything I missed?

Is there something crazy or unique you do that you think is a silver bullet to find an awesome tenant?  

If so, please post in the comments below.