Investing in real estate starts with choosing and preparing properties that attract prospective tenants. Renovations, cleaning, landscaping, and arranging for trash removal are all prerequisites. The most critical aspect of success, however, is tenant screening. Signing off on a lease with tenants who haven’t shown they can reliably pay rent on time, comply with rules and policies, and take care of the property appropriately is a recipe for disaster. All the money a property owner puts into rehab, purchasing new appliances, cleaning, painting, and landscaping is for naught if a destructive, unreliable, or financially incapable tenant moves in. These common tenant screening mistakes are avoidable with preparation and know-how.
Failure To Comply With Fair Housing Laws
New landlords make mistakes with the best of intentions. Yet, innocent “getting to know you” questions could land property owners in hot water. Inquiries such as “Do you have kids?”, “Where are you from?”, or “Would you like a list of nearby churches?” could result in inconvenient legal trouble.
Fair housing laws prohibit discrimination based on race, color, sex, national origin, family status, religion, disability, and national origin. State and local housing regulations may impose additional restrictions. It’s critical to know the laws and regulations that apply in the location of the property and to treat every applicant equally.
In addition to areas of inquiry prohibited by federal law, state and local regulations may cover sexual orientation, age, or other categories. Landlords can run background checks for criminal convictions, but they can’t ask if a prospective tenant has ever been arrested. Arrests of innocent people happen every day. Criminal convictions disproportionately impact minority populations, and excluding a prospective tenant solely because of a past conviction can qualify as discriminatory if unsupported by a legitimate, substantial, nondiscriminatory interest.
Not Establishing Consistent Criteria
The safest way to screen potential tenants is a consistent way. Establishing clear, nondiscriminatory criteria for prospective tenants is a prerequisite to appropriate screening. Criteria should focus on the ability to pay rent and keep the property well-maintained (without discriminating on the basis of physical or intellectual disability). You might have a minimum credit score or a requirement that a tenant has maintained consistent employment for at least a year or two. Put criteria in writing, and have a real estate attorney vet it to ensure that no criteria you impose could reasonably constitute discrimination. Provide your criteria in advance to prospective tenants so that they can self-select if they know they won’t be able to meet your standards.
Not Screening Co-Applicants
Tenants come with roommates, partners, or other adult family members. All prospective adult occupants should undergo screening. This policy circumvents a situation where a tenant with a good credit and employment history covers for one with a poor credit score or sketchy employment history.
Every adult who will occupy the property should sign the lease and assume responsibility for rent and upkeep—and landlords should thoroughly screen each of them to ensure that they can take on the full payment if a roommate unexpectedly moves out or loses their job. Make it clear in policies that whoever occupies the property will be responsible for paying rent, keeping the place clean, and reporting any maintenance issues promptly.
Relying on Just a Credit Report
There’s a lot more to know about a prospective tenant than their credit score. Get written consent for a criminal background check, as well, and run an eviction history. Confirm employment and income. Although you cannot ask about the source of income, you can ask for proof of income in the form of pay stubs, checking with employers, or asking for a bank statement. But property owners cannot discriminate based on the source of income, and prospective tenants aren’t required to disclose sources of income they don’t want to be considered, such as public assistance, alimony, or parental support.
Not Checking References
Contact current and former employers, as well as former landlords for references. Your prospective tenant may look great on paper, but you can gain valuable insights from other property owners who had the person as a tenant. Their ability to pay rent says nothing about whether the person consistently complies with policies, sneaks a pet in where prohibited, or creates a nuisance with noise or guests. Contact references and ask pointed questions about whether they would employ or rent to the applicant again—and if not, why not.
Believing in “Gut Instinct”
Deadbeats can be charming. Going with “gut instinct” absent a thorough screening can end in disaster. Resist the temptation to fill vacancies quickly based on likeability. Every prospective tenant should undergo the same screening, and property owners should wait for results from credit and background checks before offering a lease. A charmer can talk their way around late payments, find excuses for damage, and skip out on a lease without notice. Protect yourself and your property with credit checks, background checks, and checking references. Letting screening slide because a prospective tenant “seems” reliable is a big tenant screening mistake to avoid.
Professional property managers know how to conduct tenant screenings. Excalibur Homes provides tenant screening, rent collection, maintenance services, marketing, and help in locating potentially profitable rental properties in the greater Atlanta area. Excalibur is top-rated among Alpharetta property management companies and serves property owners with rental units in Atlanta and surrounding suburbs. Investors benefit from professional property management services that provide expert tenant screening to ensure the expected cash flow from rental properties keeps coming reliably.