Today we are telling you about how we handle tenant screening. This is one of the most important aspects of property management overall. Finding the right tenant for your home can make or break your experience as a landlord. It’s not that difficult to find the right tenant, but you have to know what to look for.
First, don’t ever make a decision based on gut instinct. Some of the best professional tenants (the bad ones) are real charmers. You meet them at your property and show it to them and they’ll have the best story in the world. Don’t listen to that story. You need to look at the facts.
The most important part of tenant screening is the credit report. We run a credit report but we don’t look at the score because scores can be deceiving. We look at the credit report from start to finish and we evaluate every part of it. You can’t just look at how many accounts they have; look at what types of accounts those are and how long they have been opened. Consider the balances and any delinquencies. Delinquencies are a big part of credit reports and 20 years ago, we’d decline anyone with derogatory credit. That’s changed because a shift in society has occurred and more and more people have at least some dings on their credit. So you need to look at whether delinquencies are isolated and recent. If their report shows financial issues that date back to 2009 and seem to still be there today, that’s a lot different than a credit report that shows seven dings in 2012 alone. The perspective is that if there hasn’t been any derogatory credit since then, the tenant is not a credit risk. Having problems every year is a bigger risk than the person with an isolated event.
Don’t stop at the credit report. Check landlord references as well. So many people don’t check these references, but you need to call them. Ask questions and determine whether they are being honest about the tenant. Have a list of questions ready for when you call. Ask how long the tenant has lived there, when they moved out and whether they would rent to them again. If the person doesn’t know when a tenant moved in, you might be speaking to a friend and not an actual landlord.
Income is also important. You want to establish whether they can afford the property. We use the general standard that a tenant must earn 2.5 to 3 times the rental amount. What you’re really looking for is the resources to pay rent on time.
These are the areas we look at when we’re screening tenants. Following your gut instinct is okay at the end, but look at the details and facts first. If you have any questions about tenant screening, please contact us at American Heritage Properties.