Screening and selecting tenants is easily the most important decision a property manager makes, whether they represent a landlord or are the landlord themselves. It may not be quick and easy, and sometimes it's downright tedious, but it can make or break the profitability of your rental property. Here are a few tips to help you successfully screen your rental applicants, and determine which one will be most likely to perform well.
Step 1: Finding Strong Prospects
Where you advertise, and how you publicize your rental vacancy, is the first step in the screening process. Who are you trying to reach, for your rental property? If you're looking for young professionals, then Craigslist or Hotpads may be great spots to list your rental, but remember that this form of advertising will reach certain demographics disproportionately (younger, middle class, professional). If your rental property is in a largely Hispanic neighborhood, you might consider advertising in the local Hispanic newspaper (and in Spanish!). The trick is to consider your target demographic carefully, and then try to reach them as directly as possible through the resources they're most likely to reference. Finally, remember to put a For Rent sign in the window, to reach local foot traffic.
Step 2: Collecting Rental Applications
So you've started advertising, and your phone has started ringing; now what do you do? First, set up an open house for the upcoming weekend, and take a stack of pens and rental applications with you (you can find free rental applications on EZ Landlord Forms). Have interested prospects fill out the rental applications on the spot, and sign them, authorizing you to perform background checks on them. Be sure applicants fill in their dates of birth, social security numbers, full names, employers' contact information, income information, landlord contact information, and current addresses. Finally, collect a reasonable application fee (most landlords collect around $20 per application), which is absolutely critical: first, it separates the applicants who are serious from those who arent, and second it will pay for the expense of the background checks you'll have to do.
Step 3: Interviewing Applicants
Only six people showed up to your open house, when twenty people said they were coming! What happened? Unfortunately, you'll have to expect a low turnout rate, especially for lower-end rental properties. This is another reason why it's important to advertise well and reach as many people as possible up front, and to schedule an open house instead of meeting rental prospects individually. After the prospects finish filling out the rental applications, glance over it quickly and interview them on the spot. Ask about their jobs, their roommates/families, their pets, their lifestyles, etc. This will help give you a gut feeling about the applicants, which turns out to be accurate more often than not.
Step 4 Perform Your Due Diligence
The open house is over, and you've collected a series of rental applications and performed all your interviews. Take a closer look at your rental applications, and discard any that aren't promising or who gave you a bad impression in the interview. Of the remaining applicants, pull their credit reports and/or background checks (this can be done through sites like SafeRent or NTNOnline), and start calling employers to verify income and employment. You may also want to speak with rental applicants' current landlords, but beware: the easiest way for a landlord to get rid of a bad tenant is to sing their praises to the next landlord that comes along! As a final step, visit the applicants at their current residences to see firsthand how they live, and how they treat their residence.
Step 5: Sign a Strong Rental Agreement
Once you've found the perfect tenants, it's time to sit down and sign a strong rental agreement with them. The most important part of using any rental agreement is making sure that it complies with your state's landlord tenant laws, and contains all the necessary legal language for your state. You can find a state specific rental agreement online at EZ Landlord Forms, or by going through your real estate attorney, but the importance of a legal rental agreement can't be overstated, as it will be the first evidence reviewed if you and your tenant ever have a dispute.
Congratulations! With a promising new tenant in place, you can hopefully relax until your rental agreement needs to be renewed, and enjoy the benefits of being a landlord.
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