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Renters in America

6 Reasons Why Its Essential to Properly Screen Tenants

Whether you own hundreds of units or a single rental home, you are lending an asset worth hundreds of thousands of dollars. Why not spend the time and money to properly screen tenants?

Here are six reasons why it’s in your best interest to screen all rental applicants.

1. Eviction

The average time and cost involved with an eviction can add up quickly. Tenants may attempt to extend the court process to stay rent-free or buy time to apply for another rental. Even when you can get a court judgment against a tenant, it is likely they will not pay you what they owe. This can be easily avoided by calling landlord references and running an eviction report on every applicant. If you use a tenant-screening company, do not rely on a credit report alone, make sure to purchase a separate eviction search which will include records that are not provided by the credit bureaus.

2. Liability for illegal activity

As a landlord, you are responsible for keeping your community safe. If you do not run a background check, you may be liable for your tenant’s wrongdoings and could be sued for negligence. If you are sued, you may need to prove that you conduct criminal and sex-offender searches and decline applicants that pose a threat to the safety of your community and property.

3. Rental-income losses

Renting to a tenant who does not have sufficient income to cover the rent may result in an early lease termination or the tenant may leave owing you rent. This often happens when landlords do not properly verify their rental applicant’s income and debt. Be sure to purchase a credit report to find out the tenant’s monthly debt obligation and verify all sources of income by collecting W-2’s, paycheck stubs or other proof of income.

4. Reduce tenant turnover

As a rental property owner, you know vacancies equal lost rental income. An applicant who earns sufficient income, has positive references, a good credit score and a clean background is more likely to be a stable, long-term tenant. This translates to a better tenant relationship, lower vacancy rates and reliable rental income.

5. Proof of identity

Collecting a government-issued ID and using a background check to verify an applicant’s identity ensures you uncover any discrepancy or misrepresentation before making a rental decision. If you do end up renting to a tenant that unexpectedly skips out on rent, you or your collection agency will be much more likely to track them down using their verified social security number, references, employers and previous addresses.

6. Discourage bad tenants from applying

Scam artists, felons and bad tenants target landlords that do not have strict screening policies. By simply requiring a background and credit check for all applicants, you discourage tenants who have something to hide from applying. If a tenant refuses to be screened that is a major red flag and they will likely have problems down the road.

A troubled tenant can eat up your cash flow quickly. Be sure to have screening criteria based on local and federal fair-housing laws and apply the same requirements to all applicants. By utilizing a solid screening policy, you can feel confident you will reach an informed decision that will minimize the risk of renting to the wrong person.

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