Any major investment involves risk, and renting out property is no exception. If you rent to a bad tenant, you could face financial difficulty. Some people just don't pay rent on time, damage the property, or cause other problems.
A landlord in Maryland, for instance, faced $1200 in expenses after a tenant failed to report a water leak issue. Talk about Negligence!
Thankfully, there's a way to deal with these issues. By doing a tenant background check, you can figure out the kind of person a potential applicant is. That way, you can avoid renting to someone who might cause you problems.
So, how exactly should you do a tenant screening? Read on to learn more.
Understand the Law
First, you'll need to understand the local laws. Federal laws apply to doing background checks for a rental property. For example, the Fair Housing Act states that you can't refuse to rent to someone based on a protected characteristic.
There are also California-specific regulations. California is a state with strong tenant rights, so you always need to ensure you follow local laws too.
Get the Information You Need
Once you're sure you understand the legal regulations, you're ready to start the tenant background check process. You'll need the potential renter's full name, date of birth, and social security number.
You should also ask them for information about their previous rental history. For example, can they provide you with a reference from a previous landlord? An applicant who can't do this may have something to hide.
Do a Credit Check
A credit check is a key way to see if an applicant can afford the rent. Generally, you'll deal with a major credit bureau to get financial information about a potential tenant. You'll need to look at things like credit score, outstanding debts, and payment history. Be cautious of anyone with a lot of debt.
Do a Criminal Background Check
You'll also need to do a criminal background check. In the US, you need to take a holistic approach. A common mistake is that landlords only consider criminal records at the state level. This could mean you overlook any criminal background involving federal crimes.
Verify Employment and Rental History
You'll also need to take the time to verify the applicant's claims are true. Another classic mistake is to simply believe everything the applicant says. Later, it comes to light that the evidence was made up!
It's not unheard of for applicants to totally invent references, so always verify.
A Property Management Company Can Help You with a Tenant Background Check
As this article has shown, there's a lot to consider when doing a tenant background check. Not only do you need to consider the applicant's finances, but you also need to consider their character. Verification is also crucial.
This might sound like a lot of work. That's because it is! It's no surprise many landlords choose to outsource this process to a property management company.
PMI East Bay is standing by to help you do a deep dive into any applicant. We have decades of experience helping landlords like yourself do comprehensive background checks on rental applicants.
We always strive to help you get the maximum value from your property. Contact us today to learn more about how we can help.
