Did you know that 20 percent of adults between the ages of 20 and 29 in the United States don’t know their credit scores? Owning multiple rental properties is a wonderful way to grow your wealth and make a passive income, but there are a number of things that you need to do when it comes to tenant screening, like a background and credit check for tenants.
There are a number of reasons to screen your tenants, from protecting your property to ensuring that all of your tenants have a safe place to live. For this reason, it is vital that you learn how to perform a background check and credit check on potential renters.
The good news is that you’re in the perfect place to learn all about why check a tenant’s credit history and background. Keep reading this article to learn more about tenant screening and its benefits today!
1. Avoid Dangerous Tenants
The most obvious reason why you’d want to conduct background and credit checks for tenants is to avoid renting to someone that is dangerous to themself or those around them. It is a scary situation to find yourself stuck with a tenant that puts you or others in harm’s way.
Learning how to perform a background check is a wise move because you’ll have an idea of who you’ll be renting to before signing any documents. Tenants that have a history of violent crime or that are registered sex offenders could put your other tenants in an unsafe position.
Even if you find that your potential tenant has a criminal history, it is a good idea to do your research and understand what happened. You shouldn’t rule out these tenants immediately. If the criminal issues happened a long time ago or the acts were minor then you should consider giving them a shot as a tenant.
If the crime is a more serious one then you’re better off trusting your instincts. If you get a bad feeling about the person then avoid signing them on as a tenant.
2. Financial History
In addition to learning more about the potential tenant’s criminal history, you’ll also get a chance to learn about their history with money. The purpose of tenant screening is to find out about if the person will pay their rent on time each month and whether or not you can trust them. This is why you check a tenant’s credit history.
You’ll have peace of mind when you run a potential tenant’s credit history because you can have a clearer idea of how reliable they are. Some tenants will run out on what they owe you and never end up paying. You don’t want to find yourself in a situation like that, so you’re better off learning how to run a background and credit check for tenants.
Some troublesome signs to keep your eyes out for are large credit card debts and unpaid loans in the tenant’s past. These are key reasons to screen your tenants because you can feel comfortable knowing if you can trust the person to pay.
Many young people have lower credit scores. You should consider giving them the benefit of the doubt when they come to you with an application to rent from you. Many of these younger people have student loan debt that makes each paycheck difficult to manage.
3. Discover Legal Battles
Another of the many reasons to screen your tenants is to find out about their legal battles. Use a civil search to find out their history of going to court with other people and suing others. Taking this step will show you the number of times that this potential tenant has been in court and give you the reasons behind those court battles.
Looking at their legal battles will give you a clear-cut view of what happened so you can decide whether or not you feel comfortable renting to them. If there are any legal battles that resulted from the potential tenant getting sued for unpaid bills then you should know then and there to steer clear. This is a huge reason why landlords report rent to credit.
4. Learn About Eviction History
If your potential tenant has a history of getting evicted from rental properties then that is another big red flag to look out for. No landlord likes evicting tenants. It is one of the worst parts of the job when it comes to owning rental properties.
Your best bet is to talk to the potential tenant to try to get more details behind the eviction story. Even with their side of the story, a history of getting evicted should give you major pause. Eviction is often a last resort for landlords, so something severe would need to happen for the tenant to get evicted.
Most landlords offer warnings to their tenants multiple times prior to evicting them from their property. These warnings are both written and verbal. Many tenants that get evicted are unreliable and dishonest, so keep that in mind.
5. Stories From Previous Landlords
Another big reason why tenant screening is important is the chance to get the other side of the story from previous landlords. You’ll learn a lot about each potential tenant when you run background and credit checks for tenants. Doing your own research and getting in touch with past landlords is one of the last pieces of the puzzle when conducting tenant screening.
Start by asking potential tenants for the contact information of previous landlords. You can get in touch with that person and learn all about the rental history of your potential tenant before agreeing to rent to them. You’re likely to get a great recommendation from that landlord, but you’ll get peace of mind since you have more information on the person you’ll rent to.
Other times you’ll get horror stories and hear everything that you need to know in order to determine that the renter is not someone you want to deal with. Perhaps they damaged property or cheated the landlord out of money during their time renting from that person.
6. Contact Their Employer
If you’ve ever filled out an application to rent an apartment or condo then you’ve likely needed to provide the contact information of your employer. Talking to the employer of the potential tenant is a big deal because it will give you an idea of how the person conducts themselves at work.
If the tenant doesn’t have any previous landlords or renting history then the employer is a great resource. This happens often with younger people that are just out of college and looking for a place to call home. Finding out that this person shows up to work on time and handles themself in a professional manner will give you confidence that you can trust them as a tenant.
You can get a direct reference from their employer regarding how they treat their coworkers as well as their managers. If they’re kind, respectful, and responsible then they’re someone that you should have confidence in as a tenant going forward. That’s the type of person that you want to work with a landlord.
7. You’ll Learn About Their Future Plans
Another good idea to consider when you’re going through the process of tenant screening is asking about the tenant’s future plans. Ask them questions about what they picture for themselves on a short-term basis as well as a long-term basis.
There are many things that you can find out about the tenant during the screening process. Their criminal history, renting history, and credit history can paint a picture of someone that you feel comfortable trusting and renting to. The interview is your chance to learn more about the person directly from them.
Reference checks and background checks will tell you a lot, but you can’t get the whole picture when you go that route. Make sure that you ask the potential tenant about where they see themselves in five years. Learn more about their plans for the future and what they want out of life.
The process of finding tenants is time-consuming and expensive. Asking questions about their short-term and long-term plans can give you insight into how long they foresee living in your rental unit. It is wise to find tenants that have plans to stick around for a while.
Not only will long-term tenants make your job easier, but they’ll provide a steady and consistent cash flow to your monthly income. You have a tenant that you can rely on and trust.
Start Conducting a Background and Credit Check for Tenants Today
Becoming a landlord is one of the first steps toward growing your wealth and enjoying a relaxing retirement. A big part of being a successful landlord is doing a background and credit check for tenants before making the decision to rent to them.
Make sure that your tenant screening process involves talking with previous landlords as well as the tenant’s employer. You should also keep an open mind and get every side of the story if there are past issues.
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