Tenant Background Checks: Practice Due Diligence
By JD Esajian on January 13, 2014
As a property owner and a prospective landlord, you will spend months worrying that every last detail of the purchase goes according to plan. You will check each item on title and every line of the settlement statement until you are 100% confident that nothing can go wrong. It is surprising, but these are the same people that will spend less than one day in finding a tenant to occupy that very same property. One bad tenant can ruin all of the good work you have done over the past few months. If you are considering renting out your property, you need to put the time in and properly screen your tenant.
All it takes is one bad tenant to change your portfolio and negatively impact your business. A good tenant is one that, first and foremost, pays on time. After that, you want a tenant to take care of the property in question. Many landlords have been duped by smooth talking tenants or ones that come across as desperate to live in the house. They will pull at your heart strings until you decide to rent to them. What you will find is that they move from one house to the next, sometimes paying for a few months before leaving you high and dry.
Preforming your own due diligence is the best way to avoid a scenario like this. You should have a system in place that allows you to present your tenants with an application and follow up as you see fit. The application can be general in nature, but you should get a social security number to pull credit and at least a few references of past landlords that you can call. If they are reluctant to give you this information or there is a story that seems to be attached with every past landlord, you may be looking at the wrong tenant for your property.
Having potential tenants fill out an application is not enough. Once the application is done, you need to take the time and follow up. Look at the credit report or call past landlords. Ask them their name and if they own any other properties. Desperate tenants will often give names & numbers of friends in the hope they get a lazy landlord who does not follow up.
It is OK to give the benefit of the doubt to someone that has a low credit score, but pays everything else on time. What should never be overlooked, however, are any past evictions. If they can do that once, they can do it again.
Who you rent to is as important as the property itself. You may not need to go back and ask them what happened on a credit card from 10 years ago, but you should feel confident that whoever you rent to will pay on time and take care of your house. Even if you are desperate to find a tenant as soon as possible, you need to spend the time to get the right one instead of anyone. It may be convenient to fill the vacancy now, but in six months you could be facing a much bigger problem if you rent to the wrong tenant.