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Rental Report: Tenant Screening Tips

By BethesdaNow.com

Tuesday - 4/8/2014, 10:25am  ET

Rental Report

Editor’s Note: This biweekly sponsored column is written by Rick Gersten, founder and CEO of Urban Igloo, a rental real estate firm that matches up renters with their ideal apartments, condos or houses. Please submit any questions in the comments section or via email.

If you are a new landlord, or have had a string of bad luck with tenants, you should establish a quality tenant screening process. Be sure to keep your expectations realistic. Not everyone is going to look perfect on paper, but you can still save time, headaches and money by following some of these tips.

Pre-screening – If you are advertising and screening the applicants on your own, make sure your standards are clear up front. This helps weed out potential tenants who will waste your time– you only want to show and screen those who are qualified.

Explain if you accept pets or short-term rentals. Learn the applicant’s backstory. Get their move details. When are they looking to move? How many people will be living in the unit? Where will they be working? Where did they live previously? If they are local, why are they looking to move? If they have an issue with their current place, it will help you figure out if that issue (maybe not enough space, not enough parking or a new pet) will also continue in your unit.

If you decide to deny a tenant, you want to be able to clearly explain why, and be sure there are no issues with discrimination.

You never want to be on the receiving end of a Fair Housing suit. Be sure you know the protected classes, and that you do not discriminate in advertising, showing practices or by denying applications based on race, color, religion, national origin, sex, disability, and family status.

In Montgomery County, protected classes also include sources of income, presence of children, sexual orientation and age. Once you’ve decided to move forward, the next tips will help you through the formal screening process.

Income – Obviously, the top question is can the tenant afford the rent? Generally, a good rule is for the tenant or tenants to have a combined monthly gross income of three times the monthly rent.

If the prospective tenants don’t meet that minimum, then you have to decide if you will accept co-signers. Co-signers will need to complete the full application process as well. Remember, they not only need to make up for the income difference on the rent for your property, but also be able to afford their other commitments.

Employment verification – Do they have a job? How long have they been in their current position? Is there relative stability in their position?

Especially in the Metro D.C. area, many renters are not only new to the area but possibly new to the job market. An offer letter from their new job might need to suffice for employment verification.

Depending on the position, some offer letters will note if the position is temporary or permanent. You can also feel confident that the applicant went through a pretty thorough screening process with his or her new employer. That doesn’t mean you shouldn’t do your due diligence.

For those with established jobs, get their paystubs to verify the income they told you on their application is accurate. You can also request permission to contact current and past employers. You can have this on the application or have an additional form. You can ask about their dates of employment, salary and probability of continued employment (for current employees) or would you rehire (for past employees). Remember, the human resources department can only answer certain questions, so keep it general.

Landlord references – Landlord references are helpful for many reasons. For one, it helps to hear from other landlords if your applicants were good tenants. Especially when those tenants have pets, knowing the previous landlord had no issues eases the mind. It is also helpful if your applicants don’t have excellent credit. Landlord references help gain insight as to whether — at a minimum — that tenant can pay his or her rent on time.

Credit screening – This one is a must, but of course doesn’t have to be the sole indicator as to whether you accept an applicant.

If the applicant’s credit is less than perfect, ask them to explain. Life happens and credit can get messy. Issues such as job loss, divorce, medical problems and high student loans can all negatively affect a credit score, but it doesn’t mean that person won’t pay his or her rent. Determine up front if you will accept those applicants. Using the additional information gained from the above screening items can help you look at the full picture.

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