8 Tenant-Screening Myths

Myth #1: Go with Your Gut Most landlords know that using their gut to judge a person is not the wisest decision. According to a 2016 survey done by the TransUnions screening service, SmartMove, 86% of landlords said they verify an applicant’s information before signing a lease. However, there are still thousands of landlords a year that are duped by rental scammers who prey on “gut-feeling” landlords. The applicant might look perfect on paper, but are they really? No matter how strong your gut feeling is, never assume that an applicant’s self-provided information is accurate. If they claim to make an astronomical amount as a self-employed individual and are offering to pay the year upfront – that should be, at the least, a yellow flag. While rental applications are designed to collect information about the prospective tenant, that alone is not enough. You need to take caution to protect your property and rental business. Take the time to verify income and employment. If they’re self-employed, they should be able to provide you with their tax returns. If someone shies away from full transparency, move on to the next. You’ll be glad you did. Myth #2: A High Credit Score = A Great Tenant Their number doesn’t tell the whole story. A high credit score doesn’t necessarily mean an applicant will respect your property and, conversely, a bad credit score doesn’t necessarily mean an applicant would be late paying their rent. Younger applicants—especially Millennials and Gen Z—may have little to no credit history. Furthermore, someone that has recently gone through a divorce or has been battling cancer may have a lower score because of their spouse’s debt or outrageous medical expenses. There is not a definitive “good” credit score when it comes to renting. Many factors determine creditworthiness. An in depth report will tell you what those factors are to help you better judge what their score means to you. Pro-tip: One rental scam to be aware of is for applicants to provide a copy of their own credit report, which could be outdated or fake. Myth #3: Ability to Pay Rent is the Only Thing that Matters Rent non-payment is the number one concern for many landlords. Especially this day in age with statewide eviction moratoriums in place. Without rent from your tenants, you may be unable to fork out the mortgage payment for your income property. According to a Statista survey, 16% of low-income renters reported being unable to pay rent for at least one month out of a three-month period. It’s easy to see why landlords put their primary focus on a tenant’s ability to pay rent. However, only focusing on payment ability during the tenant screening process, could mean missing other red flags. Myth #4: The Landlord Pays for the Tenant Screening Landlords can pass the cost of a tenant screening onto each rental applicant as part of the application fee. The average rental application fee ranges from $30 to $60. This fee can cover both the cost of the hard credit/background check and the time spent screening the applicant. As a quick reminder, you should review all laws applicable to you and consult your legal counsel with questions (we’re not providing legal advice in this blog). Myth #5: Any Tenant is Better than Vacancy If you have few qualified applicants to chose from, you might be tempted to fill a vacancy with a subpar renter. Before you do, consider this fact – vacancies cost an average of $1,750 per month, but evictions cost $3,500 or more. Rushing to approve any tenant can have serious repercussions causing you a major headache and potentially major losses. In the worst-case scenario, you could end up with a tenant that fails to pay rent and refuses to leave, forcing you to go through the eviction process in an effort to remove a squatter. Myth #6: Checking a Tenant’s Credit Hurts Their Credit Score Prospective tenants may be concerned that a credit check can negatively impact their score and they may use that as the reason to avoid a credit report. Don’t fall for this one – it’s not necessarily true. It’s important to understand the difference between a soft inquiry and a hard inquiry. Traditional credit checks require a tenant’s Social Security Number. This “hard check” or “hard inquiry” can cause an applicant’s credit score to drop. However, there are options to pull a “soft” credit check. With a soft credit check, through a service like SmartMove, an applicant requests the report on their own which results in a “soft pull” that has no negative consequence on their credit score. Myth #7: Checking One Reference is Enough You should always consider an applicant’s references, particularly their previous landlords. Don’t think speaking with just one person is enough. It’s important you reach out to the tenant’s employers and past landlords. An employer reference will confirm the tenant’s employment with the company and their income. A landlord reference will confirm the tenant’s residency, rent amount, and timeliness of payments. Be advised that due to HIPPA laws, there are only a select few questions landlords may answer such as: if the person rented from them, how much they paid in rent, if they were ever late, if they gave proper notice, etc. Myth #8: Tenant Screening Takes a Long Time If you’re a new landlord learning how to screen tenants for the first time, then you should know that there are several different ways to get information on rental applicants. Some methods may be time-consuming, but there are other ways to check an applicant’s background and get quicker more accurate results. Traditional background checks are robust and highly recommended, but they can be very expensive and you may not care if the applicant got a speeding ticket last month.These background checks require an extensive amount of research to pull such a large volume of data together, which means that you may wait days or weeks for information you don’t necessarily need. Another way to check an applicant’s background is by using online people search databases. Doing a self-search, you can find: Sexual assault offenses History of bankruptcies Judgments Address history Marriage records Forget the Myths and Find the Facts with Comprehensive Tenant Screening With all the myths and scammers out there, renting out your property may sound daunting, but it doesn’t have to be. Placing the wrong tenants in your property can mean spending thousands on damages or eviction proceedings, but almost all these screening myths can be countered with a thorough vetting process. A good property manager not only has the tools to pull all the proper checks on an applicant, but they know how best to identify scammers, weed out the bad apples, and properly vet the good applicants. True Property Management uses a thorough 3-tier screening process, checking a prospective tenant’s credit, background, and eviction history. They verify income and employment, speak with past landlords, and personally meet each of the applicants. Because of this in-depth screening process, their eviction rate is less than 1%. Employing a property manager may cost a little extra, but it will save you thousands in the long run…not to mention the time, energy, and headaches you’re …

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