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Every landlord's number one nightmare, more than a crumbling building or a quiet market, is getting a bad tenant. It's expensive to remove a bad tenant from your property, but it's more than that.
Landlords dread the stress and hassle of having to go through a court process to remove someone who owes money or has damaged their property.
That's why a tenant background check is essential. Here is how to get it right.
What Are Credit Reports?
When choosing a tenant for your property, you want to know if they will pay monthly rent payments on time. That's where the credit report comes in handy.
It's an objective report outlining that person's history in handling financial matters.
It will tell you if they always pay debts on time, late, or not at all. It's a bit like a risk assessment, giving you a good indication of whether you'll face a bad tenant who leaves without paying what they owe you.
Rental Background Screening
When handling a tenant screening process, credit scores and reports are only one aspect. You'll also need to run some comprehensive background checks. This will include checks into:
- Criminal history
- Previous landlord reports
- Previous evictions from rentals
- Proof of employment
- Proof of identity
It's essential that you don't skip any of these checks because anything amiss could result in a bad tenant later, costing you time and potential property damage. It's the best way to spot red flags and help protect your real estate investment from trouble.
Checking a Tenant's Proof of Income
Tenants may fall in love with your property and commit to the rent, even when it's beyond their affordability. That's why you need to check their income. You can do that in several ways, including:
- Asking for bank statements
- Requesting tax returns
- Requesting pay stubs
You should also consider other relevant factors, like whether the tenant's income and job are permanent. Self-employed or inconsistent income earners may be more of a long-term risk.
Tenant Verification and Asking for References
When a tenant completes the application to live in your property, add some fields to the form where they can provide references. This is useful if a tenant lacks a credit history.
Ideally, you want references from previous landlords, as they can provide the best picture of whether that tenant will be reliable. However, for some tenants, this will be their first property. In this case, you can ask for character references, such as feedback from an employer.
Legal Screening Processes
There are laws you must follow when undertaking any tenant screening. The Fair Housing Law, for example, forbids you from discrimination based on information in the screening.
You can't discriminate on grounds of race, religion, or family status, for example. You must also follow data privacy laws, ensuring that all personal data remains safe, secure, and private.
Getting the Tenant Background Check Right
The most important rule to remember when conducting your tenant background check is to be comprehensive. Leave no stone unturned because the costs of a bad tenant are high.
SJC Management Group has an exceptional team to manage our landlords' properties, offering peace of mind and a hassle-free approach. Head here to find out how we can help you with tenant screening in Puyallup, WA.
