If you own a rental property, it’s important to take certain steps to avoid the major landlord headaches that come with managing unreliable tenants.
To do this, you need to make sure your screening process weeds out tenants who may be financially unequipped to sign a lease or who have a history of damaging other properties. Screening should include conducting background checks on all prospective tenants, and such checks can easily be incorporated into the application process.
If you’re not sure where to start, don’t worry. Here’s a guide to everything you need to know about conducting background checks on potential tenants:
Why Is a Background Check Important?
A background check is used to look at the prospective tenant’s past as it relates to their financial status, personal history, and other areas that may affect their agreement with you as a potential tenant. It will shed some light on their previous renting habits, any late payments, and current loans. It can also be used to check if a tenant has any previous criminal convictions that you should be wary of.
These checks are essential as they help you screen candidates before you agree to them rent your property. Without a background check, there’s every chance you could end up with a renter who has a history of missing rental payments, has been in debt several times, and has a terrible credit score. Or worse, you could acquire a tenant who has recently been in criminal or other nefarious activities.
With a background check, you ensure that the person that’s renting your property is trustworthy, will pay their bills on time, and won’t cause damage to your property.
What Should You Do before Performing a Background Check?
Before you start running a background check on a potential tenant, you need to develop an application process. Start by setting up an application form that people can fill in and send back to you. You can use this example by RentChecks, or you can create your own personalized form if you want to add certain sections to the applications. For an easier set-up, places like LawDepot will create an application for you based on the information you are seeking to acquire and allow you to download and distribute it to prospective tenants.
Regardless of how you choose to set up your application, your form should require the following information from each potential tenant:
- Employment information/history
- Financial information/history
- Personal info
- Number of people living in the property
You’ll want your application to require other information as well, such as if they own pets, but these are the key things to be wary of. Ideally, the application should give you an idea as to who the tenant is and what their current financial position looks like.
We recommend requesting a small application fee—around $20 —from each prospective tenant. After all, if they can’t afford to pay a small application fee, then how will they afford to keep up with regular rental payments? A fee can attract only those tenants who are serious about and prepared to rent your property.
Always clearly state that you are carrying out a background check following the completion of the application. Applicants should be made aware, and notifying them that you plan to conduct a background check can deter potential tenants from lying on the application.
To go through with a background check, you’ll have to ask the prospective tenant for their social security number and get their signature of permission, so make sure this information is also requested on the application.
How to Perform an Official Tenant Background Check
Now that you’re in a position where the background check can be carried out, collect the applications from your prospective candidates and see which ones you’re considering choosing. You can take out any applications that don’t meet your minimum standards as a landlord.
Once you’ve selected your candidates, contact a respectable company that has experience conducting future tenant background checks. A company like RentPrep can help you with this, and they even have different packages to help you choose what should be included in the check.
How Long Will the Background Check Take?
The time it takes to perform a background check may vary depending on how difficult it is to find information about the tenant. However, it will typically take anywhere between 1 and 3 days for the check results to be compiled and sent to you.
How Much do Background Checks Cost?
Prices can also vary depending on how thorough you want the background check to be. If you want a very detailed background check that also looks at their credit report, then it usually costs around $30 to $40. For a background check without a credit check, the price will likely be closer to $20.
What’s Included in a Tenant Background Check?
A standard tenant background check generally gathers most or all of the following information on a potential tenant:
- Social security number verification
- All previous known addresses
- List of any court judgments or creditors legal claims
- Details of any bankruptcies
- National Eviction Search for eviction history
- National US Criminal Search for criminal records
- US Sex Offender Search to identify registered sex offenders
- Global Homeland Search to identify links to terrorist activities, money laundering, and other federal crimes
- Credit check (if you pay an additional fee)
When you receive the report, you need to analyze it to determine whether or not the applicant meets your standards as a future tenant. Look for the key things first, like evictions, criminal activity, and financial information. If all of this looks good to you, then look through the other aspects to determine whether or not you’d like to continue the application process with the individual.
Other Ways You Can Learn More about a Tenant’s Background
As well as a background check, you can do a few other things to learn more about a tenant’s history:
If your background check doesn’t already include a credit check, then it’s well worth getting one through another service. Credit checks allow you to look back over 10 years of financial history to see what financial habits the tenant has had. You’ll see any late payments, all the debt they have incurred, any loans they’ve applied for, and much more. This is the best way to determine the financial stability of a prospective tenant.
Ask the tenant for information on previous employers and landlords. From here, you can contact these references to learn more about the individual. The landlord helps you understand what they’re like as a tenant, which can be so valuable for you. Obviously, employers help you see if they have a steady source of income currently.
Hire a Property Management Company
The entire application and screening process can be a lot to manage. If you want to ensure that your tenants are correctly screened, then you should think about hiring a property management company. They can acquire all the financial, personal, and historical information you need to assess your tenants. Plus, they offer expert advice on which tenants they believe are most suitable for you. As a result, you have the best selection to choose from.
In conclusion, you need to develop an application form before ordering a background check. Get the check from a reliable company and make sure you analyze it thoroughly. Conduct some additional investigations to get a deeper understanding of a tenant’s history. All of this helps you find the best tenants for your rental property. To make life easier, hire a property management company to take care of the entire screening process for you and make the application search stress-free.