Your cash flow from a rental property can be compared to water running through a pipe; every pipe leak is an income loss. Hence, your job as a property owner is to ensure that these leaks are minimized or done away with if ROI or return of investment is your topmost goal.
Maximize your ROI; find good tenants.
Tenants are the lifeblood of your rental property business. Without them, your vacant property will not be able to generate an income. However, while tenants are what you need, you also have to ensure that losses and leaks are minimized and it cannot end up like that unless the tenants you have accepted are responsible payers and occupants in general. Clearly, here’s where tenant screening is necessary.
If you want to have a continuous cash flow out of your property investment, having a stable and reliable renter who is highly likely going to pay on time and take care of your property should be the answer.
Tenant screening is a vital step that you, like all other rental property owners, will have to effectively and efficiently go through in order to attain a maximized return of investments and profits. However, no landlord is really good enough to accurately predict whether a prospective tenant is a good one or a headache bringer unless he’s got all authorized accesses to relevant information. And unless you hire a credible team for extensive tenant screening services, your future decisions whether to accept an interested tenant or not will less likely guarantee a good outcome.
Nevertheless, below are a number of steps that should guide you towards finding excellent renters:
1. Lay out an organized rental application process.
Although it sounds quite formal, preparing a detailed application form can actually serve as a great help in initially screening your prospective tenants. This will help you remove from the list the ones that are clearly not qualified.
What should be in the form?
The general rule is that the applicant should be over 18 years old. All other questions about an applicant’s basic information including whether they own a pet or not should be indicated in that form.
If preserving your property is one of your topmost concerns, this application process should also greatly help you decide if the prospective tenant can help you with it or otherwise. In this case, you will want to find out how many occupants are moving into your property; chances of wear and tear are amplified the more occupants your property accommodates.
Moreover, the applicant’s housing history is another area that you may also want to scrutinize if you want a stable income for a longer period. It will help if you know how frequent the applicant moves from one place to another. Information about how long the applicant had stayed in his previous place, whether it was for years or only months long, should speak volume of how stable your income will be for the next period. That said, transient tenants should be a red flag if tenant screening more than once in a year tires you out.
Lastly but most importantly, the applicant’s job history should also be a part of your audit. Their career arc will tell you if the tenant can afford to pay for a long time or otherwise. Do not easily fall for tenants who can pay the first three months’ worth of down payment. You barely know where that money came from.
2. Run an extensive tenant screening.
As soon as prospective tenants have submitted their filled-up rental application forms, generate a tenant screening report and start the actual screening right away after you have successfully crushed out the names of the least qualified ones.
Here, you will also need to look into each of the applicant’s credit history. Therefore, you may need to seek their credit files for a fee if possible. Apart from this, another important report you will also want to obtain is the applicant’s criminal history and public records. Not taking this matter into account not just puts your property at risk but also the safety of the neighbourhood as well.
The problem here, though, is that more often than not, access to this critical information is limited to uphold confidentiality besides the safety standpoint. This is why there are accredited tenant screening service providers who are authorized and permitted to do the job. These providers have earned their permits to access credit reports, criminal history, and other information that can significantly help in identifying which prospective tenants are safe and good, or otherwise. Seeking their help will save you all the hassle, time, and the numerous expenses that you would have to spend or bear in exchange for incomplete information. Tenant screening services promise convenience and now, a lot of them are already affordable. Allowing these providers to help you will be a great decision you will come up with as a rental property owner.
3. Seek other information that will be of help to you.
You can even call the applicant’s employer if you wish to just know what kind of employee your prospective tenant is. If the applicant has shown up an impressive attitude, then most likely he’s not going to cause you unnecessary headaches as well.
All the other information that will help you gauge how responsible, trustworthy, and conscientious your prospective tenants are should also be worth finding out; liars deserve instant rejection.
4. Talk with their former landlords.
Their former landlords can greatly offer a wealth of information about what kind of tenants your applicants are especially with regards to their paying behaviours. Late payers are bearable but with a limit. How well they were as occupants should also be gauged. If they constantly called to demand upgrades of property, then you might want to consider raising a red flag.
5. Know about their current location.
You have to carry out this step as secretly as possible. In terms of importance, knowing about where they currently stay will help you get a sense of how they actually live and maintain their place. Do not accept tenants with poor hygienic practices because more often than not, how they currently behave, whether smooth or rough, will be how they will be behaving once they have occupied your property.
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