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5 Red Flags to Watch Out for During Tenant Screening

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The importance of tenant screening cannot be overstated.

If you don’t conduct proper tenant screening, there’s no way to avoid bad tenants and locate great ones.

Best property management software provides you with the necessary tools for comprehensive tenant screening. While you may have all the tenant screening resources at your disposal, it’s ultimately up to you to make the final decision on whether you accept a tenant.

Here are five red flags to watch out for when you’re conducting tenant screening:

1. Low Credit Score

A credit score is an indication of how financially responsible someone is. A credit score is calculated based on five components: payment history, amounts owed, credit history length, new credit, and credit mix.

A tenant with a low credit score suggests that they aren’t reliable with their credit/finances. You don’t want to rent to someone prone to making late payments or who has multiple debts on their plate. After checking an applicant’s credit score, you should continue to look deeper into the credit report to find out the specifics of their credit history, such as the severity of late payments and outstanding debts.  

2. Insufficient Income

Even if someone has a great credit history and has always made on-time payments, it’s important to consider their monthly income. A tenant renting a unit that’s too expensive for them isn’t good for anyone. They’ll struggle to make ends meet, and you’ll be at a greater risk of receiving late payments.

A good rule of thumb is that a tenant’s monthly income should be three times the price of rent. This ensures that they have enough money to pay for rent on top of their other financial responsibilities. 

You should also make sure that their income is steady. You don’t want someone who has inconsistent jobs. On your rental application, you should ask applicants for proof of income, which can exist in the form of recent paystubs, W-2 tax forms, and other related documents.

3. Unstable Rental History

Long-term renters are better for your business. A vacancy means you aren’t collecting rent, and it also means you need to spend time trying to find another tenant to fill the unit. A tenant who renews a lease reduces tenant turnover, saving you from dealing with a vacancy. If a tenant has always hopped around from unit to unit, they most likely won’t stay with you long-term.

Another bad sign is tenants with unexplained gaps in their rental history. This suggests that the tenant is irresponsible. A tenant with no rental history suggests they’re inexperienced, and while this isn’t automatically a red flag if the applicant is young, you may want to consider requiring a cosigner.

4. Previous Evictions

When a tenant consistently misses payments or damages property, you may have to resort to eviction. No landlord wants to be in this position. Evictions are time-consuming and stressful, and they can end up costing you a lot of money if you go to court. 

A tenant with one or more evictions is a red flag. If someone has been evicted before, the chances that they’ll be evicted again are higher than someone with a clear record. With that said, you should learn about the specifics of someone’s eviction before you automatically reject them, since wrongful or understandable evictions do happen.

5. Poor References

In your rental application, you should ask for current and previous employer and landlord references. If you reach out to these references, they’ll be able to confirm whether the employment and residence history an applicant has provided is accurate. An applicant who gives false information is a red flag.

Contacting previous landlords also gives you valuable insight into what kind of a renter your applicant is. By talking with landlords who’ve rented to this person, you can find out if they reliably pay rent, are respectful to neighbors and property, etc.

Conclusion

Performing effective tenant screening is one of the most crucial parts of a landlord’s job. If you can’t distinguish good tenants from bad ones in the tenant screening process, your business will suffer. Knowing the signs of a bad tenant ahead of time can save you much time and money down the road. 

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