Screening and Selecting Tenants

Screening and Selecting Tenants


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We have an eviction problem in the U.S. brought on by COVID 19 and the loss of jobs. These are unusual circumstances. The number of people across the U.S. believed to be on the edge of eviction for non-payment of rent is a staggering 18 million renters. No landlord wants to go through evicting a tenant.  If you have a new or vacant rental property, you may be eager to fill it and begin collecting rent as soon as possible. However, it is worth the extra time and effort to conduct your due diligence when screening and selecting tenants.

A prospective tenant’s employment and income sources, rental history, credit history, and any relevant public records are all essential factors to consider when deciding whether to accept or reject a rental application. Investing the resources to identify good tenants at the application stage can lead to significant benefits over time if you can rent to responsible tenants and retain them over the long term. However, it is also critical to ensure that you comply with federal, state, and local anti-discrimination laws when evaluating prospective tenants.

Screening and Selecting Tenants

Drew Sygit writing at BiggerPockets has some suggestions: “The tenant screening process needs to start with the end in mind—specifically, what are you willing to accept as a “minimum viable tenant”? There are lots of metrics that people can and do use to make that assessment. Still, we’re not even worried about metrics at this point—we’re talking about the most fundamental attributes here, the really non-negotiable bits.”

Independence:

This aspect never occurred to me until just now. The prospect must be able to function independently in terms of accomplishing the basic goals of daily life, or they must be applying alongside someone who can do that and trained to help them get by.

Financial History:

The prospect must be able to show that they have sufficient income to pay rent regularly, or if the candidate doesn’t, they need to submit and get approval for a plan showing how they intend to pay at least the first few months’ rent while they get their feet under them. They must also submit letters of explanation describing why any previous credit issues shouldn’t remove them from consideration.

Residential History:

The prospect must not have been evicted for any ‘dealbreaker’ reason like the destruction of property and must submit an acceptable letter of explanation for any other type of eviction.

Criminal History:

The prospect must not have been convicted of any ‘dealbreaker’ crimes like arson or drug dealing and must submit a letter of explanation for any felony whatsoever.

Personality:

Are they a person who has left behind a trail of former employers & landlords, and other references that have only negative feedback

Know (and Follow) the Law

Drew Sygit writes, “When putting your criteria together (and throughout the tenant screening process), you must always keep in mind the Fair Housing Act (FHA), the most significant U.S. law that dictates what you can and can’t do during the screening process. According to the FHA, you cannot consider any of the following when screening applicants:

  • Race/Color/National Origin
  • Religion*
  • Gender*
  • Marital/family status*
  • Disability

When we say you “cannot consider” those factors, what we mean is that you cannot:

  • Include any mention of any of these attributes or anything directly related to these attributes in your advertisements. So not only can you not say “no kids,” you can’t even say that the backyard is “perfect for games of tag.”
  • Require different rules for applicants in or out of one of these groups (for the same unit). For example, you can’t raise the security deposit for a Latino applicant or an applicant with five children.
  • Steer particular applicants toward or away from a given unit due to these factors. That includes anything from saying “we can find something more appropriate for you” to lying and saying a unit is off the market when it’s not.

Importantly, because there’s almost no way to prove exactly why you’re treating different applicants differently, it’s 100% always the best idea to treat all applicants identically until you’ve figured out one or more of the “non-negotiable bits” above that gives you a solid, legal reason to do otherwise.”

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