A rental housing business is a business like no other - at least when it comes to customer acquisition. While other businesses may accept any customer, rental property owners must screen their would-be tenants and accept or reject their applications.
So many things can go wrong if you were to have an open-door policy for renters. Renters who don't pay rent, cause chaos and disturbances, or generally don't care about your rental rules would find their way to your property.
Thus, doing a thorough tenant background check is key to being a successful landlord. And to do that, you have plenty of tools at your disposal. Read about them below:
Credit Checks
According to National Equity Atlas, about 6 million households in the U.S. were two months behind on rent. As a landlord, you know the importance of collecting timely rent payments from your tenants. A late or missed rent payment could mean a late or missed mortgage payment on your part, for instance.
You want landlords who can pay their rent on time every month, without fail. A credit history check is one of the two tools you can use to assess the financial wellness of a renter. From their credit report, you can tell whether they have a history of defaulting on loans, or if they're currently in debt, which could be a red flag.
Income Verification
While credit checks are useful, they don't say much about a consumer's current earning ability. You could have someone with a bad credit score but are now on a six-figure annual salary.
An income verification check will give you the clearest indication of a renter's ability to afford your rent. If you're charging $1,500 a month and someone is earning $2,000 after statutory deduction, common wisdom would indicate that the renter is high-risk.
Income verification goes beyond seeing how much someone earns. If they're formally employed, for instance, you'll need to see a few paystubs, a letter of employment, and even confirm the same from the employer. If self-employed, bank statements would suffice.
Criminal Background Check
In Maryland, landlords are allowed to check a renter's criminal background history, but the check is limited to the last three years. You must, however, get consent from the renter.
Although having a criminal background is not automatically a reason to deny housing, certain crimes can be valid grounds for denial. For example, you're within your rights to deny a registered sex offender, as they can be a threat to the community.
Within criminal background checks, use your best judgment, and ensure you're following the law.
Use These Tenant Background Check Tools
These are the primary tenant background check tools at your disposal, but you can also stretch the screening and consider the renter's rental history. You can even call a few references to verify things you might not be sure about.
You can also hire a rental management company to do the tenant screening. In Columbia, MD, look no further than PMI Real Asset MGMT. Being part of a dynamic national property management franchise that has been in business for two decades, we have the technology and experience to screen tenants effectively. Our services also include property marketing, accounting, and property maintenance.
Schedule a free consultation with us today.
