Tenant Screening Best Practices: How to Properly Screen Tenants to Protect Your Investment

As a landlord, finding reliable and trustworthy tenants is essential for the success of your rental property investment. Proper tenant screening and referencing is the key to finding tenants who will pay rent on time, take care of your property, and cause minimal headaches. In this blog post, we will outline the best practices for tenant screening, including credit checks, reference checks, and criminal background checks.

Credit Checks

One of the most important aspects of tenant screening is conducting a credit check. A credit check will provide you with valuable information about a potential tenant's financial history, including their credit score, debt, and payment history. A credit check can help you determine if a tenant is financially responsible and can afford to pay rent on time.

To conduct a credit check, you can use a tenant screening service, which will pull the applicant's credit report for you. You can also ask the tenant to provide you with a credit report directly, but be sure to obtain written consent to do so.

When reviewing the credit report, look for red flags such as late payments, collections, or bankruptcies. It's also important to set a minimum credit score requirement and only consider tenants who meet that threshold.

Reference Checks

Reference checks are another important aspect of tenant screening. By speaking with a potential tenant's previous landlords, you can get a better understanding of their rental history and behaviour. When conducting reference checks, be sure to ask the following questions:

Did the tenant pay rent on time?

Did the tenant cause any damage to the property?

Did the tenant violate any lease terms?

Would you rent to this tenant again?

It's also important to verify the reference by checking public records or contacting the landlord's property management company.

Criminal Background Checks

Conducting a criminal background check is an important step in tenant screening to ensure the safety of your property and other tenants. A criminal background check will reveal any criminal history, including convictions, misdemeanours, and felonies.

To conduct a criminal background check, you can use a tenant screening service or run a background check yourself through a public records database. Be sure to obtain written consent from the tenant to conduct a background check.

When reviewing the background check, look for any criminal activity that could pose a threat to your property or other tenants. It's also important to be aware of any discrimination laws in your area that prohibit denying a tenant based on their criminal history.

Additional Screening Measures

In addition to credit checks, reference checks, and criminal background checks, there are other screening measures you can take to further evaluate potential tenants. These measures include:

Income verification: Requesting proof of income to ensure the tenant can afford the rent.

Employment verification: Verifying the tenant's employment to ensure they have a stable income source.

Rental history verification: Verifying the tenant's rental history by checking with previous landlords.

By combining these screening measures, you can get a comprehensive understanding of a potential tenant's financial history, rental history, and criminal background.

Fair Housing Laws

When conducting tenant screening, it's important to be aware of fair housing laws that prohibit discrimination based on race, gender, religion, national origin, and other protected characteristics. It's important to treat all potential tenants equally and evaluate them based on their financial and rental history, rather than personal characteristics.

Property Inspection

Once you have conducted all of the necessary tenant screening checks, it's important to do a thorough property inspection before allowing the tenants to move in. This inspection should include a walkthrough of the property with the tenants, taking note of any damages or issues that need to be addressed before move-in day. It's also a good idea to take photos or videos of the property to document its condition. A professional inventory of the property is essential in case you need to lodge a claim against the tenant's deposit when they vacate the property.

Use a Tenancy Agreement

A tenancy agreement is a legal document that outlines the terms of the tenancy, including the rental amount, payment due dates, and the responsibilities of both the tenant and landlord. It's important to use a comprehensive tenancy agreement to ensure that both parties are aware of their obligations and rights. You can find tenancy agreement templates online or hire a solicitor to draft one for you. Additionally, you must provide the tenants with certain documentation upon move-in. The requirements are updated regularly, so be sure to check the government website to make sure you are fully compliant. Documents include but are not limited to: How To Rent Guide, EPC, gas safety, EICR, AST.

In conclusion, properly screening tenants is a critical component of successful property management. By following these best practices, landlords can ensure that they find reliable tenants who will take good care of their property and pay rent on time. Additionally, conducting tenant screening checks can help to reduce the risk of financial losses, property damage, and legal issues. By investing time and resources into tenant screening, landlords can save themselves a great deal of stress and expense in the long run.

With the ever increasing changes to legislation and required paperwork, landlords who previously opted to self-manage their portfolios are now appointing property management agents such as Property Guru Lettings. Whilst this is an additional cost, the benefits of having a fully compliant portfolio can save you thousands in the long run.