If you're a landlord or property investor one of the most important things to understand is how to pre-screen tenants. While having a tenant in your property might seem like one of the most important pieces of the puzzle, that’s not quite true. Having the right tenant, or a good tenant is more important than having just any tenant. In fact a bad tenant can wind up costing you a lot of money.
There are really three phases to the screening process:
- The initial call or contact
- The In-Person showing meeting
- The Due Diligence phase where you review the application, call references, confirm financials, etc.
Each of these are important and can confirm a good tenant or raise red flags of a potential problem tenant. In this post we’re going to focus on how to pre-screen tenants. After all, if the tenant isn’t a good fit for your property, discovering this in the initial phases will save you time. There no point in showing the property or doing all of the paperwork and background checks if they are not a qualified tenant.
Tips on How to Pre-Screen Tenants
- Understand Their Moving Motive
The simplest way to get to this is to simply ask, “why are you moving?” You’re looking for a well reasoned explanation that is based on positives rather than negatives. For example if the response is “I do not like my landlord or get along with them” then you better follow up and get specific details of what they dislike. Is the reason based on landlord actions or is the tenant more to blame? On the flip side some positive reasons might be that “we need more space”, “want to move closer to work”, “want to get into a better school district”. You’re more likely to have a positive outcome if the reasons for moving result from a positive reason.
- Understand Their Moving Time Frame
Given the option of selecting a tenant that takes time and plans their move verses one that makes impulsive or unplanned decisions, you want the planner. A good time frame is one where the tenant is looking to move 30-45 days out. This person has taken the time to think about the decision and is getting their ducks in a row. If it's closer to a week or two then you have to wonder how well the renter has thought out the decision. Will they be just as quick to decide to move out of your property in the future? There could be legitimate reasons for the quick move, just make sure to dig deeper to find out more about their decision. On the flip side someone that is planning on moving 3 - 6 months down the road, might be a planner, but can you wait that long to get someone into your property? Likely they are just starting to research options and likely are not at a point to make a decision.
- Understand Their Financial Means
Can the tenant comfortably afford to live in your unit for an extended time? During the Due Diligence phase you’re going to confirm their income and employment, but if the answer is no its better to discover that sooner rather than later. You want to make sure that the renter’s income is 2.5 to 3 times more than your rental price. Don’t be afraid to ask how much the total after-tax income is for the persons that will be on the contract. You also want to make sure that they will have no issue paying the first months rent and security deposit up front before moving in. If they ask to pay the security deposit over several monthly installments this should raise a red flag.
- Understand Their Rental History
During the screening process you’re going to want to get personal references, business references and previous landlord references. During due diligence you’ll make sure to investigate each. In this pre-screening phase you simply want to know if they will be able to provide these references and if they have any problem with you contacting each. If they cannot provide references are are not comfortable with you contacting them, you’ve raised another red flag.
- Understand Their Willingness To Play By Your Rules
Get confirmation that they will not have an issue with completing your rental application and authorization to do a credit and background check. If they are unwilling to consent to any of these then it doesn’t make sense to go any further in the process.
- Understand Who Will Be Living In Your Property
Its important to know how many people will be living in your property. Its a simple fact that the more people that are in the property the more wear and tear that will occur. Also will they have any pets? If you do not allow pets, then this is sign to move on. You also want to know what types of pets and their sizes to help determine if this is a good fit for your property.
- Understand The Law
Make sure that when you are pre-screening tenants that you don't violate the Federal Fair Housing Act. There are seven classes of people that you can't discriminate against by asking questions about a person’s race, skin color, sex, national origin, religion, disability or familial status. Stay clear of questions that involve these. And be sure you are up-to-date on Georgia Lease and Rental Laws
Up to this point you’re simply asking questions to weed out potential tenants. While its understandable that you need to keep tenants in your property, neglecting to address any of the above means you’ll be wasting time on tenants you should have walked away from much sooner. Once you learn how to pre-screen tenants your screening process will be much more effective.
If how to pre-screen tenants seems confusing or time consuming, maybe you should consider hiring an Atlanta property manager. GSPM assists property owners and investors in maximizing revenue potential while minimizing the hassles in marketing and managing their properties. We recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services