Renting out your property in Virginia is a great way to make money…that is, if they actually pay their rent on time…and take care of your property…and avoid illegal or dangerous activities that lead to eviction or put your property value at risk.
With all of these stipulations that determine the profitability of your rental property, you can’t afford not to screen prospective tenants before they sign a lease agreement.
Screening tenants is one of the most important steps you can take as a landlord. If you fail to catch red flags and warning signs before they come to fruition, you could lose thousands of dollars in unpaid rent or property damage. While you can evict tenants for nonpayment of rent or destruction of property, doing so could cost anywhere from $3,500 to $10,000.
According to NYU Law, 82% of the 2 million people who are evicted from their rentals each year are evicted due to nonpayment of rent. The landlords in these cases not only had to deal with missing out on rent, but they also had to contend with costly evictions.
Ultimately, taking the time and effort to screen tenants ahead of time can save you countless thousands of dollars in the long run when you rent out your property. Although any form of screening renters is better than not screening them at all, it is also critical that you have an effective screening process if you want to gain the best results from this tool. While many landlords feel comfortable signing a lease agreement with a tenant after a standard credit and background check, the best way to ensure that your property is in good hands is to require a comprehensive screening process for prospective tenants.
Not sure how to develop a comprehensive screening process? We’ve got you covered! Here are a few tips and tricks you can use to adequately screen your tenants so you can make the most of your rental property investment:
Know the laws in your area
Before you screen any prospective tenants, make sure you are aware of your obligations under the Fair Credit Reporting Act, fair housing laws, and other policies governing tenant screening in Virginia.
While you can reject an application because of poor references, unfavorable credit reports or background checks, or reason to believe based on income or past experience that they won’t be able to pay rent, you cannot refuse to rent to someone solely because of their race, religion, national origin, sex, familial status, or any physical or mental disability in accordance with the federal Fair Housing Act of 1968.
Although the screening process is instrumental in making sure the rental process is a success, make sure you aren’t violating any laws in your attempt to screen tenants.
Create a detailed renters’ application
You can eliminate some applicants before you go deep into the screening process by creating a detailed renters’ application.
If interested applicants know you have guidelines and expectations that won’t align with what they are looking for in a property, they won’t go further with the renting process, saving you time, energy, and money.
You can also provide information on the application about what the screening process will include. If someone is not interested in providing references or information for credit and background checks, they won’t apply.
Get a credit report
Some landlords believe that a credit score is all they need to determine the financial responsibility of a potential renter.
Although credit scores can be helpful, it is far more useful for landlords to get a credit report instead of just a credit score.
Credit scores are not sufficient because they are not always consistent, they measure factors that you don’t necessarily need to make a decision, and they don’t include some key information that you will need to determine whether or not you will accept an applicant.
Credit scores differ depending on the credit reporting agency that is calculating the score and the scoring model for each agency.
Also, credit scoring includes factors like “length of credit” which might not actually be pertinent for you as a landlord. Someone can be in a great financial situation and faithfully pay off credit cards each month, but they could still have a lower credit score if they have only had a credit card for seven or eight years. On the other hand, someone who is not financially responsible will receive a small credit score boost just because they have had credit for a longer period of time.
Ultimately, credit scores are not an accurate way to measure financial responsibility.Credit reports are preferable because they provide additional information like loan payment history, credit activity, details about repossessions and bankruptcies, and specific details about credit accounts.
This additional information will give you valuable insight into your tenant’s financial situation and history so that you can have a better idea of whether or not they will be able to afford rent and pay rent on time.
Complete a background check
A background check will help you get a deeper look at your tenants so that you can see if they have any potentially troubling criminal charges.As a landlord, you don’t just want to safeguard your property, but you also want to make sure that you are considerate of the people who live in the homes surrounding your property.A background check will show you if an applicant has a criminal record or a concerning rental history that you can weigh when deciding whether or not to accept their application.
You might find that an applicant has a history of committing violent crimes, vandalism, or other criminal acts that would provide a significant risk for you, your property, and the neighboring properties.
A comprehensive background check will also show you eviction history and information like whether or not they have a tendency to move from place to place frequently.
If you want to get a more detailed look at your applicants before they sign a lease agreement, a background check is essential.
Check tenant references
The three most common mistakes that landlords make regarding tenant references are 1.) not asking for the right references, 2.) not verifying tenant references, and 3.) not asking the right questions when they check references.
You could ask prospective renters to provide ten, twenty, or even thirty references, but these references will not matter if you don’t specify the types of references you would like, call these references, and ask these references questions that will garner helpful responses.
Only allow professional references and landlord references.
If all of the references that a tenant lists are family members or friends, you aren’t going to get an accurate picture of who they are as a potential tenant. Instead, you should require references from employers, former landlords, and current landlords.
These references will give you a clear idea of your tenant’s work ethic and other important character traits that may influence the way they care for your property. If an employer says that an employee is always dependable, reliable, and punctual, it is likely that they will pay rent on time. If their former landlord says they were a model tenant, chances are they will take care of your property and not cause you any problems.
Likewise, if an employer or landlord says that a prospective renter was flaky or problematic, you will know to steer clear.
Double check names, addresses, and other contact information for the references your tenants provide to make sure that the people listed actually exist.
It can also be helpful to call these references instead of only sending an email so that you can ensure the renter did not just create an email address to respond as their own “reference.”
Ask important questions
When you speak with the references your tenants provide, it is important to ask the right questions. If you just ask a couple of “yes or no” questions, you won’t get the type of responses you’ll need to make an informed decision.
If you are talking to an employer, you should ask questions like:
- How long has the tenant worked for you, and what is the nature of your professional relationship?
- If you could hire the tenant again, would you?
- What is the tenant’s current salary/hourly wage?
- How does the tenant get along with their supervisors and co-workers?
- Is there anything else you would like to add regarding this tenant?
If you are talking to a former landlord, you should ask the following questions:
- Did the tenant pay rent on time each month?
- Did the tenant have any roommates that contributed to their monthly rent?
- Have you ever had or received any complaints about the tenant?
- How did the tenant maintain the property?
- Did the tenant have any pets? If so, did the pets cause any property damage?
- Why did the tenant decide to move?
- Does the tenant smoke?
- Has the tenant ever caused any property damage?
- Do you have any concerns about the tenant?
- If given the chance to go back in time, would you have rented your property to this tenant?
- Would you rent to this tenant again?
- Is there anything else you would like to add regarding this tenant?
When you know how to solicit, verify, and check references that will provide useful information, you will be able to weed out candidates that won’t be a good fit for your property.
With these tenant screening tips in mind, you should be able to find great tenants and eliminate unqualified or potentially problematic applicants.
Work with a property management company
A good way to make sure you don’t miss any steps in the screening process and that you’re able to make the best decisions when reviewing applications is to work with a property management company.
When you hire a property management company, it won’t matter if you don’t know how to do a credit check for a tenant or how to do a background check on a tenant. Your property management company will know how to screen renters effectively, and they will take all of the stress out of the entire process.Learn how RentSimple can help you with tenant screening as well as other steps you’ll need to rent out your Virginia property when you call us today.