As an investor, it’s very important that you know how to screen a tenant, and if you’re working with a professional property management company, you want to make sure they have an extensive tenant screening process. Today, we are talking about the importance of tenant background checks and rental verifications.
Tenant Screening: Credit and Background
The most important thing you’re looking for is indication that the potential tenants can pay rent. When a resident gives you information, verify it. Ask for a copy of identification, such as their social security card. You want to know who this person is. Do a credit check and if the score is high – awesome. If it’s low, find out why. Look at the applicant’s background, and see how that background will affect your rental. You want to do a rental verification for the last two years. Talk to the previous two landlords and as for information on whether rent was paid on time, how many times it was late, if they were good tenants, and how the property was left after they moved out. You want to know if former landlords had to put money into the investment to turn it. This is important information because you need to know who is going into your property. If you don’t have a good idea of who that person is, the tenancy probably won’t end well.
Tenant Screening: Income
Look at the tenant’s income. When you’re evaluating how much they earn, look for income that is 2.5 or 3 times the amount of the monthly rent. We are more stringent and want to see a net monthly income that’s at least three times the rent. We want to make sure that when the resident enters the property, unless something catastrophic happens, rent is going to be paid. As an investor, you want your return, and the best way to get that return is by making sure your resident can pay. If rent is not paid, the owner isn’t paid and the property management company isn’t paid. Your return is our top priority.