What is the single most important step in owning and operating rental properties? What can give you the highest amount of return compared to time and money spent? Researching the area before you buy a property? Perhaps hiring a professional management company? Is it using a credit reporting system to report rent?
These all have a major impact on the profitability and sustainability of your rental properties but one process has more impact than the rest. Screening tenants. When you consider the amount of time a proper tenant screening takes and compare it to the amount of time, money, and energy saved by having good tenants, the return is astronomical.
Questions to Ask Yourself When Screening Tenants
Why does it make such a big difference when you properly screen tenants? Better tenants lead to longer tenancies. Longer tenancies equal less vacancy time and less damage to repair when the tenants eventually move. These two factors alone will save you more money and time than other strategies.
So, what should you look for when screening tenants?
- What is their monthly income? Ideally, their income would be 3x rent. That gives enough of a financial buffer to accommodate for bills, rent, and other expenditures. If less than the 3x rent figure, they may have an issue with paying rent on time if a financial emergency comes up in their life.
- How is their past rent history? Check for their names in all available credit reporting databases and any available databases that allow landlords to report rent. This will give you an accurate picture of their history when it comes to paying rent.
- Do they have positive references? Having positive references from either an employer or a previous landlord goes a long way to establish a potential tenant’s character. Since you don’t have a relationship with them yet, positive references show that they are trustworthy enough to have other people vouch for them.
- Have they been evicted before? If a tenant has been evicted, there is a better chance that you may have issues collecting rent from them in the future. If you report rent to a credit reporting agency, you can let them know in the screening process. Knowing that missing rent could affect their credit score can incentivize people to pay rent on time.
- What is their credit score? A bad credit score isn’t a great sign. However, sometimes circumstances lead to a bad credit score that are outside of a person’s control, such as identity theft. If you use a credit reporting system to report rent, this could be a draw for many tenants who are looking to increase their credit scores.
Other important questions include…
- Do you own pets?
- Do you smoke?
- How many people will be living in the unit?
- Have you ever been convicted of a crime?
- How long were you in your last home?
- Why did you leave?
Proper Screening Leads to Better Tenants
Every landlord wants the best tenants possible. Proper screening techniques give you the best possible chance at finding the most suitable candidate for your property. Follow these steps to help sift out the best of the best.
Another great way to attract good tenants and protect your real estate investment is to use CreditRentBoost.com. CreditRentBoost.com allows you to report rent payments to credit reporting agencies. This is an incentive for those wanting to boost their credit score and a deterrent for anyone planning on skipping rent payments.
Contact CreditRentBoost.com and see how you can benefit from a partnership with them today!
