How to Screen Tenants: Red Flags to Watch for in Rental Applications

August 29, 2024

The Big Picture On How To Screen Tenants Effectively:

Always collect and review rental applications, looking for red flags in housing history, job stability, and occupancy plans.
Run thorough tenant screening reports, including credit checks, criminal background checks, and eviction history.
Conduct reference checks with current and former landlords, and if possible, inspect the applicant’s current living space.

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Imagine cash flow from a rental property as water running through a pipe.

Every time the pipe leaks, you lose money. Once you’ve purchased a property, your returns (ROI) are based on minimizing those leaks.

So, how do you maximize ROI and cash flow while minimizing losses and leaks? By finding good tenants who will pay on time every month and serve as a solid pipeline for your cash flow.

Tenant screening is any landlord’s most important activity in protecting their returns and profits. And despite what non-landlords might say, you can predict who will be a good renter and who won’t with 99% accuracy.

How to Screen Tenants Effectively

Here’s what all landlords need to know about tenant screening, rental applications, and keeping their properties occupied with excellent renters.

Step 1: Collect a Rental Application & Review for Red Flags

If you haven’t yet collected a rental application from each applicant over 18, email them one now.

Read it carefully. Do they have pets? If so, are the pets acceptable to you?

How many occupants would be moving in? More occupants means more wear and tear on your property, and besides, what kind of people squeeze eight people into a small two-bedroom apartment? Probably not the type you want living in your investment property. (We’ll talk about Fair Housing laws later, don’t worry.)

How’s their housing history? Do they move around every 18 months, or have they been in the same home for seven years? Transient tenants are both a red flag and a sign that you’ll probably have yet another vacancy within a year or two.

Likewise, how stable is their job history? Are there gaps? If your applicant moved companies to take a higher position elsewhere, it’s another if they can’t hold down a job. Get a sense of their career arc.

Key Red Flags to Watch for in Rental Applications

While at it, below are the common red flags to be aware of when learning how to screen tenants thoroughly.

Step 2: Run Tenant Screening Reports

When prospective renters submit a rental application, run tenant screening reports on them. Screen every person over 18 who will spend more than five nights each month at your property.

And no, you don’t need to pay for them. Select that the renter pays the cost for tenant screening reports when you submit the request for them.

What reports should you run? Whether you use our tenant screening service or a competitor’s, always pull a full credit report, nationwide criminal background check, and nationwide eviction report.

I actually argue that the eviction history report is the most important — it gets to the heart of what you want to know. Will this renter comply with the lease agreement, or will they break it and need to be evicted?

I don’t lease to renters with evictions on their records. Period.

With criminal history, some discretion is needed. I don’t lease to renters with fraud-related crimes on their record or with recent violent crimes. Drug trafficking crimes are also a huge red flag, but I’m more lenient with minor drug possession offenses.

As for credit reports, please don’t worry about renters with public records. Bankruptcies, liens, and judgments are all major red flags.

Get a sense of the applicant’s payment history. Do they make all their monthly payments on time, with no exceptions? Or do they pay intermittently or inconsistently?

Step 3: Talk to the Applicant’s Employer

First, call the applicant’s direct supervisor. What kind of employee and person are they?

Do they show up on time for work every day, week in and week out, or do they wander in 20 minutes late sometimes?

Can they be entrusted with an asset worth $150,000 (or however much your rental is worth)?

Try to get to the root of how responsible and conscientious they are.

Next, call the HR department at their employer’s office. What’s their income? Does it match their rental application exactly? If not, is there a good explanation, or did the applicant exaggerate?

One of the traits you’re screening for is trustworthiness. If the applicant lied about anything, however small, reject them.

Step 4: Call Their Current & Former Landlords

Current and former landlords can offer a wealth of information about what kind of tenants these applicants are. Do they pay on time every month? Have they ever been late? Do they treat the property well? Do they constantly call to complain and demand property upgrades?

Current landlords could lie and give a rosy review of their tenants to get rid of them. I’ve found this to be rare. More often than not, they’re just reluctant to speak too badly of bad tenants. Just keep an ear out for hesitation in their answers. “Well, they’re not terrible…” Red flag.

For renters who have moved within the last five years, you should also call their former landlord. They will give you the information straight.

Step 5: Walk Through Their Current Home

This gets a little tricky. You want to give the applicants as little notice as possible. Try to understand how they live and maintain their home, rather than an artificially clean condition.

I like to call and say that I’ll be in the neighborhood in half an hour and want to drop off a blank lease agreement for them to review. If they say they aren’t home, ask when they will be and tell them you want to walk through the lease in person.

In particular, look over how clean or dirty their kitchen is. Sure, they may have rug rats with toys strewn on the living room floor, which doesn’t mean they’re messy people. That makes them human. But it’s a big red flag if their kitchen isn’t clean, with crumbs on the counters and spills caked onto the stove. Likewise, for the bathrooms, if you can get into one.

Get a general sense of how clean they keep their homes and how rough they are with them. This is how they’ll treat your property, too.

Step 6: Have a Personal Conversation With The Prospective Tenant

Sometimes, when speaking with people, we tend to forget why we wanted to talk to them in the first place, especially when the conversation gets too good (or if that person is so good at handling the conversation).

However, remember that this isn’t a simple chit-chat but more like an interview. Try to ask questions like:

What’s prompting your move?
What’s your ideal move-in timeline?
How long do you anticipate staying in this property?
How many individuals will occupy the space?
Are there any smokers among you or your co-occupants?
Do you or your co-occupants have any pets?
What are your parking needs?
Have you ever experienced an eviction?
What’s your typical daily schedule like?
How do you prefer to communicate with your landlord?
Do you work from home or have any home-based businesses?
What’s your experience with neighbors in previous rentals?

Also, be cautious of Fair Housing laws during your conversation. Steer clear of inquiries like:

Do you have any medical conditions?
What’s your sexual orientation or gender identity?
Are you married or single or plan to start a family?
Do you have any disabilities?

Fair Housing & Other Concerns

We have an entire article dedicated to what landlords need to know about Fair Housing laws, so we won’t elaborate on everything here. But be aware that you cannot ask for certain documentation from some rental applicants and not others.

If you run resident screening reports on some rental applications, you must run them on every application. If you demand to see income verification from one applicant, you must demand it from all applications. No exceptions. The rental business is a business, and you need consistent policies.

While everyone knows you can’t discriminate based on race or ethnicity, you need to be extra careful about familial status. Kids are tough on rental properties, but you can’t reject families just because they have children.

One of the reasons to run tenant screening reports and background checks on all rental applicants is to protect yourself against discrimination claims. Resident screening reports contain concrete facts you can point to: “I rejected this applicant because they have evictions on their record.” You can provide indisputable reasoning for choosing one rental application over another.

If you want to keep your rental profits flowing, you need stable, reliable, conscientious renters who will pay on time every month and treat your property with respect. Your rents are the cash flow through the pipe, and your renters are the pipeline itself. Secure a solid, dependable pipeline with no chance of leaks, and you’ll see excellent returns continue to flow.

This article originally appeared on sparkrental.com and was syndicated by MediaFeed.org.