If you are a property owner in search of an ideal tenant to occupy your rental, there are a few important things you need to know about the screening process. A tenant who is not a good fit for your property could end up costing you, the owner, a minimum of $3,000 in eviction costs. For some unfortunate owners, these costs could exceed $10,000 according to data from TransUnion SmartMove. In California, in particular, the laws tend to give tenants an advantage over property owners. There are a several key warning signs for tenants that could be unreliable, which range from; moving too often, having gaps in employment, being eager to sign the lease immediately, switching jobs, inaccurate information and refusing to provide references or providing their own credit report. It is our duty as property managers and property owners to execute due diligence and take the necessary precautions to protect our rental properties. Pacific Home Rental has complied some of our best tips to screen for tenants that we have learned over the years as our experience as both property owners and property managers.
Proof of Income is Necessary.
As a property owner/property manager, we need to determine if a tenant meets the 3x income rule. This can be challenging for several reasons. First, if a prospective tenant is self-employed or owns a business, they may not be able to provide pay stubs like one who has stable employment. In this scenario, you will need to find creative ways to obtain this information through bank statements and other means. For cash-based or commission based prospective tenants, such as waiters, salesmen, childcare workers, yoga instructors, etc., it becomes challenging for them to find housing because they do not have the proof in paper. Odds are that even with these types of tenants, there is a number that you can call to verify their employment. The best ways we have learned to check income is: Pay stubs, Employment Verification, W2, 1099, Offer Letter, Tax Return, Retirement, Social Security and Pension Distribution Statement.
Interviewing the Tenant
You can garner a lot of information about the new tenant by sitting with them face to face. Many of the warning signs discussed at the beginning of this article will arise when you are first meeting with a tenant so listen carefully to what the tenant is telling you about themselves. As a landlord or property manager you may ask the tenant when they can move, if they can pay move-in costs upon signing a lease, if they have any pets, if they are able to pass a background and credit check and why they are leaving their current residence. Some questions you may not ask them are regarding their nationality, disability, children or religious beliefs as these questions are discriminatory and against the law. Surprisingly, even though you may only ask certain questions, tenants will divulge many details about themselves unknowingly to help you assess if they are a right fit for your rental property or not.
Using a Reputable Screening Source
When you have a property manager taking care of your rental, they have many resources and IT software to make the screening of tenants easier. At Pacific Home Rental, we employ a company to take care of this process for you in order to make this sometimes-arduous process seamless for you and minimize your costs. If you are a landlord doing this on your own, you may want to check out TransUnion as a source for credit and background checks. It is imperative that the data obtained on your prospective tenant is accurate and up to date. Do not make the mistake of allowing a tenant to provide their own documentation and skipping this step! Landlords who do this will regret it in the long run.
If you have any other questions, Pacific Home Rental is here to help. We have been in business for 45 years managing our own rental properties and assisting other landlords in need. We are a property management company, located in San Diego, California.