7 Things Landlords Should Do Before Accepting a Tenant

You’ve received an application from a tenant who looks like a great fit for your rental property. Fantastic! But before officially accepting them and allowing them to move in, there are a few responsibilities landlords must adhere to.

Failing to properly prepare for and screen a tenant can be costly. Damage to your investment property, unpaid rent, vacancy and turnover costs, and legal actions can quickly drain your passive income if you don’t take proper precautions.

Smart and savvy landlords won’t rush picking a tenant just to fill their rental home. Here are seven things you can do to ensure your new tenant is the best fit.

Complete a Full Background Check

Making sure you are filling your vacant property with a safe renter is a responsibility you owe not only to yourself and your business but also to the property’s neighbors. Make sure to choose a background check provider who will run a full criminal history and sex offender check. Preferably, use a service that checks nationwide in case you are considering someone who has moved—or is currently moving—from another state.

Take note that some criminal background check services may take a few extra days to complete. For example, some research may have to be manual. Some legal details may not be registered in ‌standard national databases.

During your check, verify the personal information they have provided you, such as their social security number to protect against fraud.

Review Their Credit and Payment History

A prospective tenant may seem like the friendliest guy or girl in town, but in the end, your bottom line depends on their ability to pay their rent. Make sure your tenant has a history of being reliable with their finances. 

Use a tenant screening program that offers information on their rent payment history and utility debt history to see if they have any patterns of late payments. Income alone doesn’t always indicate their ability to pay. A credit check can help discern if a potential tenant has personal loans or student debt.

If your applicant is a foreign national, they may not have yet established credit history in the United States. There are programs you can use that will provide credit insights even in these situations so that you can get a fair idea of their fiscal responsibility without needing to rely on credit history alone.

Check for Eviction History

Another item a good tenant screening process will review is a tenant’s eviction history. There are national eviction reports available for access. See if your tenant has ever been evicted from a rental property.

If anything looks odd, you can also call the landlord who previously evicted them. Try to fully understand the situation before making a judgment call.

Require Income Verification

Successful rental property cash flow depends on consistent rent payments. A typical rental application includes a tenant’s income, but you shouldn’t simply rely on a self-reported number. Even an honest applicant may have forgotten to take out taxes or other pay deductions from their monthly take-home paycheck. It’s best to recalculate those numbers to verify what they can afford.

There are various documents you can request to verify a tenant applicant’s income:

• Pay stubs (last three months)
• Bank statements (last three months)
• Tax returns
• W-2s
• Social Security statements
• Earning statements from employer

Note: You need to use the same income standards for every prospective tenant who applies. This ensures you comply with fair housing regulations and avoid fines or complaints.

Some services, like Rent Check Advisor, can also recommend whether accepting checks from a particular tenant is wise.

Call the Tenant Applicant’s References by Phone

Don’t skip ‌references just because their background check and credit look good. Tenant references allow additional context to your understanding of the applicant.

Require contact information for the prospective tenant’s most recent landlord and current employer on the application. You can also require additional references if desired. Recent landlords can give you insights into how easy it is to communicate with the applicant and whether they tend to be good stewards of rental properties.

Current employers can confirm things like their current job and reliability.

Be Familiar with the Landlord-Tenant Laws in Your State

Before taking on any tenant, landlords must be sure they are familiar with the Landlord-Tenant laws in their state. Pay special attention to tenant rights, fair eviction regulations, landlord identity registration requirements, and disposal of abandoned personal property laws.

Ideally, you won’t need to worry about most of the items you’ll review in state laws for landlords. However, it’s best to know the regulations in case you have to handle disputes.

Outline Tenant Responsibilities

No matter who is moving into your rental home, your mutual responsibilities must be clear. Ensure the lease agreement accurately identifies tenant and landlord responsibilities.

Double-check the utility section and have your new tenant agree on the division of utilities. Popular utilities include water, sewage, electricity, internet, and waste disposal, to name a few.

Preparing for Landlord-Tenant Success

By completing your due diligence before accepting a tenant, you’re setting yourself and the prospective tenant up for success. Making sure your property is one they can afford and setting up positive, clear communication will be an asset in what will hopefully be a happy, long-term landlord/tenant relationship.

As you screen your prospective tenants, remember that laws like the Fair Credit Reporting Act (FCRA) govern your access to everyone’s private data. Be sure to act responsibly.

Protect your bottom line as a landlord and properly screen and prepare tenants. A reliable, communicative renter is a huge asset when running your first investment property.

Source: 7 Things Landlords Should Do Before Accepting a Tenant