Tenant screening will make or break the whole investment extremely profitable. If you are having a realtor fill your rental, you should still be the one making the decisions for who is qualified to rent the property and who is not. You have the final say when working with a realtor.
Screening Tenants Is KEY
No matter if a realtor is involved or you are self-listing and showing the property it is important to screen tenants to make sure they are willing and able to pay. If the economy crashes and they lose their job for 2 months or more will they still be able to pay you? Will they treat the rental like it is their own house or will they trash it? Occasionally asking prospective tenants for credit reports and for them to do a background check will scare them away, which is ultimately the point if they do not feel comfortable doing it. Of course, this applies to long-term rentals, but the same principle of screening renters applies to short-term rentals too.
When selecting a tenant when house hacking it is important to keep in mind if they will be okay with you being a landlord and being on the property with them. If they see value with it during the showing then there most likely won’t be any foreseeable problems or conflict between tenant vs house hacking landlord. Since you will be a live-in landlord there is an extra layering of screening that needs to take place especially if you are renting by the room and you and them will be roommates.
Lease Snapshot Handout
Another idea to do when screening tenants is to have a snapshot of the rules in the lease be sent to them before they go to the property and have a handout when they are at the property. The snapshot can have an important shortlist of lease details such as security deposit, guest rules, pet policy, utility payments, land rental use policy, and most importantly the unique selling proposition. The purpose behind the snapshot of the lease handout is to make life easy for the prospective tenants to remember what they would be getting into. When you go to an open house to buy a property they typically give you a piece of paper of the listing and other marketing material, the lease snapshot is essentially the same thing, but it lets them know if they are a good fit for the property in a quick glance.
Below are some suggested guidelines to screen tenants for preliminary approval. It is important that the prospective tenant knows these standards before viewing the property so they can see it for themselves if they meet the expectations before going through the application screening process. Having this upfront agreement will save you the hassle and save the applicant time too.
Tenant Screening Guidelines:
- The monthly gross salary of tenants/applicants is at least 2.5 times rent or total annual tenants on the lease
- A credit score above 680
- References: previous 2 landlords & employers
- 3 past most recent pay stub (assumption of bi-weekly or semi-monthly payments)
- No prior criminal history or evictions
- The tenant’s social media checks out from nothing out of the ordinary
- Drive-by their current residence and see if it is taken care of. How they treat their current property is most likely how they will treat yours.
- Arrive punctual and not late to the showing of the rental
- Are they easy to communicate with in person, over the phone, email, etc.
- Are they a smoker?
- Do they have any pets?
- Do they have any kids?
- How many people will be living on the property? and who?
