Tenant Screening: What You Need to Know

As an investment property owner, it’s tempting to go it alone when renting out your property to avoid extra financial outlay. You’re already working hard to get the home ready to rent, paying for upgrades, repairs, insurance, and more. Especially in Portland, where right now the rental market is super red hot, it’s easy to think that with so many tenants to choose from, it will be a breeze to find good ones. With so many prospective tenants applying, it will be easy to rule out the shady prospects. Right?

It’s not so easy.  A research firm in Boston collected some local statistics about  landlords who decided to go it alone and not rely on the services of a property management company:

  • 66% of them do not conduct Sex Offender Registry checks on their prospects.

  • 49% of them do not conduct criminal background checks on their prospects.

  • 49% of them do not contact past landlords or other references offered by their prospects.

  • 23% of them do not conduct credit checks on their prospects.

Let’s face it, conducting all those checks is a lot of work.  A lot of phone calls, checking references, and other tasks when you are eager to get that property rented. However, ignoring tenant screening can cause a lot of problems — in obvious ways,  and ones not easily recognized.

According to the Bureau of Justice Statistics, more than three in four criminals will be arrested again within five years of leaving the system — presumably, those that don’t get caught commit crimes even more often.

This means that every one of those 49% of DIY landlords who isn’t conducting regular criminal background checks on their clients is opening up not just themselves, but every neighborhood near their property to a criminal that is waiting to stumble onto a situation they can utilize.

Maybe you are willing to put in the effort to do a criminal background check, but do you also do a Sex Offender Registry check? Some state laws will keep some crimes from showing up in a criminal background check performed in a different state — but the Sex Offender Registry shows up no matter where you are. So while it might be possible for a clever criminal to hide a burglary or vandalism, no convicted sex offender can do the same.

A  shady prospective tenant might be very good at what they do, and therefore, have no record of their crimes when a criminal check is run. That’s one of the reasons why it’s so important to perform a thorough credit check and to contact all of a prospect’s references —beyond just the landlords — and chat with them. Don’t just ask a couple of  simple questions and hang up; provoke a conversation. If they got a funny feeling at any point, you want to know about it.

Also, be on the lookout for financial red flags, like a potential tenant asking if they can pay rent in cash, especially if they want  to drop the cash into your drop box every month rather than seeing you face to face.

No matter how likeable a prospect tries or wants to be, remember that tenant screening is a business transaction, not a personal one.  And keep in mind that your poor tenant screening practices have costs that go far beyond your pocketbook: they affect your neighbors, your neighborhood, and ultimately your other tenants as well.

A property management company navigates these waters with every new property they manage, and are experts at knowing when something looks too good to be true as well as able to spot a red flag with accuracy and speed. Investing in one to guide you through the screening process, as well as any situations that come up, is just as important as sprucing up the property before the first prospective tenant takes a tour, and will help you discern if they are the tenant of your dreams...or nightmares.