Do you have a thorough, detailed and consistent process when you do your background checks for potential tenants? Here are eight steps that you MUST incorporate into your process so it’s rock solid.
Step 1. Credit Check
This is obviously the thing that most people do first. But don’t let it be the only thing. It's a great first step but it's not enough. A credit check shows the financial health of an applicant. It tells you how much debt they have, do they pay their bills on time, etc.
Step 2. Income Verification
You need to verify income, not just accept the applicant’s word for it. You need to call the employer and confirm that what the applicant has put down is actually in fact true or ask for recent pay stubs. If someone is self-employed you can ask for their most recent tax returns as a way to verify their income.
Step 3. Check Debt to Income Ratio
Figure out the ratio of the debt to income. That will indicate how much of their income is taken up by debts and how much is actually left over to pay the rent. Generally speaking the guideline is to allow about 30% of their gross income to be comprised of the rent and associated utilities. After you add in their other debts t (from their credit report) that really shouldn't exceed much more than 40% of their gross monthly income. Use that as a guideline to help you figure out whether they have enough money to pay the rent.
Step 4. Employment Verification
You will want to confirm that they are still employed where they said on the application. They may have been fired the day before, left their job or doing something entirely different.
Step 5. Identification Verification
You will want to get a copy of the front and back of their driver's license or alternate picture government identification so that you can actually verify that they are who they say they are.
Step 6. Confirm Prior Tenancy
Be sure to get a prior landlord verification. This is really important. You may want to go to a few previous landlords. You want to find out if they paid their rent on time, were they respectful of the property, were they able to get their whole security deposit back. That'll tell you how well they took care of the property. The landlords will probably share a lot more information but knowing how they were before is a very good indicator of how they're going to be and behave in your rental property.
Step 7. Pet Verification
A majority of the population has a pet so there's a very good chance that somebody will come and apply for your property with a pet. So, if you allow pets there are a few things that you can do to protect not only your physical property but also protect your liability. First of all you want to make sure on the application that the applicant notes the breed ,the size, the weight and provides a picture of their pet. Many applicants may think that you as the landlord might not like a dog that's a hundred pounds; so they say the dog's about 50 pounds. And then they come and you've got this huge dog and it's not the dog that you thought you were getting or that you approved. CHeck with your insurance company that this breed is not excluded from your insurance as there are certain breeds that certain insurance companies do not cover. Make sure you have no exposure for liability.
Step 8. Criminal / Background Check
There's a lot of misinformation out there about what you can use in a criminal background check. You need to make sure you understand all of the rules and regulations of how a background check can be used for tenancy. Check with your state or your local jurisdiction to make sure you use the information the right way and don't discriminate against someone.
Obviously for property management, tenant screening is a big part of what needs to be done. At Richey Property Management, we have refined our process over the years and apply it consistently. We treat every applicant the same and fairly because that's really really important. No one ever has a feeling of being discriminated against. We do everything in our power to get the best tenant possible using this process.
If you would like to discuss having us take care of this most important step in being a landlord, please call us at 703.471.4800 or email us at info@richeypm.com.
