Having a troublesome tenant can be a nightmare. However, property owners and managers can take steps to properly screen tenants before signing a lease and cut down the risk of problems in the future.
Reference check
It’s important to check an applicant’s references. A property manager should contact previous landlords going back two or three tenancies. Chances are a problem tenant’s current property manager will not tell the whole truth when asked for a reference as it wants the tenant to leave. Calling a tenant’s former property managers is a better bet as they have nothing to lose.
Another good reference is the tenant’s current employer. A quick call can provide insight into the nature of their work, length of employment, frequency of pay and personal characteristics.
Credit is king
While having perfect credit is not necessarily a good indicator of a potential tenant’s reliability, a credit report does provide an unbiased snapshot of their financial habits. After all, credit reports do not lie.
The following key pieces of information can be obtained from a credit report:
- Previous and current employers.
- Previous places of residence. An applicant with many former addresses in a short time frame may not be in for the long haul.
- Details of credit cards, lines of credits and other outstanding loans.
- A history of late payments. A rating of one indicates timely payments, while nine indicates bad debt.
Encourage prospective applicants to order a credit report at their cost (approximately $16). Ordering a personal credit report once per year is a ‘soft inquiry’ and does not affect credit score. A ‘hard inquiry’ occurs when a business (such as a landlord) or bank is reviewing someone else’s credit. It is therefore ideal for the renter to minimize the number of hard inquiries as too many can negatively affect their credit score temporarily.
If a prospective tenant does not want to order a credit report, the property manager should order one and incur the cost since it is an effective tool for screening tenants.
Aside from good references and credit scores, property managers should trust their instincts when reviewing potential tenants.
Josh Tesolin is principal of Sunriff Inc., an Edmonton-based real estate asset management company that focuses on property management, investment and tenant placement services. Josh is also a licensed realtor with the Real Estate Council of Alberta and Canadian Commercial Council of Realtors.
Josh makes some very good points with respect to screening tenants. 90% of tenants are good tenants. The tenant from hell or one that uses landlords and property managers as a revolving line of credit, may hand a consumer credit report over to you (landlord/property manager) that has been altered, or counterfeited. How would you know? Unless of course you have the prospective tenant sit in front of your PC to order same, but I doubt you would do that. In addition to Josh's recommendations I have another suggestion, report your Tenant's Pay Habits to a Credit Reporting Agency. How? Google tenant screening and you will find one or two sites on the first page that allow you to report tenant pay habits at no cost. When the residential rental industry networks to identify high and low risk tenants, rental income loss owing to tenants from hell will be significantly minimized. Two of the sites that you will find on the first page of Google when you search tenant screening, offer a FREE landlord guide and a FREE tenants guide to renting. Educating your tenants about their responsibilities and rights is half the battle to hassle free renting. Reporting tenant pay habits is also a significant factor in eliminating collections hassles. Thanks for the article Josh.