You have invested in a great property and have ensured it is ready to receive your first potential tenants. You then advertise the property and wait for applicants. Once you have interested parties, the next vital step is to undertake a thorough tenant screening process. (Also known as “resident” or “applicant” screening). You have heard the horror stories about tenants disappearing in the middle of the night leaving you high and dry. Sometimes the tenants don’t pay their rent and then refuse to leave, while others might end up causing extensive and expensive damage to your property. While it is impossible to ultimately foresee if a particular tenant is a possible liability, a well-executed screening process can at least alert you to any red flags. Most Colorado Springs investment property managers already have an effective screening process they use for all of their Colorado Springs rental properties to ensure a reliable renter is selected.
Properties in Colorado Springs For Rent
A solid, reliable tenant contributes to protecting your investment. Your first priority is to know if your tenant can actually afford the apartment or home. Having a good tenant stay for longer time periods creates stability for your investment and you don’t lose incomes for the months in between finding new tenants. With a high tenant turnover, you are losing rentals and are constantly restoring the apartments to marketable conditions. You don’t want other residents to be put off by seeing too much movement in the property with constant moving vans, eviction notices and a general negative environment. You don’t want your property to resonate with a less than desirable condition and put off others from living there in the future.
Screening Your Rental Tenants
One thing to bear in mind if you are conducting a tenant screening on your own, is that you have to be aware of the legality surrounding how it is conducted. The apartment industry’s screening policies are governed by the Fair Housing Act (FHA) and the Fair Credit Reporting Act (FCRA).
Here is some essential advice:
- Different states have different laws governing tenants and screening criteria and you want to make sure you are operating legally. There are very specific tenant’s rights that you must adhere to during the entire application and screening process. You might discover that there are restrictions on the amount of rent you can charge or how much you can ask for a security deposit.
- Stick to your decision that tenants must be earning at least three times the rental amount. (or whatever rent to income ratio you decide)
- Do the first part of the screening over the phone so you can weed out anyone who doesn’t fit into your established criteria.
- Remember that it is against the law to refuse to rent your property on the basis of race, color, national origin, religion, sex, familial status or handicap. (the protected classes) So you must be certain that you NEVER ask discriminatory questions.
- Once the tenant has sent through their application form they give you permission to complete background checks. Make sure that the process you do for one potential tenant is the same for everyone and keep the records. This will protect you in case of any legal action.
- A complete credit check gives you insight into the spending habits of your potential tenant and points to their financial responsibility. You’ll see all of the red flags surface like consistent late payments or increasing debt.
- You want to make keep your property and the people that live around it as safe as possible and that is why a criminal check must be done. You will be able to see any convictions for the past seven years.
- Your tenant must display a steady income. You can contact their employer to ascertain their current monthly wage so you can be sure they are able to cover the rent.
- Sometimes people falsify their past landlord references. You must gather as much information in this regard and then verify its accuracy. Previous duration of lease and timely payments will provide you with a good understanding of their previous conduct.
- These days, social media is a highly successful way to verify some details they might have given on the form. You can quickly see if they have pets where on the form they could have indicated that they don’t have any. But always be sure you are not breaching the person’s privacy.
- Don’t fall prey to emotional stories.
Get the Full Story About Your Renters
You can conduct background checks on criminal records, bankruptcies, medical collections, foreclosures, employment history, known aliases, past address history and eviction notices. Make sure you really take the necessary time to do these checks as it will ultimately save you money and protect your investment.
If the process seems daunting, you can always hire a Colorado Springs property manager to conduct the screenings for you.