Blog & Resources for Landlords

3 Little Known Ways Background Checks Help You Choose the Right Tenant

Jan 24, 2020 12:53:39 PM

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There are some 22.5 million rental properties in the United States encompassing a whopping 48.5 million leasable units. That represents a lot of potential income for enterprising landlords, but only if they know how to sign up the right tenant. When it comes to sifting through virtual stacks of online rental applications to find the ideal candidate, tenant screening services can help.

1. Tenant Screening Services Protect Your Property and Your Other Tenants

Background checks can certainly help paint a picture as to whether or not a potential resident is likely to pay up on time every month, but that’s far from the only benefit. Screening reports, such as criminal background checks and terrorist alerts, let you know whether an applicant could pose a threat to the physical assets that support your livelihood. They also hint at issues which could put neighbors in danger — and leave you open to liability.

As a landlord, you’re basically selling space. Whether you’re renting out an apartment, a condo, a single-family home, or a yurt, you’ve tied your financial security to the responsibility and care of others. It’s crucial you take steps to protect that investment, and that includes conducting a thorough background check. Without one, you’re left exposed.

Depending on where you live and do business, you could be held liable for a variety of poor tenant behaviors such as drug dealing. In some states, landlords can be prosecuted and/or face fines if they know about illegal activity and allow it to continue. You could have your property confiscated or be sued for contributing to a public nuisance. You’re also likely to suffer a drop in property value if your tenant’s dealings become public knowledge.

Even if you are free from criminal liability, you still have an ethical and moral obligation to best protect other tenants and the community at large. Running applicants through the sex offender registry allows you to immediately rule out anyone who could be seen as a threat; sex offenders are not protected by fair housing laws, and you’re perfectly within your rights to turn down anyone whose background check causes alarm bells to ring.

Obviously, the most logical protection you can put in place is to include a clause in your lease banning illegal activity and making any related behaviors cause for eviction. If you become aware of a violation, immediately report it to the proper authorities and initiate eviction proceedings according to the letter of the law.

To avoid becoming embroiled in a legal quagmire and all that drama in the first place, put all applicants through a criminal background check to see if they have a pattern of drug-related activities or violence.

2. Get a Better Idea of What You'll Accept, Starting With the Online Rental Application

If you’re new to the real estate world or just moving from sales to rentals, you might not have a firm grasp of what to look for in a tenant. The more background checks you conduct and the more information you gather (a great online rental application will help), the more you’ll understand your applicant pool, what your options are, and where you’re comfortable drawing the line.

Did you know…?

  • A perfect credit score is almost like a unicorn. Most people have never seen one, and if you’re determined not to settle for anything less than perfection, you’ll likely find yourself disappointed. Credit scores range from a rock-bottom 300 to a highly coveted 850. Only 4 percent of the population in the United States ever achieves that elusive 850, while the average rate hovers just over the 700 mark.
  • Frequent moves aren’t necessarily a red flag. A 2016 survey by the United States Census Bureau says move rates are at an all-time low, but the average person will still relocate 11.4 times over the course of their life. An applicant with a long address history showing short stays at many different places may seem sketchy, but there could be more to the story. If your potential renter is someone just getting out of the military or a former travel nurse settling into a new permanent position, they present less risk than a self-professed nomad with a penchant for evictions. Same goes for a prospect in urgent need of housing because of a natural disaster or fire. Get to know the person behind the numbers; context is important.
  • There are good reasons for uneven employment history. It’s not a reach to assume employed people are more likely to pay their rent, but an applicant with an uneven job history isn’t necessarily lazy or doomed to stiff you. A recently divorced stay-at-home mom may just be returning to the workforce after years off but still have a solid, reliable position. A younger applicant may have just turned a series of internships into a high-profile job with a Fortune 500 company. Weigh not just the long-term record but also the strength of an applicant’s current employment situation, and if you’re unsure, ask for a letter of verification from the employer that confirms details such as contract term and annual salary (your request may be denied, but it doesn’t hurt to try).
  • Just requiring screening could help eliminate questionable applicants. If you give a potential renter a tour, mention the screening process. If they act skittish or disappear, that in itself is a big indicator they aren’t the tenant for you. People with nothing to hide know that screening is part of the rental process; they may not be proud of their credit score or happy to talk about a prior eviction, but they understand the relevance and have an honest explanation at the ready. No matter how new to the rental scene you may be, you’ll quickly appreciate not having to go through the motions with an applicant who seems ill-suited from the beginning.

It’s normal to want a flawless tenant to inhabit your property, but you have to strike a balance between your dream scenario and reality. Seeing what’s really out there and probing the circumstances behind seemingly unfavorable reports will only benefit your bottom line.

3. Get the Big Picture in One Easy-to-Read Score

It’s always a good idea to take all available information into consideration before whittling down your applicant pile and settling on a new tenant. However, it would be a heck of a lot easier to do so if you could look at one type of documentation or rating and make a reliable decision. MyRental’s Tenant Score is the closest thing to a one-and-done tenant selection solution.

MyRental uses a model similar to a credit score to rate the likelihood a potential applicant will fulfill their lease obligation. The three-digit score runs from 200 to 600 and takes a variety of criteria into account, including:

  • General applicant information
  • Payment history
  • Eviction record
  • Past due accounts
  • Bankruptcies
  • Credit scores

All that data is funneled into an algorithm where the numbers are crunched and formulated into a single score related to risk. Using that score, it’s easy to gauge whether someone is an unlikely candidate, a potential candidate, or the best candidate.

Is MyRental Tenant Score a replacement for all the other background check options? Not necessarily. Sometimes it’s nice to have the big picture as well as more detailed reports so you can begin to weed out potential residents who obviously don’t fit the bill before digging deeper on the rest.

Get even more insight via Tenant Score PLUS. You will see your applicants’ Tenant Scores and how they stack up by ZIP code, city, and metro area. Because demographics change from location to location, knowing what you can expect from renters in your region will help you weigh one applicant against another and give you even more confidence in your final decision.

Choosing a new tenant can be a long, arduous process, but background checks are designed to make each step easier and the outcome that much better. To kick-start your property screening process, create your MyRental account today.

Topics: tenant screening, background check

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