Property Insurance & Tenant Screening: Do Landlords Need Both?
Property insurance can help protect your investment from damage caused by renters, but it's a smart move to minimize risk from the outset by screening each online rental application upon submission. Tenant screening services help you weed out bad renters. Prescreening all applicants and getting good landlord insurance coverage are complementary ways to protect yourself and your investment.
As a landlord, how well you screen your tenants can have a big impact on your finances. The ideal tenant pays you on time, causes no problems, and leaves the rental unit in great shape when they leave. A bad tenant can keep you up at night wondering what problems they'll cause next and leave you with a large clean up bill due to damaged property. Proper tenant screening can help you to increase the odds of each of your tenants being an ideal renter.
Reduce Your Risk By Conducting Thorough Tenant Screening
Take the time to do a complete screening on every applicant. This will weed out the people who increase your risk of having to deal with one or more of the following problems:
Payment issues - These tenants can have an excuse for why they can't pay on time, or can't afford to pay the entire amount. They may take advantage of you and delay paying as long as they can. This makes your budgeting impossible to do accurately.
Damage issues - Unless you have an annual inspection policy, you're likely not going to see the inside of a unit until the tenant moves out. An irresponsible tenant can leave you with ruined carpets, damaged walls and ceilings, and broken sinks and toilets.
Screen for All Potential Risks
A thorough screening uncovers the financial risks and behavioral issues that a tenant may bring to your complex. A complete screening process takes time but will save you money if you don't to deal with rental issues. Many successful property managers rely on tenant screening services to do these checks into a tenant's rental history. If you do them yourself, make sure you cover all of the following areas:
The Online Rental Application- This is the initial source of information you need from a prospective tenant to determine if they are a good risk as a renter. This information is the starting point for the various checks you'll do to research the tenant and is useful to any service you use to perform those checks for you.
The Credit Check- The information lets you see the current financial status of the tenant as well as any issues in their credit history that may be a red flag for renting to them. Because this is a critical part of the tenant evaluation process, some property managers make use of a rental credit check service to make sure they get accurate information.
The Rental History Check- Another important part of the process is looking at the tenant's history with previous landlords. A rental history report will show if there were issues with the tenant paying on time or any history of property damage.
Because this requires contacting previous landlords to get the information, using a service to get the rental history reports will save time and frustration, should you have difficulty connecting with a landlord. You'll get accurate information to answer your questions about a tenant's renting behaviors.
Sorting the Information
Collecting all of this information is just half the battle; the other half is reviewing it so you can determine how big a risk an applicant is as a renter. If you manage a small number of units or have very low turn over, you may find that a tenant screening service is worth the time and money. They can provide you information for your tenant background check, credit check and rental history.
A good tenant screening service will provide you with a tenant score. This will indicate how likely the applicant is to default on a lease, which can save you time and money in the longrun.
Odds are high that many of your applicants have been evicted or fought to stop an eviction. Each year, approximately one million evictions are filed and 1 in 40 renters get evicted. Some of these renters bounce back from the eviction process and become reliable tenants, while others couch hop for years before applying at your property.
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.
Owning property and being a landlord comes with some responsibilities and risks. Property must be kept in good repair and tenants afforded privacy. In turn, landlords need to know the people they choose to rent to will pay their rent on time and comply with the terms of the rental or lease agreement. When they leave, they must return the property in substantially the same condition as when they moved in.