Renting your investment property without having a prospective resident go through the necessary review can be both financially and civically irresponsible. How do you know that this person is who they claim to be? How do you know whether they have the means and the responsibility to pay the rent on time and each month? How do you know that they do not pose a threat to the health, safety, and welfare of the surrounding neighborhood?
Before you accept applications from prospective residents, you should look into credit and background check companies to find one that fits your needs. Credit and background checks will often cost you about $25 per applicant. After you have a found company to run credit and criminal background checks, see whether the company has an application you can use. Another option is to search for free landlord forms online (although don’t use free leases). As prospective tenants show up to view your rental property and show an interest in renting from you, ensure that you have a rental application available for them to complete.
Also, do all of the following:
- Verify the applicant’s identity by comparing their state ID to the information on the application
- Verify income with recent paycheck stubs, bank statements, et cetera.
- Determine each resident who will be living in your rental house
- Identify any pets (if applicable) and what is the weight, color, and breed of each
Having the application filled out and signed allows you to process or send it to the credit and criminal reporting agency. Send it out and wait for the reply, which often will take around two to three days. While you wait for the application to be processed, follow up on the applicant’s employment (if applicable) reference. Get in touch with the prospective resident’s employer and confirm that the applicant is employed. Be mindful of how the “employer” answers the phone, though. You need to ensure that the number you call actually is a business, and not merely one of the prospective tenant’s friends. As an example, a typical employer will answer the phone professionally, not casually.
The next rung in Raleigh tenant application review is to contact the past landlord and personal references. Bear in mind that if a prospective renter is being evicted, the current landlord most likely cannot or will not offer negative information. As such, this is why you should obtain 2-3 past landlord references.
Inquire of each landlord reference the following:
- Did the prospective tenant fulfill the terms of the lease?
- Did the prospective tenant pay the rent on time regularly? Or were there problems?
- Was the prospective tenant evicted or asked to leave?
- Would the landlord rent to this applicant a second time?
Keep in mind family members or friends should not be considered rental references. Checking up on references should take about half an hour of your time for each applicant.
After reviewing the credit and criminal background and determining that the prospective resident is a good risk, gather the rest of your findings together to build a picture of the people who have applied to rent your investment property. If everything comes together and the prospective renter looks like someone you would like to take care of your property during the next year or two, then contact them to inform them of their application’s approval. You can then set a move-in date.
But, if you do not consider that applicant a good fit, and you decide not to have the person rent your house, then you need to inform the applicant that you are not going to be renting to them at this point. The best path is to call, and then follow up with written communication (it’s OK to send an email) stating the reason for not accepting the application, such as: “An invitation to lease will not be extended based on your credit findings.” If your reason for not renting to the applicant is credit, then the credit reporting agency will give you the name/address of the credit bureau for you to then give to the prospective tenant to obtain a copy of their report at no charge.
Here are some other common reasons for rejecting a tenant application:
- Inadequate Rental History
- Past Bills in Sitting in Collections
- Previous Evictions
- Past Criminal Convictions
Doing your due diligence to find a quality, qualified tenant for your rental property is both time and money well spent to help ensure a healthy relationship for you and your renter in the future.
Want to learn more about how much time is needed for various aspects of property management? Please check out our landlord calculator for more information. For more information about our property management services, please contact us online or give us a call at (919) 827-1107 today!