Introduction
Leasing your housing property to a stranger can be risky. However, the danger can be less if you have useful insight into the foreigner's past and current state. A tenant background check affords you this privilege.
It exposes key areas of the life of an interested occupant. This is required to safeguard your property and housing investment from misuse. By having insight into the tenant screening report, tenant turnover can be reduced. It also reduces the hassle of frequently searching for another set of renters.
This important process of tenant background screening on a housing rental helps filter the quality of lessees you acquire. This article will guide you on executing tenant screening and what key things to look out for in your potential renters.
(also read; Understanding the Role of a Cosigner in Property Management)
Types of Tenant Background Screening
Certain data are non-negotiable in a house leasing contract. Information like name, source of income, nationality, and next of kin are basic required information. It enables the establishment of a lease agreement.
However, certain information is not commonly disclosed by potential tenants. These must be sought out to ensure no losses in the middle of the contract. They are:
1. Tenant Credit Check
Before anyone should desire to rent a home, there must be sustained capacity to do so. This capacity can be seen in the credit history of the interested inhabitant. The tenant credit check gives house owners a comprehensive insight into the tenants' earning capacity.
It also speaks on spending habits, loan history, and repayment frequency. This information can help you secure quality individuals as renters and also help filter the potentially stubborn ones.
2. Tenant Criminal Background Check
You don't want to disobey the law by harboring a fleeing criminal. A landlord has the right to know if the interested renter has committed a crime and was sentenced to prison. This ensures accountability, transparency, and non-ambiguity in a leasing contract.
3. Tenant Employment Verification
Since only working persons can afford a lease rent, house owners have the right to verify employment claims. Proof of appointment letter or statement of employment from a potential tenant's employee can be requested. This is to prove this claim and ascertain their ability to pay for their rentals comfortably and when due.
4. Tenant Rental History Checks
Conducting a tenant background screening on their rental history also helps identify erratic individuals. You need to know the reason for their departure from former places of residence. This can give amazing insight into their character and help screen out troublesome individuals.
5. Social Media Screening
Social media is a common area recently adopted to gain insight into a potential tenant's life. The media space constitutes a major aspect of the modern person's daily activity. So, you can easily surf through their social media accounts. This will help you better understand who they're dealing with.
This information makes up a tenant screening report. It can also be used to determine whether to continue with a leasing contract with a potential occupant.
Why Conduct Renter Background Checks?
A renter background check is not a legal requirement for establishing a lease contract. Tenant background screening helps prevent avoidable pitfalls. The process could be demanding but it is certainly rewarding. These benefits highlight the tremendous importance of conducting a thorough renter background check on each potential tenant:
1. Reduces Risk Of Property Damage
You will get an idea of why a tenant left his or her formal residence when you have insight into their rental history. Violation of the lease agreement or irreversible damage to the rented property can be the reason. Whatever the reason may be, it can better inform you on whether to proceed with the contract or end it before it starts.
2. Minimized Risk Of Nonpayment
Nonpayment or delayed renewal of rental fees is a thorn in any house owner's flesh. You can determine if a lease buyer is fit enough to rent a space in your house by looking into their credit history. Their employment history can also give you more information.
This helps to greatly minimize the risk of nonpayment of rent. It also reduces abandonment of housing property due to the inability to renew the rent fee.
3. Enhanced Safety And Security
You need to gain sufficient information on the financial capacity, management, and reputation of a renter. Your mind will be at rest on the issue of housing maintenance and rent renewal.
4. Compliance With Regulations
Conducting tenants' background checks saves you from a truckload of legal complications. Criminals with a record of drug smuggling can be avoided. Individuals with a history of rape or security infringement can be filtered out too. It ensures the safety of their neighbors and eliminates court cases.
What to ensure in every tenant background check
Although background checks are highly necessitated, they must be carried out with every sense of respect for the tenants. In the course of this process, their privacy could be invaded. They may feel offended which could spark legal issues. This is why certain guidelines are laid to ensure that landlords do not cross the limits and interested tenants comply.
Some important things to take note of when conducting your tenants' background check include:
1. Consistency In the Screening Process
Have a document that outlines the process of your background check. Also, ensure it's consistently used for every tenant you screen.
2. Compliance With FCRA Regulations
The Fair Credit Reporting Act (FCRA) contains detailed guidelines on how to use consumers' information correctly. Ensure to follow it to the letter and let your lessees be aware of your compliance.
3. Transparency
Be clear and explicit in what you plan to use the demanded information/document for. Your intending tenants have the right to know why you're demanding their private details.
These processes require a high level of professionalism and knowledge. A real estate manager or property management agency is better positioned to handle the process. They are equipped to ensure that your tenant's background checks are carried out thoroughly while following the strictest regulations.
(also read; Breaking a Lease: What You Need to Know)
Conclusion
A tenant background check provides insight into a potential renter's credit history, criminal history, and past rental activity. This information can help solidify a lease contract and foster trust between landlords and tenants. Ensuring a thorough process while complying with the minimum standards is essential for its success. By going through this process, landlords can secure their rentals' relevance and maximize returns from their housing investments.
