When it comes to managing Nashville rental properties, the professional team at Apex Ventures, Inc. believes that personal relationships and good communication are the starting points for any successful tenancy.
That requires having the right tenant in place.
The success of any rental property investment largely depends on the quality of the tenants who are living in your rental home. It’s essential to have a reliable and consistent tenant screening process in place to ensure you’re selecting the best possible tenants to occupy your property.
We want to place tenants who we’ll enjoy working with. While our role as your property manager is to hold tenants accountable and protect your property, we also know that by developing relationships with residents that are built on transparency and trust, we’ll ensure those tenants are happy, likely to renew the lease agreement, and easy to work with.
Let’s explore some of our most essential strategies for tenant screening, including legal compliance, checking credit, verifying income, looking for past evictions, talking to rental references, and when necessary – utilizing the expertise that only local property managers can provide.
Understanding Fundamentals: The Importance of Tenant Screening
Selecting the right tenant for your property can help protect your investment and avoid costly problems later on. A good tenant will pay rent on time, take care of the property, and follow the terms of the lease agreement. In contrast, a bad tenant can cause a variety of problems, such as late payments, property damage, and potential eviction issues.
To maximize the potential returns from your rental property and minimize potential problems, it’s essential to adopt a robust and reliable tenant screening process that ensures you’re selecting the best possible tenants.
Consistency and Legal Compliance with Tenant Screening in Nashville
When conducting tenant screening, it’s critical to be consistent and legally compliant with your procedures. Fair housing laws exist to protect tenants from housing discrimination based on race, color, religion, sex, national origin, family status, or disability. As a landlord renting out a home, you must screen all applicants consistently and fairly to avoid violating these laws. We know you’d probably never discriminate intentionally, but you may be surprised at where perceived discrimination can surface. Here’s how to avoid it:
- When advertising your property for rent, do not use language that discriminates against potential tenants based on protected classes.
- Use a standard rental application that asks for relevant information such as income, rental history, and credit history.
- Apply the same tenant screening criteria to all applicants. Do not change the criteria based on individual applicants or make exceptions for certain applicants.
By following these guidelines, you ensure that your tenant screening process is both consistent and legally compliant, protecting yourself against potential legal issues and ensuring a fair process for renters.
Screening Procedures: Reviewing Credit, Income, and Evictions
One of the most critical aspects of tenant screening is reviewing an applicant’s background. You ask them to complete an application in order to get a full picture of who they are and whether they’re qualified to rent your home. A thorough screening process will include a review of credit, income, and eviction history. This information can provide valuable insights into the applicant’s financial stability and their likelihood of being a responsible tenant.
Credit Checks
Performing a credit check on a potential tenant can provide a wealth of information about their financial history and overall ability to pay bills, including rent, on time. A credit report will typically include the applicant’s payment history, outstanding debts, credit inquiries, and general credit score.
When evaluating an applicant’s credit, pay attention to the following:
- Credit score: While no specific credit score guarantees that a tenant will be reliable, a higher credit score generally indicates a better track record with managing debt and making timely payments.
- Payment history: Look for patterns of late or missed payments, as these may indicate a potential risk of late rent payments.
- Outstanding debts: High levels of debt relative to income may indicate potential difficulty in affording rent payments.
Income Verification
Verifying an applicant’s income is another essential part of the tenant screening process. It’s important to ensure that a potential tenant has a stable and sufficient income to afford rent payments and other living expenses. You don’t want to set a tenant up for failure by approving an application when clearly not enough money is earned to meet the rental obligations.
To verify income, you can request the following documents:
- Pay stubs
- Tax returns
- Bank statements
- Employer verification letter or offer of employment
A general rule of thumb is that a tenant’s monthly gross income should be at least three times the monthly rent. As rents have risen, this has been a more difficult standard to set, but in the Nashville market, we think it’s reasonable.
Rental References
Rental references form a crucial part of the tenant screening process, providing firsthand insights into an applicant’s behavior as a tenant. Current and former landlords can share valuable information about the applicant’s rental history, including rent payment punctuality, property maintenance, and overall adherence to lease terms.
When considering rental references, pay attention to the following:
- Timeliness of rent payments: Regular and timely payments indicate a tenant’s financial stability and responsibility.
- Property care: Ask about any property damage caused by the tenant. This will help you evaluate whether the applicant takes care of the rented property.
- Lease agreement compliance: Check whether the tenant followed all the rules and regulations as per the lease agreement. Any violations or legal disputes can indicate potential issues.
Remember, honesty and transparency in this process are paramount. Always inform applicants that you will be contacting their references, and ensure you obtain their consent before doing so.
The Importance of Background Checks
Background checks form an integral part of the tenant screening process, offering a deeper insight into an applicant’s past that might not be evident in their credit report or income verification. They can uncover a vital history such as criminal records, previous evictions, or fraudulent activities.
A criminal background check can reveal if the prospective tenant has any criminal history. While minor offenses might not be a deal-breaker, serious crimes may raise legitimate concerns about safety and compliance with community rules. Establish what you’ll accept and what you won’t accept, and make sure applicants are aware of your standards.
Also, eviction history can be a telling sign. A tenant with a history of eviction could hint at potential trouble down the line, as it may signify past rental disagreements or inability to pay rent.
Running background checks adds another layer of protection against potential risks, giving you a holistic view of the applicant’s reliability and suitability. It helps to ensure that you’re leasing your property to responsible tenants, thus safeguarding your investment and the tranquility of your rental community.
It’s essential to stay updated with the ever-evolving legal landscape surrounding property management and tenant screening, considering the changes in laws and regulations at both the local and federal level. Legal compliance is not just about obeying the law – it’s about demonstrating commitment to ethical practices in your property management operations, fostering positive relationships with tenants, and securing your real estate investments against potential risks.
Don’t Skip the Screening
Screening tenants can be time-consuming. But, it’s worth your energy and resources. Skipping tenant screening can expose landlords to numerous potential risks. Foremost, without proper screening, there’s a higher probability of renting to financially unstable tenants, leading to frequent late or missed rent payments. This scenario can disrupt your cash flow and may necessitate legal action for eviction, incurring additional costs and time.
Additionally, if tenants have a history of property negligence or damage, your property maintenance costs could skyrocket. Repairing damages beyond normal wear and tear could be costly, and constant repairs negatively impact the property’s value over time.
In essence, forgoing tenant screening presents an array of financial, legal, and reputational risks. Therefore, it’s substantially more prudent to invest time and resources in thorough tenant screening upfront to safeguard your property, finances, and reputation in the long run. If you don’t think you have the expertise or the resources to conduct a thorough tenant screening, make sure you partner with a Nashville property manager who can help you.
The tenant screening process is crucial for any landlord or real estate investor aiming to protect their property, maintain a harmonious living environment, and ensure steady rental income. By examining a potential tenant’s income verification, rental references, and background checks, you can paint a full picture of the applicant’s suitability.
As property managers, we have established systems for tenant screening that are effective, legally compliant, and likely to result in a well-qualified tenant who will pay rent on time and take good care of your property. Don’t be afraid to ask for help if you’re not sure what you should be doing in terms of background checks, financial screening, and reference-calling.
It’s important to get the screening right. This impacts your entire rental experience. Contact us at Apex Ventures, Inc. We can help you will tenant placement and all of your Nashville property management needs.
