Finding Great Tenants: Key Considerations for Property Managers

Vetting new tenants for a rental property is one of the most challenging responsibilities property managers face.

After all, tenant turnover and eviction are both expensive processes that cost property managers an average of $1,750 and $3,500, respectively.

These figures come from mortgage, maintenance, cleaning, advertising, homeowners’ association, court, and legal fees, among others.

Mitigating these costs requires robust tenant screening to find tenants who are reliable, make enough monthly income, have a clean criminal background and eviction history, and will treat you and your investment property with mutual respect.

This article provides a blueprint for your tenant screening process so that you can have a smooth rental application process, avoid unqualified tenants, find your dream tenant, and have peace of mind that they will maintain the integrity of your rental property.

What Defines a Great Tenant?

The first step to understanding how to find great tenants is defining and understanding what makes a good tenant.

There are several criteria property managers must consider to ensure prospective renters are able to make all necessary payments and will not damage the rental property or cause problems for neighbors. These include the following: 

• Stable and sufficient income
• Good credit scores
• Established history of on-time payments
• Clean eviction history
• No relevant criminal record
• Honesty, respect, and responsiveness 

Other criteria exist as well, but these serve as an excellent starting point for predicting potential issues and sifting through candidates for your rental property when performing tenant screening.

We will delve more into the implications of these criteria and suggestions for how to identify a good tenant who meets them below. 

How Can I Tell That a Prospective Tenant Will Pay on Time?

On-time payments are the backbone of property management, making them one of the most coveted traits of a new tenant. 

To predict whether potential tenants are financially qualified tenants, you should look at the criteria below when screening candidates for your rental property.

Ability to Pay

One of the first things to do when evaluating whether someone is the right tenant for you is determine whether they have the means to pay monthly rent or calculate their rent-to-income ratio.

This means having a stable and sufficient income or having significant savings if the tenant is between jobs and unable to verify employment.

You can verify this by requesting the following as a part of your potential tenants' rental applications:

• Recent paystubs
• Tax forms
• Salary verification letter
• Copy of the candidate's bank statements

In general, a qualified tenant should have an income-to-rent ratio wherein their gross income is at least three times the cost of rent.

If they don't meet this but seem otherwise qualified, you might be able to ask for a higher security deposit to compensate. Should you decide to do this, however, be sure to look into and follow your local state landlord-tenant laws.

Established History of Financial Responsibility

Once you confirm the potential tenant has the resources to meet the terms of the lease agreement, it is good practice to make sure they have an established history of financial responsibility.

Credit reports and the prospect's credit score illustrate their financial history and liabilities, including debt, credit length, and punctual payments.

Documentation from prospects' previous rental history can also be helpful. Letters from the candidate’s previous landlords or property managers can be used to demonstrate a reliable rental history of on-time monthly rent payments as well. 

What Do Eviction Records Say About Tenants?

Reviewing eviction records is an essential aspect of tenant screening. Eviction records shed light on a tenant's past rental behavior and their adherence to lease agreements.

By reviewing these records, property managers can gain valuable insights into whether a prospective tenant has encountered significant issues with their previous rental agreements.

This information is vital for making informed decisions, finding a good tenant, and minimizing the risk of potential problems in the future.

Common Reasons for Eviction

Evictions can occur due to various reasons, and understanding the common causes can help property managers assess the suitability of prospects and find good tenants.

Some of the typical reasons for eviction include:

• Non-Payment of Rent: If a tenant has a history of failing to fully pay rent, it raises concerns about their financial responsibility and ability to meet their rental obligations.
• Lease Violations: Evictions can result from tenants violating lease or rental agreement terms. This may involve unauthorized subletting, engaging in prohibited activities, or breaching other specified provisions.
• Property Damage: Evictions can occur when tenants cause significant damage to a property beyond everyday wear-and-tear. Property managers need to assess whether a prospective tenant has a history of causing extensive damage.
• Unauthorized Occupancy: Evictions may result from tenants housing unauthorized individuals or pets without prior approval. This can lead to complications and disruption to the property and other tenants.
• Illegal Activities: If a tenant has used a rental property for illegal purposes, it raises concerns about potential legal and safety issues. Property managers must carefully consider the implications of such actions.

Although not all evictions are caused by these actions, reviewing a prospective tenant’s eviction history is still a good starting point for understanding whether they have had issues with their rental agreements before.

When considering eviction records, it's important to approach the information with fairness and an understanding of individual circumstances.

Some evictions may be the result of unforeseen circumstances or a misunderstanding between the tenant and landlord.

Property managers should take into account the overall context of the eviction and consider additional factors before making a final decision about their interested renters.

What Criminal Records Are Relevant to Tenancy?

You should always conduct a criminal background check when performing tenant screening for your rental property.

Minor criminal offenses like traffic tickets are not relevant to tenancy. However, serious crimes like fraud, burglary, domestic violence, and sexual abuse are. 

By screening for such criminal records, you are safeguarding yourself and your property while assuring other tenants or neighboring property owners that their interests are in mind too.

In general, running a background check is essential to vetting tenants. That said, it's important to comply with federal fair housing laws when performing these screenings so that you do not discriminate.

Understanding the Fair Housing Act

The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, family status, and disability. When performing screenings, property managers must ensure that their criteria for evaluating criminal records do not disproportionately affect individuals from protected classes.

Property managers should follow these guidelines to navigate the tenant screening process while adhering to federal fair housing laws:

• Consistent Criteria: Establish clear and consistent criteria for evaluating criminal records. The criteria should be applied uniformly to all prospective tenants, regardless of their background.
• Individual Assessment: Consider each applicant's unique circumstances when evaluating their criminal records. This allows for a fair evaluation of their ability to meet the obligations of the lease.
• Justifiable Business Interest: Ensure that your screening criteria align with legitimate business interests, such as protecting the safety of tenants, maintaining property security, and preventing illegal activities.

By adhering to federal fair housing laws during the tenant screening process, property managers can maintain a fair and non-discriminatory approach while safeguarding their property and the interests of all parties involved.

How Can I Tell Whether a Prospective Tenant Is Respectful?

Nobody wants a bad neighbor. Bad neighbors can deter tenants from renewing their leases, leading to high turnover, low retention, and reduced desirability of your property. 

For this reason, when determining whether a tenant is a good fit for your property, you should take additional steps to assess their character. This is also helpful for anticipating whether the tenant will be honest and respect you as a property manager during their tenancy.

Consider the tone and timeliness of prospective tenants’ correspondences with you, and request references from their former landlords or property managers. 

Interviewing Prospective Tenants

You can also interview prospective tenants. Through an in-person interview, you can learn more about your candidate firsthand and ask key questions, such as:

• When would you like to move?
• Why are you looking to move?
• How long have you lived in your current home?
• How many people will live in the property?

These questions can provide you with a glimpse into the likelihood of the tenant renewing their lease and how well they will take care of the property.

Contacting Past Landlords

You can also consider contacting your prospect's previous landlord when performing tenant screening.

Previous landlords can be valuable resources for finding good tenants for your rental properties and mitigating the risk of getting a bad tenant.

Whether you ask for landlord references or call the independent landlords or property managers directly, make sure these questions are covered:

• Was the tenant paying rent on time during their lease term?
• How long was the tenancy?
• Did neighbors or other tenants file complaints against this tenant?
• After the tenant left, did they keep the unit in good and clean condition?
• Did the tenant take good care of the rental property during their lease term?
• Would you rent to the tenant again?

As always, be sure to review and follow federal laws related to fair housing so that you don't overstep or accidentally discriminate with your screening criteria.

How Do I Screen Prospective Tenants?

Many factors need to be considered when finding good tenants for your rental property. It can be overwhelming, but thankfully many services and resources exist for screening candidates. 

If you’re looking for an effective and user-friendly software for screening new tenants, there's also DoorLoop.

DoorLoop provides a comprehensive suite for screening and evaluating tenants’ employment, credit reports, criminal background, eviction record, and more. It makes the tenant selection process easy and uses a reliable tenant screening service powered by TransUnion.

Additionally, because DoorLoop's rental applications, lease management, and tenant management are largely automated, you can enjoy the following benefits for your rental listing:

• Screen more prospective tenants faster
• Handle applications from multiple tenants at a time
• Confirm and gather documentation for renters' insurance
• Expedite your rental process
• Easily sift out bad tenants
• Perform a credit check and criminal background check
• Make collecting rent easier

Try DoorLoop’s free demo today and fill your rentals with dream tenants.