How To Screen Your Tenants
You’ve put in the work and found the right property in the best location as the right investment for you. To ensure the investment works, you’ll want to place the ideal tenants that will value their relationship with you and will show the same commitment to the investment you’ve made. It’s not a walk in the park, but it is always important. It’s about responsibility, reliability, track record, and mutual respect. In this blog post we’ll discuss tips on how to screen your tenants.
Deciding whether you want to go the route of using a letting agent or handling the process yourself is an important consideration to make before you begin the process.
Using a letting agent
A letting agent is helpful as this will provide a focused point of contact that handles the administrative details of the agreement on your behalf. Processes such as vetting, securing, contracts, rental collections, and any other related costs that may arise throughout the term of your agreement with that tenant are conducted by the letting agent.
The one drawback? A cost that is commonly based on a commission of the total monthly rental figure. It’s important to find the right letting agent and is as important as finding the right tenant for your property.
Doing it yourself
For a number of reasons, people prefer not to involve a middleman and choose to manage the tenant process on their own. If the hands-on approach is more in line with how you choose to manage your investment, it’s critical that you take an informed approach from the very beginning to the end.
The following guidelines will help you get the best out of the business model of your property rental.
Finding a tenant
Spread the word. From word of mouth through trusted friends and relatives to classified ads or via social media, be sure to communicate what you’re offering in a clear and coherent way.
Establishing Tenant Criteria
To secure a responsible and dependable tenant, landlords should establish a clear set of criteria for evaluation. Here are pivotal points to consider:
- Income Verification: Ensure the potential tenant has a stable income that is at least three times the monthly rent. This threshold helps gauge their ability to afford the rent consistently.
- Credit Score Assessment: Look for a credit score that indicates financial responsibility, commonly a score above 620. This can vary depending on the market and property.
- Rental History Check: Contact previous landlords for references and inquire about the tenant’s payment punctuality, how they maintained the property, and if they followed the terms of their lease.
- Criminal Background Check: Conduct a comprehensive criminal background check to ensure the safety and security of your property and the neighbourhood. This check should balance between security concerns and fair housing laws.
Adhering to these criteria not only helps in finding a reliable tenant but also standardizes the screening process, ensuring it is fair and equitable for all applicants.
Describe the unit
Save yourself the time of having to answer endless, unnecessary questions: How many bedrooms? How many bathrooms? Is it a ground-floor unit or upstairs with a balcony? What about security and parking? Ask yourself all these then list the answers accordingly, including the amount you are charging for the unit on a monthly basis.
Establish a professional relationship
Meet your tenants in person and ask questions. You must get to know them in a way that is relevant to them living your investment. Their hobbies and interests may give you a lot of insight into their lifestyle and will give you a good idea about the potential fit for a good relationship.
Once you’ve shortlisted your potential candidates, supply them with a tenant application form that you can use when screening, vetting, and setting up the agreement with your prospective tenants.
The application
Along with the completed tenant application form, be sure to secure the following:
- Proof of identity — a certified copy of their Identity Documents
- Employment details — confirmation of employment and/or most recent payslip
- Proof of financial stability — three month’s bank statement
- Background credit check — their agreement to undergo a credit check
- References — written references from previous landlords
- Details on all the relevant people who will be living there
- A signed copy of a written code of conduct that you have shared with them
Once you’ve acquired all the relevant information you need, you’ll make an informed decision. Trust your instincts. Ideally, both parties want the best dynamic from this relationship. Thereafter — and once you have approved the tenant — draft the final agreement including the duration dates of the rental period and make duplicate copies for both parties to sign and keep.
Deposit
Before your tenant moves in, make sure you collect a deposit (usually equivalent to the monthly rent amount) and one month’s rent in advance.
A deposit works as a security fee, necessary to protect your investment, and should be used to cover any damages caused or defaults incurred during the rental term.
The deposit is secured for the duration of the rental agreement and is refunded to the tenant at the end of the agreement, once they’ve vacated the premises at the agreed-upon date and granted there are no damages, discrepancies or disagreements as to the state of the unit or any outstanding payments.
LEGAL RESPONSIBILITIES AND OBLIGATIONS
When screening tenants, landlords must adhere strictly to the law to avoid discrimination and ensure fairness. Compliance with the Fair Housing Act is a must, which prohibits discrimination based on race, colour, national origin, religion, sex, familial status, or disability. This means all potential tenants must be treated equally during the advertising, screening, and selection process.
Knowledge of landlord-tenant laws at both state and local levels is also essential. These laws typically outline the rights and responsibilities of both parties concerning security deposits, lease terms, rental amounts, entry to the property, and maintenance protocols. Additionally, local ordinances may have stipulations on rental properties, such as caps on the number of occupants per square foot or specific safety requirements.
Landlords must provide a rental agreement that follows the law and details the expectations and responsibilities of both the landlord and the tenant. Landlords should consult with a lawyer to ensure that their rental agreement, application process, and screening procedures comply with all applicable laws and regulations. Failure to adhere to these legal obligations can lead to costly legal disputes and potential liability.
Handling Tenant Disputes
When faced with disputes, the key is to resolve issues amicably and professionally. Approach each situation with clear communication—articulate your concerns and listen to the tenant’s side of the story. If rent is late, a polite reminder about the terms of the lease and a request for an explanation should be the first step. If the issue persists, propose a payment plan or a late fee arrangement as per the lease agreement.
For property damage, assess the extent and determine if it falls under normal wear and tear or if it’s significant enough to warrant repair costs deducted from the security deposit. If tenants dispute charges, provide detailed documentation and receipts for transparency. It’s advisable to handle minor damages through direct communication and negotiation for prompt restoration.
Lease violations, such as unauthorized occupants or pets, typically require issuing a formal notice that outlines the specific lease term being violated and the required corrective action. Tenants need to understand the potential consequences, including eviction if they fail to remedy the violation.
Eviction is the last resort and must follow legal procedures. If all attempts at resolution fail, ensure you serve a formal eviction notice as required by state laws, documenting your reasons for eviction and allowing tenants to respond or rectify the situation. Legal counsel can guide you through these proceedings, which should always adhere to local and federal regulations to avoid potential liabilities.
Throughout all interactions, maintain professionalism and ensure that all communications are documented for reference. This not only supports a strong case, should legal action be required, but also helps maintain a reputation as a fair landlord—something that’s invaluable for future tenant relationships and leasing endeavours.
Property Maintenance and Inspections
A well-maintained property is not only essential for attracting and retaining tenants, but it also ensures the safety and value of your investment. As a landlord, you have a responsibility to provide a habitable and safe living environment for your tenants.
Regular inspections are crucial for identifying and addressing any potential maintenance issues before they become major problems. They also allow you to assess the state of the property and ensure that tenants are complying with their lease obligations.
When conducting inspections, it’s important to provide proper notice and follow all local laws and regulations. Typically, 24-48 hours’ notice is required to enter a tenant’s unit for inspection purposes, unless there is an emergency. Ensure you document any existing damages or issues and communicate clearly with your tenants about any necessary repairs or maintenance.
Insurance and Liability Protection
Landlords should strongly consider obtaining landlord insurance as a safeguard against potential liabilities, which could include property damage or personal injury claims made by tenants or visitors. Standard homeowner’s insurance policies might not provide adequate coverage for investment properties, so specialized landlord insurance is crucial.
Landlord Insurance Coverage
Landlord insurance typically offers several types of coverage:
- Property Damage: This covers damage to the building due to fire, storm, theft, vandalism, and tenant damage.
- Liability Protection: In case a tenant or visitor files a lawsuit for injury occurring on the property due to maintenance issues or neglect.
- Loss of Income: If the property becomes uninhabitable due to covered perils such as fire or natural disasters, this can compensate for lost rental income.
- Optional Coverage: Landlords can also opt for additional coverage for items such as legal costs, rent guarantee insurance, and emergency repair service.
Selecting the Right Policy
When selecting a policy, landlords should:
- Assess Risks: Consider the location and type of rental property to determine potential risks that need coverage.
- Compare Policies: Evaluate different insurance providers and their offerings to ensure the most comprehensive protection.
- Understand Policy Limits and Deductibles: Be aware of the limits of coverage and deductibles, as these will directly affect the cost of the policy and the out-of-pocket expenses during claims.
- Review Regularly: Insurance needs can change over time, so it’s vital to review and adjust coverage as necessary.
Partnering with a reputable insurance agent can assist landlords in navigating this complex field to choose the policy best suited to their needs, providing peace of mind that their investments are well protected.
Lease Agreement Details
Drafting a comprehensive lease agreement is a critical aspect of property management that delineates the rights and responsibilities of both the landlord and the tenant to prevent future disputes. The agreement should explicitly state the rent payment terms, including the amount, due date, and acceptable payment methods. It should also clearly define the lease duration, specifying the start and end dates, and the process for renewal or termination of the agreement.
A section dedicated to the security deposit is essential, and it should cover the exact amount required, the conditions for its return, and an itemized list of potential deductions for property damage. Furthermore, the lease should comprehensively detail any specific rules or regulations related to the property, including but not limited to, pet policies, noise regulations, subleasing restrictions, and maintenance responsibilities.
To ensure that the lease agreement meets all legal standards, it’s advised to consult with or have it reviewed by a knowledgeable attorney who specializes in landlord-tenant law. This step will help ensure that all provisions are enforceable and in compliance with state and local housing laws.
Tenant Retention Strategies
Keeping tenants happy and satisfied is crucial for a successful landlord-tenant relationship. Happy tenants are more likely to stay long-term, reducing vacancies and turnover costs. Here are some strategies for retaining good tenants:
- Maintaining regular communication: Regularly check in with your tenants to see if they have any concerns or needs. This shows that you care about their well-being and value them as tenants.
- Promptly addressing maintenance issues: Responding quickly to maintenance requests shows that you take care of the property and prioritize your tenants’ comfort and safety.
- Showing appreciation: Small gestures like holiday cards, small gifts or discounts on rent can go a long way in building tenant loyalty and satisfaction.
- Renewal incentives: Offering renewal incentives such as reduced rent or a lease extension can be an effective way to retain reliable, long-term tenants.
By implementing these strategies and demonstrating a commitment to maintaining a positive relationship with your tenants, you can create a mutually beneficial partnership that works well for both parties. Keeping good tenants happy not only ensures steady rental income but also makes being a landlord much more enjoyable.
It’s a big decision deciding on who lives in your investment. Getting rid of a bad tenant can be a tricky process, make sure you’re as sure as possible about the people you’ve chosen as tenants — before they move in.
At MMR, we are committed to making your real estate dreams a success and helping you find your new home. Contact us today and get the best advice on investing in property in the best area for you. We look forward to hearing from you.
