Tenant selection is critical to a profitable investment property, and the best way for Landlords to improve their screening process is to develop and utilize a written tenant screening worksheet. A written tenant screening worksheet is a simple but powerful tool that landlords can use to document their criteria and improve their tenant selection process.
Written screening criteria will:
- Save you time — by pre-screening tenants before showings.
- Keep your decisions objective — tenants either do or do not meet the criteria
- Guide you to the best possible candidate for your vacancy.
Most real estate investors have heard the story of a landlord who made an exception to their rules and were stuck with a difficult or non-paying tenant and months of lost rent during the eviction process. A tenant screening worksheet forces you to document the findings of your screening process and objectively compare them to your criteria.
The following criteria serve as the backbone of my tenant screening worksheet:
- Income is 3X Rent Payment or greater.
- No Evictions. Period.
- Positive Landlord References.
- No Felonies or violent criminal history.
VERY IMPORTANT NOTE: Your tenant screening criteria CANNOT include questions about or discriminate against tenants on the basis of race, color, national origin, sex, familial status, or handicap. Doing so would be both morally wrong, and a violation of Federal Fair Housing laws.
In addition, State Fair Housing laws may include protections based on marital status, sexual orientation, gender identity, age, or participation in the Section 8 program. Be sure to conduct a Google search to understand your state laws.
Once you develop your written criteria, be sure to utilize it for every potential tenant and retain the worksheet for your records. Share your criteria on the first phone call with a potential tenant to avoid showing your property to tenants who cannot afford your unit or are otherwise disqualified by your criteria.
Lastly, if you utilized a consumer report (credit or criminal background check) in your application process, be sure to understand your obligation to issue an Adverse Action Notice, and maintain copies of both your screening criteria worksheet and the adverse action notice for your records.
Good screening criteria and background checks cannot predict the future, but they are very effective at guiding your screening process towards the best possible tenant for your property.