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The 6 Rules of Tenant Screening


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The 6 Rules of Tenant Screening.

Whether you’re a landlord, an investor, or someone who is considering buying rental properties these six rules will be foundational for you to be able to find great tenants for your properties. We recommend that you follow them and that you abide by them every time that you are looking to fill one or all of your rental properties. So let’s jump right into it.

The first one is, don’t trust your gut! You’d be surprised how many times we’ve heard from landlords that have been managing on their own where they say, “You know what? My tenant hasn’t paid me in three months and have trashed the house, but when we moved him in, we just felt so great about him. They said they made all kinds of money, and they were very professional, they were very kind, and we just thought that they would be a great situation. We’ve heard that many, many, many times and it’s just not worth the risk. Now, sometimes this does pan out, but I would say it’s more the exception, not the norm.

Number two, write your process. Have a screening process where you have a checklist of different things that you’re going to be measuring against the application, and things that you’re verifying. Write down your process. Write down what sort of credit score they need to have. Write down whether or not you’re going to allow them to have X amount of negative trade lines, or what debt to income ratio or what sort of rental history they need to have. Write down everything that you’re using to screen these tenants.

Here’s our example screening checklist. This is a 14 point process that we go through that goes into things like smoking, occupancy limit, legal residency, looking at credit reports and not only their FICO score but looking at if they have bankruptcies discharged and things like that we want to make sure cleared, their debt to income ratio, income and employment – do they exceed the limit on how much income they need to make for that rental amount? Do we have pay stubs to verify that? All those sort of things. Looking at criminal history, public registries, rental history, eviction searches, and there’s other elements to it as well. Have a written process.

Number three, verify everything. Don’t take a tenant’s word for it. Don’t make a decision based on them telling you that they make so much money or that they took great care of a property or that they have been working at a place for so long. You name it, right? Don’t take their word for it. They could be very trustworthy, and that’s great, but in this world we need to verify what people say to protect ourselves. So verify everything. Get their pay stubs. Talk to landlords, get them to sign something. Run credit reports, run background checks, make sure that you’re checking in to everything that you’re asking of the tenant.

Number four, don’t cut corners. It’s tempting, oftentimes, with rental properties if you haven’t found a tenant quickly, you get someone that applies, you may be feeling a little bit of desperation. If you have red flags that pop up on their application, on their credit reports, that go against your process and your checklist, you’re marking things as bad or no on your scorecard for the tenant, don’t cut corners. Don’t allow that. Don’t just rent to them because you didn’t find another tenant. Now there will be some things that maybe are iffy that you could work with. Higher deposits, doing things like that, but for the most part being very consistent and don’t cut corners.
That’s my rule number five, be consistent. Follow the process every time, and don’t deviate from it. You may have to modify the process as maybe you made some mistakes, but be consistent with whatever process you have.

Number six, discriminate wisely. Can you discriminate when you’re screening tenants? You bet, and you better be discriminating all day long against income, against smoking, occupancy limits, different things that you have that are legal for you to discriminate against. But understand Fair Housing laws. You can watch our video. It talks about the Fair Housing classes, but make sure you’re discriminating wisely and you’re not discriminating against race and religion and disability, some of these protected classes.

Feel free, if you have questions, feel free to reach out to us. We’re happy to answer any specific questions you might have. We can even look at your situation if you happen to be having a challenge with screening a tenant or looking at an issue that may have come up in the past.

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