At some point, every landlord will encounter a problem tenant. However, our experience shows that many problems can be avoided by implementing our 6-step screening process. We’ve limited evictions to only two over the last 15 years, and that’s a huge win for landlords!

Tenant problems go beyond missed rent payments. Although failure to pay rent is the greatest fear of a landlord, it’s sometimes the easier problem to fix due to the clear breach of contract.

Our 6-step screening process will help you avoid that and also alert you to potential issues like noise complaints, smoking complaints, pet issues, cleanliness and pest issues, inconsideration toward your other tenants, maintenance or deferred maintenance issues, lease compliance, and your ability to show the unit when they provide a 30-day notice to vacate, to name a few.

Assuming the financial ability to pay is equal among applicants, using our 6-step screening process, you will be able to compare two or more applicants side-by-side to determine the best fit for your rental property.

This is one process you don’t want to relinquish 100% to someone else. If you’re new to real estate investing, you’ll want to actively participate. No one else will do as good a job at screening as you will. You may have the best leasing agent in town, but at the end of the day, they’re looking to get the unit rented to collect their commission and move on. Do your homework on applicants. This is your investment at risk so don’t take this part lightly.

It’s worth noting that there are fake documents in circulation. The world is a complex place, and some people unfortunately lie. Not all, but some. And they are getting help from websites that create fake documents. These documents can range from fake reference letters from past landlords to fake pay stubs, to fake ESA (emotional support animal) documents. So beware!

Also, be aware of your state and local laws on tenant screening. Don’t spend a lot of time trying to create and reinvent a screening process. Consulting a real estate attorney and seeking advice from experienced individuals can be invaluable.

6-Step Screening Process

Step 1: The Listing

Your screening process begins well before any showings. A well-crafted rental listing can screen out problem tenants by simply dissuading them from applying.

Define your terms and conditions (T&Cs) clearly. These T&Cs can be vast, but you don’t want to make them so vast that everyone is turned off by your ad. Consider identifying what day of the month rent is to be paid, if late fees apply, minimum credit score required, minimum monthly income requirements, security deposit, pet requirements (size, type, breed), maximum allowable pet quantity, and lease term/duration. Also, consider stating that you require documentation like pay stubs, proof of funds (POFs), references, and background checks. In essence, speak to the audience you want to attract.

For example, here’s an intro line to an ad: Owner-managed property with existing mature tenants.

This paints a certain picture. Some will read this and appreciate that it’s managed by the owner and that there are already mature tenants living in the building. It will attract a certain type of applicant. Conversely, others will read this and will not like that the owner is directly involved in managing the building or that there are mature tenants. They can choose to apply, or not.

Step 2: The Showing

Whenever possible, you want to meet the applicants and create a relationship. Ask some questions and let them do most of the talking. Do this with your leasing agent if you’re new to this process. From this meet & greet, you will be able to surmise whether this person is on the same page as you and gain valuable insights into their financial history and attitudes.

For instance, during the showing, applicants typically ask about the process and if we pull credit. When we say ‘yes,’ this leads to either a quick conversation of ‘no problems there’ or a saga on why they have a 500 credit score and claimed bankruptcy three times. Contrast this with someone who might have claimed bankruptcy during Covid but is otherwise a great candidate. The details between these two applicants may be lost in communication with your agent if you’re not there.

Step 3: The Application

Make sure you have one. If you’re using one from your leasing agent make sure it asks all the questions you want to know about from the applicant (within the law). Each state varies so this is where a local real estate attorney can help.

For example, on the application, you may want to know if the applicant has pets and what types, sizes, and breeds. This is important because most insurance companies do not allow aggressive breeds on the property and can drop your insurance if they find out.

You might also ask how much they currently pay for rent. If it’s $800 and your rental is $2000, you’ll want to know how they plan to close that gap…. this conversation could also be had in Step 2.

Step 4: Financial Status

Verify applicants’ financial stability by requesting valid pay stubs. Verify their name on the stub along with their current address. Call the employer to verify they are still employed and the company plans to keep them for the foreseeable future.

Consider also asking the applicant for POFs. This could be a bank statement showing they have sufficient funds in the bank to make the initial payments of rent and security deposit.

For example, someone might state they’ve been living with their parents or with friends for the last 6 months. Sounds simple enough. Yet when it comes to POFs, if they have little savings to show for the last 6 months of living with parents or couch surfing with friends this should give pause for whether their story is truthful or if they’re committed to paying rent.

Step 5: References

This is how you will find out the character of an applicant by just letting the reference talk. You can ask pointed questions, but keep it casual, let the reference share what they want, and know that it’s not always good news. Calling past landlords is especially important because they will share things the current landlord might not, especially if the current landlord wants that tenant out.

Calling a variety of references has saved us on more than one occasion. Three employment references may all sound great but also look for someone who can provide insight into how an applicant keeps their living space, their cleanliness, and whether their apartment smells of pets.

Step 6: Background Checks

Conduct comprehensive background checks, including credit and criminal history, where permissible by law. The application should have a section for applicants to sign indicating they agree to background checks. You can have applicants pay for these, or you can pay for them. Several companies perform background checks, but not all are equal in quality and cost. Your leasing agent can provide a recommendation and feel free to try others to find the right reports for you.

Being able to tell prospective tenants that you run background checks on all tenants is a huge integrity and credibility booster. Be consistent and don’t accept printed reports from applicants since you don’t know how they were generated and it could be a scam.

Conclusion

This 6-step screening process helps to confirm an applicant’s story…why they are moving, do the references match the applicant’s application, do the financial documents realistically support their ability to pay, etc. While disqualifying an applicant for a specific reason may be unlawful in many areas unless they cannot demonstrate an ability to pay, this 6-step screening process aids in gaining a clearer understanding of the individuals you are considering. Being aware of details such as their cleaning habits or their payment schedule (e.g., 5th vs. 1st of the month) is crucial for managing expectations if they become your tenant.

Once you’re more experienced and your leasing agent understands your process, you can step back and let your agent lead. However, know that even landlords with hundreds of units don’t leave this screening process solely to leasing agents, and nor should you.

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