The Critical Role of Applicant Background Screening: Don’t Be Misled by Appearances

Understanding Landlord Types

When managing rental properties, landlords typically fit into one of two categories: seasoned investors or “unexpected landlords.” In this post, we’ll focus on the unexpected landlords—those who may not have extensive experience in the rental market. This group often includes individuals managing a property due to unique circumstances, such as inheriting a family home or relocating for a job.

The Risks of Skipping Background Checks

Imagine this situation: You meet a prospective tenant named Sam, who arrives in a stylish car and presents himself impeccably. He shares a heartfelt story about recently losing his wife and wanting to move on from their shared home, tugging at your heartstrings. Convinced he’s a perfect fit, you sign the lease agreement and feel good about your decision.

However, the following month, Sam stops paying rent. As the months go by without payment, you delve deeper and discover that John had filed for bankruptcy before signing the lease. Under bankruptcy protection, he is not required to pay rent while his case is being processed, leaving you to shoulder the burden of mortgage, insurance, and property taxes—all without rental income. The financial strain can be overwhelming, especially as months go by without resolution.

This example, while extreme, serves as a vital lesson in the necessity of thorough background checks for potential tenants.

Why Background Checks Are Essential

A comprehensive applicant background check allows landlords to evaluate an applicant’s history and reliability. This process typically includes verifying credit, employment, and rental history. Always ask applicants for references from previous landlords and employers. If they are unwilling to provide this information, it’s a significant warning sign.

Many landlords feel pressured to fill vacancies quickly, but it’s important to remember: renting to the wrong tenant can lead to far greater issues than leaving your property empty for a little while longer.

Warning Signs to Watch Out For

Here are several key red flags that can help you identify potential issues with applicants:

1. Urgency to Move In: While some tenants may have valid reasons for needing to move quickly, this can also indicate problems like recent evictions, pending bankruptcy, or job loss. If you sense urgency, consider investigating further.
2. Taking Applications Home: A serious applicant should come prepared with all necessary documentation. If they want to take the application home, it may suggest a lack of commitment or organization.
3. Unemployment: An unemployed tenant raises concerns about their ability to pay rent. Ask about their job search status, how long they’ve been looking, and if they have other financial resources to cover rent and security deposits.
4. Lack of References: While first-time renters may not have prior rental references, it’s crucial to obtain information from employers or historical mortgage payments. Understanding why the applicant needs to rent is essential.
5. Negative Financial History: A basic background check can reveal important financial details. If an applicant shows signs of low income, high debt, or a history of bankruptcy, they may not be suitable for your property.
6. Frequent Address Changes: While people move for various reasons, multiple changes of address could indicate past evictions or other issues. Investigating these changes can provide critical insight.

Streamlining the Screening Process

While the background screening process may seem daunting, EASE CRE offers professional property management services that include thorough applicant screening. We ensure that potential tenants are genuinely reliable, helping you protect your investment and maintain a steady rental income.

By prioritizing background checks, you can significantly reduce the risk of encountering troublesome tenants and ensure a smoother rental experience.