How Do Landlords Vet Their Tenants: The Cost-effectiveness of Background Checks

As a landlord, the key to success is making smart decisions about who will occupy your rental units. This includes conducting thorough vetting on prospective tenants to avoid the headache and financial burden of a problematic tenant and subsequent eviction. In this article, we will discuss the importance of background checks and why they are worth the investment.

The Financial Impact of Bad Tenants

According to our experience, a single problematic tenant and the resulting eviction can easily cost more than three months' rent. This is a considerable loss that can significantly impact your bottom line. Therefore, the cost of a thorough vetting process, such as background checks, is a very reasonable investment.

In my experience, I always conduct a comprehensive background check, which includes credit history, payment history, criminal records, judicial records, and social security verification. Additionally, I communicate with all provided references and consider any other available information. My approach is both objective and thorough, and I am always on the lookout for those potential tenants that other landlords might overlook.

The inquiry process involves three key steps. First, I verify if all the information provided by the tenant lines up. Second, I assess their reliability and commitment by checking if they can keep their word. Third, I examine their employment, landlord, and interaction history with previous tenants. It is only when I feel there is a clear pattern and have a good understanding of the tenant that I can make an informed decision.

The Rising Adoption of Background Checks

Today, a majority of landlords, especially those running large apartment complexes, rely on background checks to screen prospective tenants. Many are now aware that these checks are much cheaper than months of vacancy and the subsequent damages that can run into thousands of dollars. Furthermore, most landlords are already asking applicants to pay application fees, which often cover the cost of a background check.

What to Look For in Tenant Background Checks

There are a variety of options available for landlords to conduct background checks, and many of the best ones are free. These checks typically include:

Criminal history: Ensuring the tenant has no criminal record that would make them a problematic tenant. Payment history: Checking if the tenant has a history of paying their bills on time. Credit history: Assessing the tenant's overall financial standing. Income and debt: Ensuring the tenant has a stable income and manageable debt.

It is critical to perform a thorough check into a tenant's past to understand who they are and how they may fit within your rental community. While there are more invasive reports, such as personal relationships and political preferences, these are not typically included in a standard background check.

Benefits and Challenges for Landlords

Background checks are valuable tools for landlords to protect their investments. However, not all landlords see the importance of these checks, particularly those who own only a couple of properties. They may believe that they can judge a person accurately or that such information is not necessary.

It is important to consider the most crucial background checks, such as:

credit rating employment history rental history eviction reports

Some landlords might only conduct a credit check and a rental history check. However, it is vital to understand that these checks are necessary to make an informed decision about who should be allowed to rent your property.

Conclusion

Landlords who invest in thorough background checks are better equipped to avoid costly issues that come with a problematic tenant. While it is true that some sensitive personal information might not be included in a standard background check, the financial and legal risks of not performing these checks outweigh the cost of a thorough screening.

For landlords looking to streamline the vetting process, there are numerous free and affordable options available. By taking the time to thoroughly vet your prospective tenants, you can create a safe and stable rental environment, leading to a better return on your investment and peace of mind.