Owning a rental property is a great way to build long-term wealth. However, rental success takes more than just finding a tenant and collecting rent every month. Small mistakes can lead to late payments, property damage, and even legal trouble.
This is why all rental property owners should be aware of the common rental management mistakes. Read this guide, and we will share them with you.
Why Tenant Screening Is Important for Rental Success
Tenant screening helps owners find renters who pay rent on time, follow lease rules, and care for the property. Screening won’t guarantee a “perfect” tenant every time. But it reduces risk and gives owners valuable information before moving in their next renters.
Things to Consider for Tenant Screening
- Completed rental application
- Verification of income
- Employment verification
- Credit history
- Rental history
- Background check if allowed by your state
- Reference checks
Some owners who don’t screen applicants may rely on a brief interview or first impression, but taking that approach can be a gamble. Just because someone is friendly and polite doesn’t mean they haven’t missed rent payments, violated leases, or caused damage to prior rentals.
Screening can also help owners avoid cash flow issues. Late payments can eat into an owner’s monthly budget. Remember, just because a tenant is late on rent doesn’t mean the mortgage gets paid on time.
Taxes, insurance, utilities, repairs, and other expenses are still the owner’s responsibility. If only one tenant is consistently late or doesn’t pay, it can put financial stress on the entire investment.
Lower turnover is another potential benefit. A qualified tenant may be less likely to move out, and your property could see longer tenant stays.
Longer stays mean less lost revenue from vacancies, less money spent on cleaning and advertising, and fewer repairs from tenant move-in damage.
Sometimes it may not be possible for you to go through this extensive tenant screening process on your own.
That’s where you need the help of a property manager. Partnering with a reputable property manager in Northern Virginia helps reduce tenant turnover through responsive service and consistent property care.
Tenant Screening Mistakes That Can Affect Rental Decisions
Understanding tenant screening mistakes is essential for property owners who want to make informed leasing decisions. Let’s take a look at a few of the most common mistakes.
Screening Applicant Too Quickly
Some owners accept the first applicant without verifying their information. They don’t want the unit vacant any longer than necessary. Every day the unit sits empty is money out of the owner’s pocket.
However, renting to an unqualified applicant can be even more expensive. Hold out for the right tenant, even if it takes a few extra days.
Accepting the Applicant’s Word on Income
An applicant might say that they can afford the rent. However, landlords should not simply take their word for it. Ask to see pay stubs, tax returns, bank statements, or request an employment verification letter if necessary.
Not Comparing Income to Rent
Some landlords require that applicants earn a certain amount each month. A common standard is that monthly gross income should be three times monthly rent. If rent is $1,500 per month, the tenant should make approximately $4,500 per month.
This is just one consideration, but it helps determine whether the rent is affordable.
Neglecting Rental History
Applicants come with a credit score. But to really learn about an applicant, owners should talk to their past landlords.
A former landlord could tell owners if the tenant paid rent on time, provided proper notice to move out, followed the lease rules, and kept the property clean and undamaged.
Talking Only to the Tenant’s Current Landlord
Renters do not care if their current landlord speaks to future landlords. In fact, many landlords will lie to entice their tenants to leave. Whenever possible, speak to a previous landlord as well. They will likely give a more honest review.
Screening Some Applicants Differently
All applicants should be held to the same standards. If one applicant is asked to provide three months’ pay stubs, then all applicants should provide the same documentation.
If one applicant can bypass the credit check, then allow all applicants to bypass it too. Inconsistent screening opens the door to discrimination.
Having No Standards
Some landlords claim that they “only rent to good people.” Landlords should avoid subjective criteria. Instead, they should write down their screening criteria.
Determine how they will evaluate income, credit, rental history, occupancy, pets, etc. before they advertise the property.
How To Create a Fair and Effective Tenant Screening Process
Begin by writing down your rental criteria. Keep your rules simple, specific, and easy to understand. Present your criteria to all prospective applicants before they apply. This will save you time and misunderstandings later.
Here are some things to include in your written criteria:
- Minimum income qualifications
- Types of income that will be accepted
- Credit guidelines
- Rental history standards
- Eviction history policies
- Pet policies & pet fees
- Occupancy restrictions
- Cosigner requirements
- Application fees
Use the same application for each adult living in the rental unit. Each person should fill out the application with their legal name, contact info, employment information, financial information, rental history, and consent to be screened.
Don’t take anything they provide you at face value. Read through documents carefully. Call employers if necessary. When possible, always call previous landlords using contact information you find on your own.
This will minimize the chances of talking to your applicant’s friend who is “holding” the rental for them.
Final Words
Good rental management takes planning, consistency, and communication. Don’t make the mistake of viewing tenant screening as an afterthought.
Yes, you may have an opening you want to fill yesterday, but moving too quickly can cost you months of unpaid rent or dollars in property damage/eviction costs.
Having a diligent process protects you and your tenant. It sets clear expectations upfront and allows your rental business the opportunity to succeed for years to come.
