How to Screen Tenants for your Real Estate IRA

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A landlord (business suit, laptop) at a table interviewing some potential tenants, a couple (female long brown hair, male short cropped crew cut)

Good, responsible tenants can be trusted to pay bills, take care of the property and give notice when it's time to leave. Unfortunately, finding the right tenants can be a challenge. These tips will help you ask telling questions and collect the right information to help you find a good tenant for your rental property.

Interview the Candidate

The interview is one of the first and most important steps to take when screening for a new tenant. Asking the right questions during the interview can help you sort out the best candidates. Common questions to ask during an interview include:

  • Why are you leaving your current home?
  • Where do you work?
  • When are you planning to move in?
  • What is your income?
  • Do you have pets?

During the interview process, pay attention to any candidate answers that could be indicative of a problem. For example, a person who is leaving their current apartment or rental home over a dispute with neighbors or a landlord might find rental life difficult in general. As another example: candidates who are looking for an immediate lease might be doing so because they have poor planning skills. When you hear an answer that concerns you, ask follow up questions that can help you understand the person's situation more thoroughly. 

Run a Credit Check

A credit check can reveal a person's payment history and how that person handles debt. In general, a few late payments are nothing to be worried about, but a person who has a long history of late payments or even bankruptcies might not be the right tenant for you. 

Every credit check is different, so you'll need to decide what your priorities are. Whether you're looking for a credit score above a certain threshold, an absence of bankruptcies or some other metric, it's a good idea to establish your expectations ahead of time.  

If you do run a credit check on a potential tenant, keep in mind that your state laws will determine who pays for the credit check. Some states require the landlord to pay for the credit check, others allow the landlord to charge the potential tenant. You'll need to find out how things are in your specific state before proceeding. 

Check References

Ask for references, preferably previous landlords. When calling old landlords, have a list of questions to ask such as:

  • Was this person ever disruptive to neighbors?
  • Does this person owe any outstanding debt to you?
  • Did this person damage the property?
  • Would you sign another lease with this person in the future?

The answers to these questions can be very helpful when identifying the issues that you might face with a particular tenant. Be careful to avoid questions that might constitute an invasion of privacy. If you're not sure what questions you can and can't ask when checking landlord references, talk to your lawyer.

Verify Employment

A person's employment status is a very strong indicator of his or her ability to consistently pay rent. Even if the person writes the name of an employer on his or her application, it's still smart to ask for verification of employment. There are multiple ways to confirm a possible tenant's employment. Most people will either ask to see a current pay stub or will ask to talk to the current employer.

Many employers will not confirm salary, only the person's employment status. Asking to see a pay stub does not necessarily confirm employment (they could have been let go after the work was done), but will confirm the person's salary as of the date the check was issued. Both options have pros and cons, so you'll have to decide which one is right for you. 

Work With a Lawyer To Ensure Compliance

Laws change on a regular basis. What you can and can't ask a tenant, who pays for the credit check and other details of the tenant screening process can change based on legislation. Working with a lawyer can help ensure that you're screening tenants properly. 

Kris Lindahl REALTOR® CRS CLHMS
RE/MAX Results
www.krislindahl.com

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