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One of the most important things for any successful landlord is a good tenant. You want to be certain that the person you are renting your property to is responsible, reliable, and careful with your investments. That is why it is incredibly important you screen your tenants.
Without tenant screening, you cannot be sure that the person you are renting to is going to be a good fit for your property. In fact, if you do not screen your tenants, you run the risk of a variety of expensive problems that will hurt your wallet such as:
- Missed Rent Payments/Loss of Rental Income
- Expensive Repairs
- Safety Risks
- Eviction Costs
- Legal Liability
So, it is crucial that you not only screen each potential renter you consider, but you do so carefully. However, many people make major mistakes during their tenant screenings that cost them 1000s of dollars in the long run. So, here are six major mistakes you should avoid when screening tenants for your income property.
However, before we dive in, if you want to learn about how bad tenants can cause serious harm to you mortgage and the importance of proper tenant screening, click the link below for a free strategy call.
Opting Out of Tenant Screening
It can be tempting to overlook the tenant screening process in favour of a quick handshake and lease agreement. Afterall, as an investor you want to minimize the time your properties are vacant to gain access to that sweet cash flow sooner. However, skipping this process is one of the biggest mistakes new landlords can make.
The most common time that people make this mistake is when they have had a property sitting empty for a few months. It is understandable why the temptation of a new tenant moving in immediately can trick so many investors. However, without properly screening your tenant, how are you supposed to know they can afford your rent each month?
How do you know that they are not going to damage your property and cost you money in repairs and legal fees? What if that tenant has a history of late or skipped rent payments, leading you to evict them almost immediately? Real estate is an expensive investment, you cannot simply trust someone blindly to reliably care for it.
This includes remembering to screen co-applicants. If you are renting to a group of people instead of a single tenant, it can be easy to check a single tenant and carry on. However, if the co-applicants are not reliable and are not properly screened, you risk losing out on rental income on what seemed like a good occupancy.
Discover How To Deal With Difficult Tenants With This Step By Step Guide
Not Properly Checking Their Credit Report
When it comes to credit reports, people rarely look beyond a single number, their credit score. However, that single value is not always the most reliable way to decide whether a tenant will be a good fit for your property. After all, a person who pays all of their bills on time each month and does not overuse their lines of credit may still have a poor credit score.
For example, someone who has recently gotten married or experienced a death in the family may have a considerable sum of debt on their report dragging down their credit score after paying for wedding or funeral expenses. However, upon further inspection they are a perfect tenant who will have no problems making your rent payments every month reliably. In fact, some of these potential renters may even be more reliable than people with great credit scores, but you would never know if you did not look.
Not Checking References and Employment History
It can be tedious calling a potential tenants’ references. The risk of playing phone tag and leaving each other a series of messages to get a small idea of what to expect from a tenant can make it tempting to just trust the renter. Yet, if you do not check, how are you supposed to know that other investors have not had issues with this individual before? How can you be assured that the contacts listed are legitimate references and not the tenants’ friends? Even if you are absolutely certain you can trust the tenant, you need to take the extra steps to be sure so you can sleep easy knowing your investment is well cared for.
Ignoring Local Housing Laws
As a property owner you want to know as much as you can about the tenants you accept. Which means you are going to want to ask a lot of questions, but you must be careful. There are a wide variety of laws in place to prevent discrimination against people due to their race, marital status, gender identity, religion, age and more.
These laws range from federal regulations to provincial guidelines to local bylaws and they limit what you are able to ask for and use in your considerations. While it feels like the majority of this is easy stuff to avoid. It is better to be safe and knowledgeable about which laws apply, because if a tenant feels they are being discriminated against, you may find yourself with an expensive lawsuit.
Choosing the Wrong Tenant Screening Service
You do not want to take forever with tenant screening. It is a long, tedious process that can take all day. This can make it tempting to use an online tenant screening service or a tenant screening company to speed up the process. For the most part these services are good and provide fast results you can use to make a decision about a tenant. However, sometimes fast service can miss key information.
The faster tenant screening options operate on the idea of instant gratification, they want you to feel like you have the right tenant instantly. This means they often overlook some of the mistakes listed above to get you an answer faster, but the results are not always an accurate representation of a renter’s potential and reliability.
Instead, you should opt for a manual tenant screening service. This way you can be confident you are getting the perfect tenant for your property.
For more information about how to get the most out of your investments, visit us at LendCity.ca or give us a call at 519-960-0370 and book a consultation today. Alternatively, click the link below to book a free strategy call with our team today.