Finding the perfect residents for your investment property is critical to long term success and minimizing future challenges. The proper due diligence and marketing of your property is paramount to ensuring you have the widest pool of rental applications to choose from and evaluate. Failure to undertake due diligence when screening applications can result in evictions further down the line or even legal issues during the rental application process itself.
Below is a step by step guide to processing rental applications for your property.
How to Process the Rental Application
Your process should be streamlined enough not to take up too much time while covering the most important details to show if the potential residents will meet your rental property standards and lease agreement requirements.
Follow the steps below for a rigorous and fair screening process.
1. Abide by All State and Federal Legislation
First, property owners must not breach any federal or state laws regarding the tenant screening process. For example, the federal Fair Housing act prohibits discrimination against seven protected classes. The seven protected classes listed in the Fair Housing Act are:
- Race
- Color
- Religion
- National Origin/Ethnic Background
- Gender
- Familial Status
- Mental or Physical Disability
Make sure your rental application doesn’t ask any questions that could be perceived as discriminatory.
1. Run a Credit Check
A credit check will allow you to research any financial mismanagement of applicants, such as outstanding debt or failure to make payments on time. Evictions are also shown on a credit report. An applicant’s credit report also gives you a glance into how responsible that person is, which typically translates to how well they will treat your property. A credit check is a critical process for a rental application, and, as such, the prospective tenant’s approval to run this screening should be part of any rental application template. However, not just anyone can run a hard credit check on someone, only verified companies are able to access services capable of pulling these reports. Individuals are able to provide their own free credit reports, however as a landlord, this opens you up to the potential of an applicant providing a fraudulent report.
2. Undertake a Criminal Background Check
Running a criminal background check was previously considered one of the easiest ways to help you steer clear of problem residents. However, be sure not to impose a blanket ban on all individuals with a criminal history.
Consider each applicant on a case-by-case basis. Real estate investors are not permitted to have a ‘blanket ban’ system to deny housing applications to individuals with a criminal history without risking discrimination claims or lawsuits.
3. Verify Past Rental History
When verifying past rental history, reach out to previous property owners who rented their property to your prospective renters. It’s a chance to confirm that the occupancy was legitimate and to ask follow-up questions regarding the period of occupancy.
Be sure to ask questions about the state of the property and if there were any outstanding complaints filed against them by neighbors.
4. Verify Employment History and Income
As a real estate investor, conducting employment and income checks for prospective tenants is fundamental. After all, you want to know that the rent will be paid on time and in full. Employment and income can be checked by requesting payslips from the applicant.
The industry standard is to ask for three months of previous concurrent income. Another way this can be achieved is through a W2 of tax form.
5. Talk to References
This is a general step to reach out to any additional references, such as professional or personal contacts. Requesting professional connections (instead of friend or family references) is advisable as they may be less inclined to provide an unbiased account.
6. Choose Your Renters!
As a final tip, solicit the services of the right companies to conduct the rental application screening and then ensure that they abide by FCRA regulations to protect data.
After completing the steps above, you’re ready to choose the best candidates to place in your rental properties.
Should I Hire a Property Management Company?
If you’re unsure how to set up a rigorous and legal rental application, store the details, and assess the applications appropriately, then a property management group can help.
JP Property Management is a property management company that can help reduce the risk of legal violations, place fully vetted residents, and reduce overall vacancy times in your property.
Property managers know what to look for and flag all potential warning signs that inexperienced property investors may miss when processing rental applications. Be sure to go local, for example, finding Salem property management professionals if you’ve bought investment properties in this area of Boston.
Follow the Steps Above to Successfully Process Rental Applications
A rigorous and legally sound rental application process can save you from adverse events and financial troubles. By following the steps above, you’ll be able to pinpoint the perfect residents for your investment property.
If the idea of rental application screening fills you with dread or you’re worried you might mess something up, the right property managers can help. Our team has the background and experience to vet and place the perfect residents for your asset. So reach out to a team member today to put your applicant vetting process in safe hands.
