Investing in property has been a typically sustainable investment for smart landlords for decades now. Markets may have their ups and downs, but the property market always recovers. It often even thrives despite there being a poor economic climate.
Whether you are experienced in the real estate game already, or are a professional realtor yourself; you may be considering the importance of screening your future tenants.
Performing a thorough background check on your potential tenant can save you a lot of headaches, and money, down the road. Unfortunately, there is a lot of misunderstanding about the importance of these checks and the benefits they can provide.
What is background screening?
Backgrounded screening is a comprehensive verification of a person’s identity. While it is fine to take someone at face value; if you meet someone directly and they seem to be a genuinely good-natured and respectful person it is still important to be wary. Just because someone may portray one thing to you or whoever handles your properties does not indicate what they are truly like that behind closed doors. A thorough background screening will indicate all sorts of information that is valuable to you as the landlord:
- Their financial situation. Gainfully employed vs unemployed for numerous years.
- Past landlord references.
- Credit checks.
- Criminal record checks.
- Whether their deposits were returned in full.
- Discrepancies between their application details and their background.
Misconceptions about background screening
Background screenings are not used as a form of prejudice against people for one reason or another. The idea of a thorough background check is to indicate any potential problems you may run into in your landlord/tenant relationship. It is perfectly reasonable, even encouraged, to perform these checks to protect your investment. It is not discriminatory to reject applications from tenants that have poor references or a criminal record, it is just common sense. If someone has a poor credit history and a habit of being late on their payments, they are logically going to be a problem to you too. It is better to walk away from a tenant with a bad background check and wait for someone who is going to be a safe choice.
What makes a good tenant?
Just as you are looking for red flags from your background checks, you should be looking for encouraging information about the tenant’s strength of character and financial situation. For example, if the background check indicates that your potential tenant has a well-paying job and glowing references, they could make a great tenant. Some things to consider when viewing a consumer report are:
- Good credit Score
- Great Credit history or trade lines
- Excellent rental references.
- Good personal references.
- Has always received their full deposit back.
- A solid career.
Background screening is an investment
The process of evicting a tenant is arduous at best. The only time you will need to evict a tenant is if they are refusing to pay rent and are treating the property poorly. You are already losing money in those situations from mortgage/utility payments. Furthermore, the average cost of having a tenant evicted is approximately $3,500. This kind of expenses can cause you to operate at a huge loss for the entire year on just one property.
Luckily, a professional background check can help prevent these kinds of tenants from ever signing the lease. So don’t rely on first impressions, performing a background check can save you so much money and time down the line.
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