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To successfully manage and earn from a rental property investment, you’ll want to be sure you lay in a strategic process for every step of operations. It’s these processes that will ensure you make the best decisions, keep a proper timeline, and reduce the risk of oversight. And one particular process you’ll want to spend some quality time developing is your resident pre-screening process.
How to market to and attract new residents requires thoughtful planning and execution. And any missteps or cutting corners will only end up costing you. No matter how much pressure you're feeling to get a lease signed and a resident moved into the space. But if you’re new to the rental property investing scene, you’ll likely have questions about what to include in your application, how to vet candidates, and protecting your assets. Keep reading because today, we’ll outline everything you need to know about developing an efficient and successful applicant screening process.
Establish Your Requirements and Standards
Before entertaining any new resident applicants, sit down and create an outline of your lease standards, guidelines, and requirements. Determine which aspects are deal-breakers and which you might instead be flexible in discussing for the right-fit candidate. These details include rent amounts, late fees, timelines, occupancy rules, pet allowances, lease terms, and deposits. And while it’s entirely acceptable to revisit these guidelines from time to time, to adjust them, be prepared to commit to these guidelines for every applicant.
Create Your Application Checklist
With your guidelines in place, it’s time to set a schedule and checklist for yourself. Detail a step-by-step process you can follow with each application you accept. From confirming with the candidate that you have received their application and intend to review, all the way to the “so sorry” template response you devise for those you plan to decline, establish a process flow for yourself or other colleagues to follow. Then, you’ll be confident that you won’t ever forget to execute a step or inadvertently miss a critical vetting opportunity.
Verifying Employment
Every step you lay out in your process is important. But verifying employment is a big one, and it deserves its own segment in this applicant screening conversation. You’ll want to verify that a potential resident has active employment first because you want to know they can afford to pay rent. But verifying employment also allows you to learn more. Here are a few questions you can ask an employer:
Can you confirm this person has sustained employment since the date provided?
What does this person do for the company?
Can you verify full or part-time employment?
Can you confirm whether the candidate earns this amount of income weekly, bi-weekly, or monthly?
Remember, not all employers will offer answers to all your questions. And you can’t press them. But you can confirm the basics you need to know, proving or disproving the information the candidate provided.
What You Can Learn from a Credit Report
When you can’t find out a lot from a call to the candidate’s employer, you can uncover what you need to know with a credit check. Your potential residents will expect you to ask their permission to pull and review their reports. So, don’t skip this step. Learn more about their financial health, including:
Overall Credit Score
Detailed Financial Summaries
Timely Account Payments
Total Number of Open Accounts
Derogatory Remarks (including bankruptcies, defaults, liens, or foreclosures)
You could have a great rental candidate who has a mediocre or poor score, maybe due to medical bills or because they’re recovering from life-changing hardship. So, there’s no right or wrong credit score from your perspective. However, if you identify a series of late payments, too many open accounts, and high balances, you can make a more educated decision.
Get the Background Checks
Don’t skip the background check, either. You don’t want to sign any lease with a candidate who has a criminal history or violent past. Use your own discretion in reviewing these findings, just as you would with a credit report. A single instance from ten or 20 years ago isn’t an indication of routine or expected behavior. On the other hand, charges of theft, violence, or recent drug use will all be deal-breaker concerns.
Calling Past Rental References
No matter how someone looks on paper, if they’re renting, they likely have a past rental history with other property investors and landlords. Make those calls every time. The previous landlord can provide you with valuable insights about what this applicant was like as a resident. Did they pay on time? Did they cause disturbances? What condition did the applicants leave the property in when they vacated? Chances are, whatever experience the last landlord had, you can expect to have.
Non-Verbal Signals
Sometimes, what a potential resident doesn’t say can be far more telling than anything they include on the application. Pay close attention to any non-verbal communication during your interview process, too, both in person and otherwise. These signals might be red flags the candidates aren’t a good fit or, at least, warrant further inquiry to learn more.
It seems they’re in a hurry: If the applicants seem rushed and eager to agree with everything you outline in your lease requirements without question, it’s entirely ok to ask more about their timeline to move. Some residents may be in a hurry to move because they’re being evicted elsewhere or have challenges that they’re not telling you.
Hesitation in responding to qualifying questions: If you meet resistance or hesitation during those critical conversations about paying rent on time, calling past landlords, or verifying employment, it could be a signal they are anxious. Follow through on those necessary calls and confirmations before making any official lease-signing decisions.
You believe they’re being dishonest: When you ask questions about pets or how many individuals will be moving in, and you suspect dishonesty, keep probing. If you have a no-pets policy, for example, and you see dog hair on their clothes, ask. If you suspect they plan to move in more residents or family members than they’re telling you, ask.
Final Interviews
If you’ve determined a candidate is a good fit, schedule the final interview. It’s during this conversation you can verify that nothing had changed in their situation from when they first applied. You can offer a final walk-through if necessary and reiterate key requirements you want them to know. If there are any glaring discrepancies or red flags, you can take more time to inquire further. Otherwise, the final interview should only confirm the lease-signing decision you’re prepared to make.
Document Every Step
As you execute each of your resident pre-screening steps, make copies, document the calls, and include the credit report findings. Should a candidate try to accuse you of discrimination of any kind, it’s your core policies and proof of your diligence to follow through that will serve as your line of protection. Keep records of everything, so you have a thorough document trail of how you arrived at all of your final decisions.
Consider these rental property investment tips as you develop your pre-screening process. And if you’re still not confident in your strategy, let the professionals at Axel Property Management help!
