Tenant background screening is probably one of the biggest headaches landlords face when looking for new renters, but it’s also one of the most important. The hassle and time it takes up front to conduct due diligence tenant checks can save you ten times the trouble down the line, so while you might want to skip the unpleasant parts, it’s always best that you don’t.
There’s no denying that one of the most awkward of tenant screening processes involves money, and it’s always uncomfortable to ask for employment and financial information.
Uncomfortable or not, however, it must be done, and here’s what you can and can’t do, and how to make sure you have the full picture.
Know That It’s Expected
Even if this is the first time you are screening a tenant, you should know what screening is an expected and accepted part of the process. The people you are considering renting to know it’s coming, and even if it leaves you tongue tied and nervous, they’re not going to get upset. If they do, that’s a big red flag!
Step 1: Gather Paperwork
The first part of the employment and financial verification part of tenant background screening is to request paperwork from your prospective tenants. This can be done as a part of the application process, and could include any of the following:
- Pay stubs
- Bank statements
- Tax forms
- Company financial statements
What you ask for will vary depending on who you are renting to, but it should provide you with details of the prospective tenant’s financial situation and annual earnings, so that you can confirm they can afford the rent.
Step 2: Verify Employment
If you are renting to an individual, then you will need to confirm that the person or company they have listed as their employer is still their employer. Sometimes, renters will apply to lease your property immediately after they have resigned or been fired, which would mean they’d still have a recent pay stub, but not actually be employed anymore.
If your tenant is self-employed or a freelancer, ask for details or character references from their clients, and call a few to make sure they’re actually gainfully employed in some capacity!
Step 3: Credit Check
Credit checks usually require written permission to obtain, and there are all kinds of privacy issues related to them. That’s why you would usually leave them until last in the three-step process. If tenants have already been excluded in steps one and two, you can save yourself the time and effort of conducting tenant background screening checks on people or companies that wouldn’t make the cut anyway.
More Than Money
Of course, financial and employment checks are important when you’re renting, but they’re not the only factor. Make sure that you conduct thorough reference checks, contact previous landlords and take care of all the other due diligence items on your landlord screening list, before you sign on the dotted line.
Remember that it’s always easier to choose a different tenant than it is to evict a terrible one!