May 15, 2024
Last Updated
In this week’s podcast, Andrew Schultz goes over the top ten tenant screening tips to ensure tenants are suitable for your rental property.
Whether it is establishing clear criteria for what you’re looking for in a tenant, such as credit score, income, and rental history, or gathering necessary information, including income and employment verification, tenant screening is crucial.
Listen to the latest podcast to learn more.
Show transcription:
Voice Over: (00:04)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.
Andrew Schultz: (00:09)
Hi, and welcome back to Rent Prep for Landlords. I’m Andrew Schultz, community manager here at Rent Prep. I’m also a licensed real estate broker here in the state of New York with over 15 years of experience in the property management and rental property industries. On today’s episode, we’re talking all about tenant screening. We’ve got some great tips and tricks to make your next tenant screening run a little bit smoother. We’ve got a lot to cover today, so let’s get to it. The first tip that I wanted to bring up today is that you need to have a solid understanding of what laws you’re subject to as well as a solid understanding of the fair housing law. It’s super, super important for you to have that solid understanding of both of these before you ever begin advertising and certainly, before you begin screening for a new tenant. And the reason for that is because not understanding these laws can quickly become a huge headache for you.
Andrew Schultz: (00:56)
For instance, any sort of a fair housing law violation can cost you up to $16,000 on your first violation. I’m not gonna sit here and teach a fair housing class in this video that’s way outside the scope of what we’re doing today, but at a minimum, you need to understand that fair housing law makes it illegal to discriminate against someone based on their race, color, religion, their sex, their gender identity, their sexual orientation any sort of disability, their family status or their national origin. And what you might find out as you’re doing your research is that your state or your county or your municipality may have additional fair housing protections in place above and beyond those that are found at the federal level. A good example of this is right here in Erie County. Erie County listed lawful source of income as a protected class back in April of 2018.
Andrew Schultz: (01:48)
In this instance, lawful source of income included sources such as public assistance, section eight vouchers, disability income, social security income, and I believe that there were a few other sources that were included in there as well. So we were responsible for adhering to that legislation even before it became a statewide law in June of 2019, a little over a full year later. It’s important to understand that fair housing laws don’t just exist at the federal level and you are responsible for adhering to them at any level no matter what level of government creates that legislation. Based on our understanding of Fair Housing law. My next tip is to have a set of fair housing-compliant criteria that you’re using when you screen every single applicant for that property. We’re asked all the time for a good set of fair housing-compliant criteria to work from, and the real answer is there’s no one set of criteria because every area is going to have different laws as to what you can and can’t look for when you’re screening your tenants.
Andrew Schultz: (02:49)
Depending on where the home is that you’re screening for, you may be limited as to what criteria you can look at commonly. Landlords will look at a large number of criteria before they make a decision on an application, including things such as the applicant’s income, their credit history, their credit score, whether or not they have a criminal background, how their landlord references come back, as well as eviction history. If that’s available in your area, the actual criteria that you use is likely going to depend a lot on your market as well as where your property’s located. For instance, you may need to use a net income of two and a half times the rent as income requirement in one area and three times the rent in other areas. Or perhaps your credit score requirement in one area is a 600 and it’s a six 50 or a seven 50 in another area just depending on the location and where the property’s located.
Andrew Schultz: (03:40)
If you’re still working on compiling a list of fair housing-compliant criteria, I recommend heading over to red prep.com and checking out the tenant screening 1 0 1 section. There’s a ton of great information in there to supplement this video, including things like a rental application that you can download as well as a set of fair housing-compliant criteria that you can start to use and modify to fit your needs in your area. But all of this is worth noting that not all of the areas that we operate in are going to allow you to look at all of the data that you’re able to obtain. For instance, here in New York, we can no longer reference eviction data as part of our screening process that was removed as part of the H-S-T-P-A laws, the Housing Stability and Tenant Protection Act that was passed here in June of 2019.
Andrew Schultz: (04:28)
And if it’s proven that you accessed eviction data or even something like a 10-up blacklist, you’re looking at a $500, $2,000 fine per violation. Another interesting screening restriction that we’re starting to see is the requirement to approve all other aspects of an application before you’re allowed to review the criminal history. So far, this is on the books in Cook County, Illinois, which includes Chicago as well as in New Jersey. Another screening restriction exists in Miami-Dade County where you can’t ask about evictions until after the applicant has been deemed approved on all other criteria. I think there we’re going to continue to see more and more restrictions placed on housing providers and as time goes by, especially when it surrounds tenant screening, and typically once a piece of legislation is passed in one area, it’s not going to be long before you start seeing copycat pieces of legislation popping up in other areas.
Andrew Schultz: (05:22)
So keep yourself current when it comes to this stuff because the rules change very, very frequently. My next tenant screening tip is that everyone gets an application. We never deny anyone an application ever. They’re more than welcome to fill it out and we will screen them even if we know that they’re not going to pass through our screening process. Why? Why would we spend that time if we know that we’re likely going to wind up denying that person? First and foremost, it boils down to fair housing law. We don’t want there to be an accusation of discrimination based on something as silly as not receiving a rental application. There’s no reason for it. Just hand them an application paper is cheap and digital apps are even cheaper, and in 2024, there’s no reason not to hand somebody an application. We require everyone over the age of 18 who will be living in the property to complete a rental application and they all go through our screening process, including the credit and the background checks.
Andrew Schultz: (06:16)
We do this even for non-responsible occupants such as college-stage students or older family members who maybe they’re being taken care of by the responsible tenant. We do require those applications to be submitted, even if they’re not going to be part of the basis for the income requirements on the apartment because we may find that there’s a criminal issue or something like that, which would result in the application being denied. We won’t begin screening any application until all of the applicants have submitted their documentation as well as all of the credit and background check fees being paid for. Secondly, I recommend that you include a copy of your selection criteria right alongside your application. More often than not, the applicants who are not going to qualify will spend some time reading through this criteria and realize that they’re not going to pass or will realize that they’re not going to be able to skate by our criteria that we do screen every single tenant.
Andrew Schultz: (07:09)
And more often than not, those applicants will self-select out of the process by simply not applying. And if they do apply, they’re going to be screened just the same as every other applicant for that home. Everyone gets an application. My next tip revolves around the income credit and background checks. In 2024, we’re starting to see more and more fake documentation being passed along than ever before. Fake pay stubs and fake bank statements have seemed to be the most popular currently, but fake landlord references have been around for a long, long time now, and those have always been a challenge for income. You may wanna consider using an income verification service. Rent Prep does offer income verification as part of their tenant screening services, and the nice thing is with the income verification, your applicant’s going to input their bank name as well as their online banking login and password, and then the service actually goes accesses their account and downloads the transaction data looking for both regular and irregular income, so things like your biweekly paycheck as well as things like cash from a check that you deposited after you sold an item or a check that grandma sent you on your birthday or something along those lines.
Andrew Schultz: (08:20)
It gives you a really good idea of what the person is bringing in both regularly and irregularly in terms of income. It also takes a look at what is currently available and tells you what their current bank balances are, as well as what the average bank balance is as well. This gives a much more consistent picture of an applicant’s income and the applicant’s not able to edit anything sent by the service providers, so it’s as accurate as their bank records are. Hopefully, the bank’s records are accurate because that means that the reports that you get is very, very accurate. If you’re still screening tenants manually. I do recommend checking out our video on how to spot fake pay stubs. It gives you a lot of insight as to what to look for. We go over several examples of fake pay stubs and other fake documentation, and we even show you how simple it is to generate a fake pay stub on your own.
Andrew Schultz: (09:10)
That’s definitely a video that’s worth checking out, especially is a supplement to this video. I strongly recommend criminal background checks and credit checks on every single applicant. This goes back to treating everyone the same In New York, we can look at criminal and credit, so we run those each and every time. We look at both the credit score as well as the individual trade lines on the credit, and we also look at the criminal as well. We found that over the years of screening hundreds if not thousands of tenants at this point, income verification is a great way to validate an applicant’s ability to pay. And credit score and credit history on the other hand will give you a really good validation as to an applicant’s willingness to pay. So if they make five grand a month and they only want one grand a month rental, but they’ve never paid a single credit card bill or a car payment on time, that’s gonna be a red flag for us.
Andrew Schultz: (10:06)
That’s something that we’re gonna catch during our tenant screening. My final tenant screening tip for today is to continue showing your vacancy until you have a signed lease as well as a security deposit. The number of times that someone has flaked when it’s time to sign on the dotted line or pay out their deposit is not huge, but it’s also not zero either. Rather than lose that precious time on market, we recommend that you continue to show the apartment until you have that signed lease as well as the security deposit. Now, I will add a little bit of a caveat here. In some areas you do have to screen applicants in the order received first. Come first, sir. So again, you need to understand your local market as well as the requirements at every level, local, county, state, and federal before you start screening for applicants. So there you have it. Tenant screening can be a daunting task and in my opinions, it’s one of the toughest parts of property management because the stakes are so high if you choose a bad tenant. Did we miss anything that you include in your screenings? Were you able to pick up some new tips along the way? Drop us a comment down below and let us know how your tenant screening is going. Don’t forget to like and subscribe. I’m Andrew Schultz with rentprep.com and we’ll talk to you soon.
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