Now, more than ever, it's important to get the right tenants into your rental. With an unstable -- well, world -- most of us don't have the time or budget to be taking large risks right now. Finding tenants who can follow your rules, honor their lease, and pay the rent is incredibly important. With landlords in many areas facing eviction moratoriums, finding responsible renters feels even more paramount than before. You need to start by creating a baseline tenant screening checklist.
Adopt Modern Baseline Standards
Tenant screening standards began with the same four principles for years, before we began to realize how much times have changed. Our world is no longer black and white, and neither should our screening process be so decided either. In 2013, financial experts at Bigger Pockets recommended setting your standards based on four criteria:
- Income must be 3x rent
- Tenants must have good references
- Criminal background checks must be clear
- No evictions ever
In general, these are still good guidelines to figure. A tenant needs to have enough income to afford rent, show a demonstrated ability to pay a monthly bill or fee, help maintain a safe community, and have a person or persons who will verify this.
The first two ideas still apply in much the same way. You should consider income verification and basic references a good baseline for your screening. References can easily include a landlord or employer to help you understand how the applicant interacts for business relationships. The concept that a criminal background check must be spotless has evolved.
The Fair Housing Act and Criminal History
Times have shown that different populations are criminalized at different rates, often for the same crimes. A blanket rejection of one of these groups for having any criminal histories at all may work to create an illegal and discriminatory screening situation. Says the FHA.
"It is not in and of itself illegal under the FHA to reject leasing applicants who have criminal records, but a blanket rejection of applicants based on criminal history may constitute a violation of the FHA if, without any justification, persons of any one race, color or national origin are rejected more frequently as a result of such policies."
Instead, set your baseline to consider criminal histories on a case by case basis. The only exception to this rule is that a blanket ban is allowed for drug offenses involving the distribution or manufacture of illegal drugs (not possession).
Eviction Criteria Has Changed
Before 2020, people who got evicted were considered to have lost a lease due to poor behavior or nonpayment. After COVID, as many as 35 million people could face eviction, a fact only delayed by current moratoriums. Keep this in mind while in your process of finding tenants. People who only one year ago would have been star tenants may now have an eviction on their record. Current shutdowns and regulations have devastated the careers of many fiscally responsible individuals, through no fault in their own.
Eviction criteria may need to expand to match the new normal after 2020. Consider a full history and current income over a single mark on a record.
But there's still more to consider when creating your rental screening criteria.
Additional Baseline Criteria
Besides the hard data, you are also allowed to consider an applicant based on lifestyle information. Lifestyle information doesn't mean a person's sexual orientation, skin color, or family makeup. You can screen a person based on pet policies (though keep in mind breed-specific rules can vary by location). You can screen a person based on smoking habits, or reject an application for a specific apartment based on occupancy size. If you have created a senior community, in some cases you may also screen candidates based on age.
Experts recommend that whatever your baseline screening process is, that you list this in your advertisement when finding tenants. Not only can this speed up the rental process, but this also acts as your first baseline screening by itself. It can be as simple as someone who has a dog skipping on to the next ad because you only accept cats. Both parties save time before moving on to a better fit.
Create a baseline tenant screening checklist to cover the standard questions, but don't forget to review each individual applicant too. Quality tenants will screen well on multiple questions, even if they occasionally show poorly on one.