Rentec Direct Software Updates, Industry News, and Screening Resources

The Value and Cost of Tenant Screening

By on October 17, 2012 in Tenant Screening

We all know tenant screening is plays a vital role in placing a tenant, but why is that?  Without properly screening a new tenant a landlord can end up losing far more time and money than they gain.  A lot of landlords might assume this would never happen to them, or they are a good judge of character and may not need to verify the facts; however, fact is, poor tenants are on the increase and they are becoming better at lying about their past.   When interviewing the most successful landlords, they all say they absolutely positively would not give a new tenant keys prior to running a background check.

Tenant screening costs less than $30 and can be as little as $15.  This cost can save you thousands, maybe tens of thousands down the road.  Landlords who did not screen their tenants have ended up in some pretty bad situations, here’s a few I’ve heard about:

  • Tenant was a “professional renter” who knew the system and worked the system in such a way as to get over 1 year of free rent, plus $15,000 in costs from the landlord when the landlord did nothing wrong other than forgetting to screen this tenant.  This tenant had been evicted numerous times in the past for doing the same thing which would have showed up on their background report.
  • Tenant was a sex offender and the landlord did not check.  Because this was a multi-unit property with kids, the landlord was held liable when a problem occurred with a neighboring child.  This sex offender would have shown up in a background report.
  • Tenant setup a drug operation inside their rental and contaminated the property.  The landlord had to pay $35,000 to rehab the property before they could re-rent it.  The landlord was out the $35k, plus over 6 months rent while the eviction and rehab took place.  This tenant had prior drug issues which would have shown up in their background report.

These issues and many more could have been avoided if the landlords took 3 minutes and ran a background report on the tenants prior to giving them keys.  Watch here how simple it is to run a background credit and criminal report on a tenant.

Tenant screening costs you nothing.  Most successful landlords include the costs to screen the tenant within their application fee.   A typical application fee would be between $30 and $50 (depending on area).  This fee pays in full your entire cost to screen a tenant.  Just remember to keep your application fee close to your actual costs.  Afraid having an application fee might deter renters?  Landlords say it only deters renters who cannot afford $30.  Do you want to rent to somebody who doesn’t have $30?  How are they planning to afford rent or the security deposit if they can not afford the application cost?   Landlords say by clearly stating the application fee and that credit and criminal records are reviewed on their listings they save a lot of time showing the property unqualified renters.

Here are some vital reports that successful landlords agree must be reviewed prior to placing a tenant.

  • Nationwide criminal:  This will show me if the tenant has had criminal issues in your state, or any other state.
  • Nationwide eviction:  This will show you if any other landlords have had to take this tenant to court to get them out of their house.
  • Tenant Credit report:  A credit report is vital in confirming if the tenant can afford to rent from you.  A credit report will not only show any delinquencies or payment habits the tenant may have but it will show their current obligations.  A simple formula is to take their income, minus obligations reported on their credit report and that is how much they have left to afford food, rent, utilities, and gas.
  • SSN Verification: This inexpensive report shows you a complete address history of the tenant and assists in confirming if the SSN really does belong to them.  You need to know that their SSN is valid since all other reports, and any future collection or judgement activity relies upon it being accurate.

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About the Author: Rentec employees share a passion for delivering the world's finest property management application to a diverse network of property managers. .

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There Are 4 Brilliant Comments

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  1. Damion says:

    Greetings! Very helpful advice within this post! It’s the little changes that will make the greatest changes. Thanks for sharing!

  2. RV says:

    I’m amazed, I must say. Seldom do I come across a blog that’s both
    educative and amusing, and let me tell you, you’ve hit the nail on the head. The problem is an issue that not enough folks are speaking intelligently about. I’m very
    happy I came across this during my hunt for something regarding this.

  3. Sean Carter says:

    This post explains a lot about what the tenant screening process is, and that is fantastic. I found a great service to do my screening and ever since I have had a higher quality of resident in my building. I have far less issues than I did before and have saved lots of time as well as money. It is a very important first step to being a landlord.

  4. Elina says:

    Hiring a professional property manager is worth the TENANT SCREENING RESOURCES that we have available to us that DIY landlords do have access to – most real estate agents are not set up for tenant screening until it is too late to know they are not qualified

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