For East Bay landlords, property owners and managers, selecting the right tenants for a property is absolutely critical to making sure that your real estate investment is a success.
Whether you own a property in Richmond, Albany, Berkeley or elsewhere in the Bay Area, choosing the wrong tenants can, unfortunately, lead to issues such as property damage and monetary loss due to costs associated with unpaid rents or eviction. Therefore, tenant screening is a vital step that will help to ensure that you find the best tenants for your property.
After 36 years as a Certified Property Manager at Feagley Realtors, I’ve learned some tenant screening tips I’d like to share with you.
Start with the Basics: Credit Check and Background Check
Basic tenant screening is simple: conduct a credit check, look for bankruptcy, proof of employment (including requesting pay stubs) and call an employer to find out the length of employment. Then, note any discrepancies in the application.
When considering a tenant, I look more thoroughly at the applicant’s background. It’s very important to search beyond the credit score and study the complete credit report. For example, a credit report will show whether a person pays bills on time, has declared bankruptcy or has been evicted.
Keep in mind that sometimes people will have poor credit due to justifiable reasons, such as medical bills or student loans.
Social media also can be checked along with asking further questions which might affect the potential tenant’s compatibility with neighbors. You may wish to ask whether the potential tenant plays a musical instrument, smokes or has a pet.
Be Open Minded: When a Low Credit Score Didn’t Tell the Whole Story
Once, I reviewed a prospective tenant who was an engineer at Chevron in Richmond with a credit score below 650 which doesn’t normally meet our minimum standards. However, he had a high income of about $180,000 per year. After reviewing the credit report, I found that he had only one credit card and that card had a low credit limit. In his defense, he wanted to stay out of debt and carefully managed his money.
Because credit scores are partially determined by the amount of credit people hold, the low limit and lack of credit history explained his low score. In this case, the tenant’s application was approved and he turned out to be a great long-term tenant.
Five Pro Tips in Tenant Screening
- Get a Copy of the Potential Tenant’s Driver’s License. If you need to do an eviction, the process server will need a photo.
- Ask the Tenant for Multiple References from Past Landlords. I recommend that you call a previous landlord and not just the current one. Current landlords are sometimes conflicted in that they may be eager to rid themselves of a problem tenant. They may give a glowing reference for someone who might not deserve one. Previous landlords don’t have a hidden agenda and typically are more honest.
- Be Consistent on Rental Applications. Social security numbers are necessary for running a credit report, but be sure to be consistent when screening tenants. For example, if you ask for social security numbers to run credit checks, make sure you ask for the same from all prospective tenants. Otherwise, that lack of consistency can be regarded as discrimination. It is not legal to deny housing based on national origin or immigration status.
- Keep Copies of All Documentation. Rejecting a potential tenant must be for a valid reason, such as having a negative reference, and it must be a standard set for all applicants. Having written applications and documents can help protect landlords in any potential lawsuits filed by a candidate claiming discrimination.
- Understand California’s Fair Housing Laws. It’s also important to know California’s fair housing laws, which specify that potential tenants cannot be discriminated against due to race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, medical condition, age or for having children. The federal Fair Housing Act offers similar protections for every person in the United States.
