Screening tenants is one of the most important tasks landlords are responsible for. Applications come in by the dozens for every apartment and it’s their job to sort through them, run the appropriate checks, hold interviews, and determine who will live in your properties.
As a result of this constant work, most landlords have a clear sense of what red flags they need to look out for when reviewing applications, but it’s important to realize that not all problems are equal and that individuals with “red flags” on their records may not be bad tenants.
The question for Houston landlords, then, is how can you tell the difference?
The tenant screening process is always stressful, but due to the consequences of the COVID-19 pandemic, the situation is more fraught than usual. Both tenants and landlords face hardships, and Houston is likely to see a spate of evictions in the coming months, since the state Supreme Court declined to abide by the CDC’s extended eviction moratorium. Evictions – especially recent ones – are typically considered a serious black mark against applicants, but that may not be a fair judgment right now.
If you receive an application from an individual with a recent eviction on their record (and right now, that’s almost inevitable unless you deal in high-end real estate), it’s worth digging deeper. Fortunes are changing quickly right now, at least in terms of the job market. There are also still several tenant assistance programs available, so their financial situation may be better.
In addition to the issue of evictions – recent or not – landlords need to be smart about how they screen tenants because screening reports aren’t always accurate. In fact, since more landlords have shifted to using outside screening agencies to handle these tasks, the likelihood you’ll receive a misleading report is greater than ever.
Not so long ago, landlords did most of their tenant screening work on their own. They gathered applications, plugged social security numbers and other information into special databases, and gathered the results. Because this typically involved a certain amount of pre-screening, though, it was usually obvious if a report didn’t seem to correspond with an applicant.
Today, so much of the screening process is automated that landlords may know nothing about an applicant before they see a report, and with such a high error rate, this can lead to serious bias against tenants who are actually qualified. The takeaway: before you rule out a tenant based on a negative report, due your own investigation.
Debt is another factor that can raise concerns about an applicant’s fitness, and with good reason; someone with a lot of debt is more likely to fall behind on rental payments than someone without debt. That being said, not all debt is made equal and there are some people with a lot of debt who still consistently pay their rent. So, how do you tell the difference?
First, know how to identify good debt. In particular, student loan debt – even when there’s a lot of it – is typically considered good debt and shouldn’t raise alarms. Payments are typically fairly low and can be adjusted based on the individual’s income.
Second, look at the applicant’s debt-to-income ratio. Someone may seem to have a lot of debt until you look at their income, and this can be an especially minor issue if they’ve chosen a lower-cost apartment than they might otherwise. It’s all about relative values and affordability. If they’ve had this level of debt for years and have always made their rent, though, it’s probably not worth worrying about.
It’s understandable that many landlords don’t want to rent to people with criminal histories, and it’s true that renting to someone with a recent violent crime charge, for example, is generally out of the question. However, it’s also true that trouble finding housing is known to increase the likelihood of recidivism and that individuals with old, non-violent records who have no recent criminal history are unlikely to be a problem. As with so many things, then, this is an area in which skilled landlords need to use their instincts and experience to determine the right choice.
Perhaps the strangest thing about determining who to rent to and whose applications to decline is that the real warning signs tend to be more subtle. For example, talking to an applicant’s current employer – at least beyond income verification – isn’t necessarily part of the standard background check, but someone who gets a negative review from their employer is almost certain to be a bad tenant.
Similarly, someone who is remembered by past landlords for damaging property should be a hard ‘no.’ If they didn’t respect previous properties, then they probably will treat yours with the same disregard.
Finally, beware of applicants who lie on their application or who don’t want you to run a credit check. It’s understandable that people can get nervous when looking for housing, especially in a tight market, but there’s a difference between anxiety and acting squirrely or being dishonest because they have something to hide.
As all of these considerations make clear, screening potential tenant applications is a big job, but it’s also an unavoidable part of owning rental properties – so what’s the solution? Given how error-prone automated systems are, you need a gate against wrongful reporting, and Green Residential is here to help. Our Houston-based property management team has been helping landlords manage their rentals, from applications and screening to maintenance, eviction, and much more.
If you’re looking for a smarter way of managing your rental property, you need Green Residential on your side. Contact us today to learn more about our services and how we can make your rental property business more efficient and profitable and improve its management. We’re a family business and when you work with us, you can feel confident that you’re part of the family, too.
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