Owning a rental property is the same as owning a business. You need processes to ensure you are can protect you and your assets. One of the most impactful processes you can have in the business of owning rental property is your renter screening.

Screening potential renters is critical to the success of your rental business whether you have 1 or 500 properties. Ensuring you know how to successfully screen tenants will be the difference between a smooth operating business or a stress-induced nightmare.

Let’s review what a successful screening process looks like.

QUESTIONS TO ASK

Your listing is live and you’ve got interest in your unit! It’s an exciting time! It can be easy for landlords to get so excited about a possible renter that all their screening criteria goes out the window. This may lead to skipping everything in order to get the lease signed. This can be a detrimental mistake!

Remember that your screening process must be thorough, although it can be nerve wracking at first, it will pay off to do your due diligence.

These questions will help you and the potential renter determine if the property is a good fit. I recommend asking these questions prior to a showing or inviting them to apply.

***Remember, you can not ask any questions that could discriminate protected classes including race, color, national origin, religion, sex, disability, or age per HUD.gov.

Here is a list of questions I ask all tenants when they express interest:

When are you looking to move in?
How many people would be living at the property (adults and children)?
The application is a $30 fee and requires a background, credit, and eviction report, are you comfortable sharing that information and paying the fee?
Do you have any pets that will be living at the property?
- If yes, I notify them of my pet policy and/or fees and monthly pet rent (if applicable)
The parking at this property is street parking only, does that work for you?
Are you willing to sign a 1 year lease agreement?
Are you able to pay first months rent and your security deposit within 48 hours of signing the lease, provided you are approved?

tenant screening laws

Depending on your state and city, you may have laws you need to be aware of that relate to what you can and cannot ask during the screening process and it’s important you know what these laws are before you begin determining your criteria.

In Minneapolis, there are two options for screening tenants, the first is an inclusive screening, where you’ll consider the applicants criminal, rental, and credit history. There are a number of rules related to what you can consider when using this method, including; not using credit score as a reason to disqualify an applicant, cannot consider evictions that were three or more years prior to the application date, and cannot consider misdemeanors with sentencing of three or more years prior to the application.

This is not an all inclusive list, if you’re investing in Minnesota, I recommend you read through this screening criteria in depth to ensure you are following the law.

The second option in Minneapolis is individual assessment, which allows for stricter screening criteria. If a landlord chooses this option, they are required to consider any additional evidence provided by the applicant to justify, explain, or even negate the information that comes out of the background, rental, and credit history checks.

If you choose this option, it is best you gather all information and ensure you have documented reasons for why you disqualified an applicant.

Screen tenants like your business depends on it.

Because it does.

DETERMINE YOUR CRITERIA

What is screening criteria? This is your documented standards for either accepting or declining an applicant.

It’s smart to have this determined prior to beginning the screening process so you can remain unbiased in your decision when selecting a tenant. It should go without saying that you can not include criteria that would discriminate protected classes such as race, color, national origin, religion, sex, disability, or age per HUD.gov.

Remember, you must follow your state or city specific guidelines first, and then can create your own criteria from there.

Some information you can consider adding as screening criteria may include:

Income to Rent Ratio (ex. Monthly Income must be at least 2.5x monthly rent)
Credit Worthiness (As a reminder, in Minneapolis you cannot use credit score as a reason to reject an applicant but you can use their credit report to determine the likliness to pay rent)
Criminal History (ex. Must have no felonies within the last 7 years, must have less than 2 misdemeanors within the last 3 years)
Rental History (ex. Must have not been evicted within the last 3 years)

SCREENING SERVICE

Now you have documented your screening criteria, next you want to decide which screening service you will use to screen tenants.

There are many different options you can consider. If you’re a new investor and only have a few rental units, I generally recommend working with a free option.

Zillow Rental Manager is one I recommend for both the listing and screening services. Zillow, although it’s had it’s ups and downs, is a great service for rental listings and screening. Their screening service comes at no cost to you, but does charge your applicant a $30 fee (common for most services). It provides an in depth background, credit, and eviction report and everything can be done securely within the Zillow site or mobile app.

There are many other free options for screening and property management to consider as well - Apartments.com, Innago, TenantCloud and more.

If your portfolio is growing and you’re around 10 or more units, it’s a good time to consider another application for screening that can service your rentals in other ways like maintenance and rent collection. Consider looking into paid options like Buildium (this is the service we use at West Edge Investments and highly recommend!), Appfolio, or Yardi which are also reputable services.

FOLLOW UP

Your applicant has completed the pre-screening questions, filled out the application, completed their background, credit, and eviction check and everything is looking great!

Should you have concerns or questions on your applicants information, now is the time to follow up on any outstanding questions. You may also require additional information such as a rental reference from their current landlord, pay stubs to verify income, or co-signer application if they require a co-signer on the lease.

Don’t be afraid to ask for supporting documents, your applicant has made it this far they will be happy to provide additional details.

APPROVAL

Congratulations! You’re ready to approve your newest residents. A personal phone call is always appreciated, but if you can’t make that happen or if you have multiple tenants, a warm e-mail will do the trick.

Congratulate your applicants and let them know they have been approved for the unit. Now is the time to confirm the lease details. You should know or have covered most of this information with them already, but it’s a good time to verify before putting everything in writing on the lease:

Move in date
Lease Term
Rent
Pets
Utilities paid by owner
Any additional fees or costs

Once your tenants have confirmed this information, it’s time to send out the lease agreement for signatures and collect the first months rent! I highly recommend collecting both first months rent and security deposit within 24-48 hours of lease signing. Cash is king, if they won’t submit these funds after signing, there is a good chance they will back out before the move in date. Make this a practice in your business so you don’t get burned.

REJECTION

One of the hardest parts about leasing is rejecting or declining an applicant. It’s always hard to tell someone no, but it’s a much better experience for them and you if you provide a response.

Too many applicants go without ever hearing back from an owner or property manager and it leaves a sour taste and bad experience - which hopefully you know is never good for your business. Provide any applicants who did not quality a response and let them know why. It’s important to be courteous and ensure you are not discriminating.

It may also be worth reaching out to other individuals who showed up for a tour or reached out about the property to let them know it is no longer available. You may want to keep in touch for other available rentals down the road!