Renting to a tenant is a major business transaction and it is important that your screening process be handled professionally.  In essence, you are extending thousands of dollars worth of credit to the tenant. You are also entrusting them with your property that is worth much more.  A Rental Application completed and signed by the tenant is an essential step in securing a reliable tenant as well as safeguarding your rights as a landlord.  With a signed rental application, the landlord can obtain the tenant’s credit history and credit report.

A thorough screening process can eliminate negative consequences for the landlord as well as for other tenants in the residence.  A recent study shows that the average risk from a “bad tenant” can amount to $1,500 which makes the screening process a good business investment.  A screening process generally includes rental history, job history, legal history, reference check, credit report and banking information.  Whether it is a residential or a Commercial Lease Agreement, by conducting a proper screening process, the landlord can avoid many problems associated with high turnover, property damage, slow payments and collections, moves without notice, disturbances and evictions.  It is also prudent for the landlord to use a Home Inspection Checklist to document the property condition before renting it.

After the rental application process is completed, the second major step is the Rental lease Agreement. A rental agreement is extremely important particularly when it comes to a valuable asset such as real estate. In essence, Your tenant will take temporary possession of your property.  The tenant is obligated by the law to abide by the rental agreement.  If the tenant refuses to leave the property, the only way to vacate them is through the legal venue by issuing them an Eviction Notice.  This is why the rental agreement needs to be in writing, and the time to execute a written rental agreement is before the tenant takes possession of the property.

No one said that it was easy to find the perfect tenant. As a landlord, you will probably encounter a few bumps and surprises along the way.  What you probably need is a set of tools to identify the problems or red flags in the tenants credit profile. There are two straight forward points to be made here:

1. DO NOT rent to a tenant who has an open bankruptcy. If they include the rent they owe you in their bankruptcy, it is most likely that you will not be able to collect this money.
    

2. DO NOT rent to a tenant who is at high risk of declaring bankruptcy. This can be identified if the tenant has a substantial amount of money in past due accounts and collections, and if creditors have issued a judgment against the tenant.  Moreover, a high risk tenant can be spotted by other means such as high debt to income ratio, seasonal or temporary jobs among other things.
    
3. DO NOT rely on verbal communication. Always keep everything in writing.   Use Email for example for correspondence to keep record.  Use legal eviction notice forms instead verbal of notices to evict your tenants.  This protects you by law in case of dispute.  When you keep all communication and agreements in writing you essentially protect your legal rights and your property. 

Gale Sanders

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