Some renter warning signs are as obvious. Frequent evictions, a history of relevant crimes, and lack of income might stick out like an over-sized elephant wearing a red flag for a hat. However, not every potential threat is so easy to see. Some of the most potentially destructive tenant warning signs are tiny by comparison - and shockingly simple to overlook if you're not prepared.
According to the data-science journal PNAS, an average of 2.7 million eviction cases are filed every year, which is about 7% of all filled units. That may seem like good odds. However, with court fees, lawyers, damages, vacancies, lost rent, and repairs, the cost of an eviction can reach $10,000 easily. Could your small property business absorb this gargantuan hit Probably not. That's why it's so important to pay attention to the warning signs below and thoroughly screen your rental applicants with a trustworthy provider like SmartMove.
This article will review both the basic red flags that most savvy landlords already know about, as well as cover the less obvious warning signs that could tank your independent property business.
Before delving into the less obvious renter warning signs, it's essential to first cover the basics:
A criminal background check is crucial to help discover if your applicant could harm your rental property or neighborhood. Not all criminal records may be deal breakers, but it's absolutely essential to know about any relevant criminal convictions, such as violent felonies, that could put your other tenants, neighbors, or property at risk.
A criminal record report typically shows someone's past history with the law. However, not all reports are created equally. It's important to know how in-depth your chosen provider goes.
For example, a SmartMove criminal record check for renters scours nearly s 370 million federal and state-level criminal records to find a match for your applicant and can provide detailed results in just a few minutes. Revealing the details of your tenant's past can help you make more confident leasing decisions.
Most landlords already know to run a credit check on rental applicants. Credit reports are a long-standing way landlords assess how a potential renter usually handles debt and financial obligations. According to a SmartMove user survey, 90% of landlords feel they have a good understanding of what credit scores mean. However, not all landlords know that credit reports aren't always the best predictors of paying rent on time.
A generic credit score measures someone's general credit-worthiness and is best for things like home or car loans. Designed specifically for rental industry, SmartMove's ResidentScore is built to predict negative outcomes of a lease better than a generic score. ResidentScore looks at a typical lease term of 12 months and is designed to predict the risk of bad tenant-related outcomes during that period: Evictions and 3+ late payments and Insufficient funds A low ResidentScore generally indicates that the tenant is less likely to make his or her monthly payments on time. This information can help you make better decisions.
People with a history of eviction are three-times more likely to have additional eviction-related events and rental-related collection records as non-evicted residents. This means, a past eviction can be a predictor of a future eviction. As an independent landlord, it's essential to understand your rental applicant's past.
Because of the high risk, many landlords delve into rental track records. Learning more with an eviction report from a qualified provider like SmartMove can help you make more informed decisions and decrease the likelihood of an expensive and destructive eviction process in the future.
You've read over the reports listed above and you should be ready to hand over the keys, right Not quite. Beyond the obvious warning signs on tenant screening reports, there are several more subtle red flags that could devastate your rental business if you're not careful.
As they say, the devil is in the details. If your detailed review turns up a tenant who falls into any of the categories listed below, you may want to take a closer look.
Here are some additional warning signs to look out for:
Any applicant who asks you to skip the tenant screening step should be a big warning sign
Ok. This one is somewhat obvious. Any applicant who insists you don't need formal tenant screening should raise major red flags. Often these applicants are in a hurry to move. They want to sign a lease right away and may try to rush you or stress you out with a sob story.
It can be tempting to move someone into your unit quickly to prevent costly vacancies. However, asking to skip screening could be a sign that your applicants may be hiding something that will potentially destroy your rental business.. . To ensure your applicants meet your screening requirements, always run a thorough tenant credit report, criminal history check, and eviction check before making any leasing decision. A vacancy can be expensive, but an eviction is always worse.
You may come across an applicant that wants to give you their credit report directly, instead of letting you get your own copy. At first, this could seem fine or even thoughtful. Afterall, maybe they recently got one for a loan or for work and they might not want another inquiry on their record. Accepting their report may seem like one less hassle and expense for both of you.
However, think twice before accepting a credit report directly from an applicant. The information may be outdated, inaccurate, or even completely fabricated. Paying the modest cost of a tenant background check is nothing compared to the burden of eviction proceedings.
Let your applicant know that you run your own background checks. Always obtain a report directly from an FCRA-compliant provider like SmartMove. Protip: Be sure to remind the applicant that by doing a credit check for rental screening, their credit score will not get dinged, as these checks result in a “soft inquiry” that does not impact a tenant's credit score.
Does your rental applicant have a history of moving around a lot If so, it's time to take a closer look and find out why. Do they move frequently for work Do they move because of issues with their landlord or rent payment
Any applicant who blames moving frequently on their prior landlords should inspire extra caution. If they move frequently for work, they might skip out on your lease early, too. Consider requiring a fee for breaking the lease and a minimum of 30 days' notice for leaving early. Have all policies clearly written out in the lease terms.
Someone who changes jobs frequently may also need to change location frequently. This means breaking the lease early and potential vacancies for you. Additionally, someone who frequently changes jobs may be unreliable or have unstable income, which could mean late payments or even non-payment. While it's true that a tenant may still have stable income even with frequent job changes, it's crucial to verify their employment and other relevant references. You can also use LinkedIn to help verify your applicant's employment history.
Perhaps they took a gap year after school to travel, or they were a stay at home parent. Long gaps in employment could be nothing - or they could be part of a harmful pattern that could mean big trouble. Double check to make sure the applicant has a valid explanation for long gaps between jobs. The last thing you want is a tenant with unstable income.
An applicant that's in a big hurry to move could be a warning sign. While there may be perfectly harmless reasons why someone wants to sign quickly, be sure to ask your applicants why they're moving and to get an eviction report on your applicant to check their rental history.
An applicant who only partially fills out a rental application should prompt you to ask follow-up questions. Then, if your applicant's self-reported information clashes with what you discover on tenant screening reports, think long and hard e before signing a lease. For example, if a tenant tells you they have no prior evictions but you find an eviction on their screening report, you may want to take that factor into consideration when making your decision.
- SmartMove March 17, 2023By Andrea Collatz
When it comes to running a successful property business, the most dangerous warning signs are not always the most obvious. Got a rental property or curious about where to start? I'm a Texas realtor and landlord who assists other landlords in finding the perfect client. Let's talk about how I can assist.
Jantavia Connor Powell
832-859-9330
Your Partner in Real Estate
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