If you're a first-time investor in real estate, you're probably keen to rent out your property as soon as possible. After all, letting a property sit without renting or selling it out costs money. You'll want to find someone reliable who isn't going to skip out on paying rent each month.
One way to ensure that you rent out to good tenants is through a background check. What does a rental background check consist of, though? And how can you use this information to your advantage?
Here's everything you should look up when tenant screening and if they have a chance to become a problem later on.
Importance of a Rental Background Check
A tenant background check should be a requirement when reviewing any potential tenants. Since you need consent to perform a legal background check, you can include it in the rental application. Once a person has signed off, you can find out things like their employment history and criminal record.
Failure to review a person's background may cause problems later on if they get into legal or financial trouble. If they can't pay rent, then that directly affects your investment.
A property manager can perform all of this on your behalf. This is useful if you own multiple properties or do short-term rentals.
What Does a Rental Background Check Consist Of?
Some of the main components of a tenant background check include a person's history regarding their employment, criminal record, previous residence, and their credit score.
These may present red flags or showcase why a landlord should let them sign a lease.
Employment History
Employment is important for one main reason: it's a reliable source of income. If a tenant does not have a job, then you can't be sure they'll be able to pay rent each month. You can also look at their employment history to see if they're able to hold down a job for more than a few months.
Criminal History
A criminal history shouldn't keep someone from renting, but it should be considered. It's a liability that should at least be analyzed based on the criminal charges and if they're on probation.
Rental History
Rental history can show how long an applicant has spent in their last home as well as why they left it. This can help you avoid renting out to someone who causes property damage or has broken their lease in the past.
Credit Score
A person's credit score shows their financial security. People with jobs can still be financially irresponsible. Their credit score should reflect how much you rely on them to pay rent each month.
Protect Your Real Estate Investment
What does a rental background check consist of? It's a thorough review of a person's history, including their employment status, previous living situation, and financial security. Running this check should be a necessity, even if you're confident that you can trust an applicant.
PMI Windy City can handle all of your property management needs. Our areas of expertise include both residential and commercial properties as well as HOA assistance. Contact us to learn more and get a free rental analysis.
