At Live South Florida Realty, Inc. we have assisted many clients become real estate investors. After all, income properties are one of the most effective ways to build wealth in real estate. With this said, how do you effectively screen for tenants? After all, you have probably heard of delinquent tenant horror stories! Given the significant costs associated with an eviction combined with the inability to re-rent the unit, one mistake can lead to a lot of expense & headaches for the landlord. As with any business model, you need to have a clearly defined list of requirements prior to accepting rental applications from prospective tenants. For starters, some common items to include on your checklist may include:
- Income criteria
- Landlord & employment references
- Eviction history
- Criminal history
- Credit history
Did you know? A TransUnion survey found that payment problems ranked as the top concern by 84% of landlords. Regarding income requirements, the industry standard is a ratio of three times the income to rent. Of course, it is critical that landlords also pay close attention to the other items on the checklist as well. Landlord & employment references are highly encouraged in order to verify that the information provided is accurate.
Lastly, landlords should consider charging prospective tenants an application fee to cover the cost of a professional background check. There are various services available & the costs may vary. Most importantly, you will want to confirm that the background screening service includes eviction, criminal, & credit histories. TransUnion data shows that evicted residents have nearly three times as many prior evictions and rental-related collection records as non-evicted residents. If that isn’t enough to sway you, consider that on average, evictions average $3,500 per unit and can take up to four weeks for the entire process to run its course.
In closing, a structured application process that is comprehensive and thorough will not deter honest & responsible tenants from moving forward with renting a unit. The additional due diligence up front may prevent you from dealing with costly & time consuming evictions in the future!
Are you thinking about investing in South Florida income properties? Contact us today for a free consultation!
Live South Florida Realty, Inc.