The Importance Of Tenant Background Screenings

Background screenings for tenants
Background screenings are a standard part of the rental application process

Investing in income-producing properties can be a great way to supplement your income or even become a full-time occupation for some real estate investors. However, it only takes one problematic tenant to result in significant loss of revenue and even additional costs. The reason for this is because even if a landlord goes through the proper channels to have a non-paying tenant evicted from a property, this process can take several months while racking up significant fees and legal costs. All of a sudden, your annual balance sheet for the property will be in the red. With this said, it is critical that all landlords have a standard background screening process in place as part of the rental application process.

Components of a background screening

Typically, background screenings take place after a prospective tenant submits a rental application. Most background screenings will include the following:

  • Verification of the person’s identity
  • A credit report
  • Check criminal history at county, state and federal levels
  • Search the sex offender registry
  • Check for any prior evictions
  • Check global terrorist watch lists

A background screening is easily conducted by a third party and the prospective tenant is simply able to visit a secured site to input their information and pay via credit card. The costs for many of these screenings is typically anywhere between $25 – $100. Oftentimes, the results may be obtained in minutes, but if a manual review is required it can take longer.

As a best practice, landlords should share the results of the background screening report with the prospective tenant. This way, the prospective tenant is not only aware of the results, but he/she can also produce the report if required by another party in the future.

While landlords in most states don’t need to give a reason for denying an application, it is unlawful to discriminate against an applicant based on the following: 

  • Race, color or national origin 
  • Prior history of drug or alcohol abuse 

Summary

Criminal background checks have garnered a lot of attention recently. In fact, the city of New York is currently considering a piece of legislation that would ban landlords and brokers from seeking a person’s criminal records and stop them from denying housing because of prior arrests or convictions. This bill is referred to as The Fair Chance For Housing Act. Similar to the moratorium on evictions that landlords had to endure throughout the pandemic, this is yet another attack on landlords and their ability to offer rental housing. Although many people believe that rental housing is controlled by large corporations, the truth is that the majority of rental housing is provided by independent investors that are not able to financially withstand the loss of revenue due to a non-paying tenant. As a result, policies such as this may result in less rental housing being available, as more landlords decide to no longer participate in this environment.

Are you thinking about buying or selling an investment property in South Florida? We can help. Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search App today!

By natasha moore

REALTOR® with Live South Florida Realty, Inc.

Leave a comment

Your email address will not be published.