Owning rental properties is a great way to supplement your income. Finding a great agent and buying the right property is only part of the formula, however. Once you own your property, you have to find and screen tenants to ensure your valuable investment is protected. Using tenant metrics is the best way to objectively know your property is safe.

Finding any tenant using Craigslist, Zillow, or other listing services may seem like a lot of work, but cleaning up after a bad situation can be much worse. Here are some metrics to screen new tenants before you sign a lease agreement.

Tenant Metrics: Income/Savings

The first thing you need to know when leasing to a new tenant is whether or not they can afford the unit to begin with. The best way to do that is to verify income or savings.

You can verify income using a recent paystub from sometime within the last month. Even employees paid with direct deposit have access to a pay stub, which may have to be printed from a human resources system at work.

If someone does not have enough income to cover the rent, a recent bank statement showing they have sufficient savings to cover the cost of the rental is sufficient.

People often move to a new city without a job and try to find a rental while looking for a job. Their employment situation is not your concern. Timely rent payment is your concern. If they cannot prove that they can afford the rental, do not rent to them.

Tenant Metrics: References

Once you have established that the potential tenant can afford the rental, you have to protect yourself against crazy situations like damage, theft, or worse. References can help prove the renter’s track record.

Start by calling the most recent landlord to ask how everything went. Were rent payments on time? Did they cause any excessive damage beyond normal wear and tear? Were they a problem tenant who disturbed neighbors?

When I was a renter, I treated each property as if it were my own. After all, it was my home. But not all renters are so careful and protective. Make sure your next renter is someone who will look after the property, not abuse it.

Tenant Metrics: Credit History

Many property owners perform a credit check when bringing in new tenants. Credit scores and reports can help you understand how the potential tenant handles their finances in general, and could give you a better picture of how likely they are to pay on time and in full.

Here are some items to look out for:

• On-time payment history – A history of all on-time payments for credit cards and loans is the best predictor of future behavior. If they regularly send in late payments, or miss them all together, you can expect the same.
• Collections and public records – Collections indicate that the borrower was so delinquent that the debt was sent to a collections agency. Public records are court judgements against an individual. Anyone with collections or public records on their credit report is a risk.

Tenant Metrics: Criminal Background Check

Not everyone is honest, but everyone says their honest.  Learn the facts before you accept a potential tenant that may have a history of violence, vandalism, or sexual abuse.  These types do not make good neighbors, and will scare your other law-abiding tenants away.

Here are some items to look out for:

• Arrest Records – There are lots of websites where you can run a criminal background check on an applicant.  One site I use is publicdata.com.  You can also use the site to verify drivers licenses and vehicle ownership.
• Minor Incident Police Records – You can also check with the local police precincts to see if your potential tenant has a history with domestic disturbances, disturbing the peace, or public intoxication. Even small crime reports that may not have been severe enough to justify arrest, or when the charges were dropped may be an indication that this isn’t the most ideal tenant.

Tenant Metrics:  Social Media

Check out the potential tenant’s Facebook and Twitter feeds.  If they’re bragging about last night’s pot party, you might not want their next party to be held at your investment property.  Or, if you see pictures of their 10 cats, when they swore they have no pets and have no problem upholding your no pet policy, you can probably assume they won’t uphold it.

Protect Your Property and Yourself

Whether you want to hold the property for a long time or sell it in the near future, tenant screening is a very important part of property management. Always put in the work up front to protect yourself down the road.  Before you start looking for a new tenant be sure you have an established set of minimum standards and adhere to those policies no mater what.

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