July 2, 2024
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How to avoid Airbnb squatters
Learn how to prevent and manage squatters in your Airbnb with effective strategies, guest screening tips, and legal advice to protect your property.
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Effectively assessing the suitability of your tenants is crucial to safeguarding your property management business and ensuring a smooth landlord-tenant relationship.
Failure to do so, and you risk encountering unreliable tenants, financial consequences, and issues with neighbors. This is why a streamlined process for managing tenant background checks should be an integral part of your property management strategy.
In this guide, you’ll learn about:
With this information, you’ll be able to efficiently use tenant background checks to protect your property management business as you drive occupancy and maintain positive tenant relations.
A tenant background check is a screening process that forms part of a prospective tenant’s rental application. This helps you evaluate their suitability for renting your property.
The background check will provide you with information about, among other key areas, the renter’s financial, criminal, and eviction history, so you can ensure they’re reliable, responsible, and capable of meeting their rental obligations.
Ultimately, you’ll be able to assess the risk of renting to them and make an informed decision about whether to proceed with the lease agreement, adjust the value of the security deposit, or reject their application.
While the look and source data of your report may vary depending on your tenant screening service and the credit bureau (normally one of Equifax, Experian, or TransUnion), it will normally include the following sections:
An initial overview of the check’s findings should provide you with a quick snapshot of the tenant's overall suitability, including key metrics such as their credit score, criminal record status, eviction history, and rental history highlights.
If this summary is positive, you can probably go ahead and proceed with renting your property to the tenant. However, if some issues are raised here, you may have to delve deeper into the report to understand the specific concerns and determine the potential risks involved.
The credit report will give you an insight into how financially responsible your prospective tenant is, with information about their credit score, payment history, outstanding debts, and overall debt-to-income ratio.
To learn more about how these reports work and how to run one, see our guide on tenant credit reports.
The section on your prospective tenant’s rental history will detail their old addresses, any lease violations, and may include landlord references, too.
It will also show you any history of prior evictions, which are pulled from public records. If you have concerns, you could consider contacting a previous landlord directly to get a clearer picture of any issues raised.
The criminal history check is normally the result of a search of international, national, and local records.
It’ll include details of past criminal convictions and arrests (in most cases with a reporting period of up to 10 years), and outstanding warrants. Criminal history checks can also include searches of sex offender registries and terrorist watchlists.
Every key area of your background check can be an important indicator of the risk of proceeding with a prospective renter.
That said, it’s important to remain focused on the objectives of running the check. A years-old traffic misdemeanor generally isn't a great cause for concern if you can see other positive elements throughout the report, such as good credit history, substantial financial liquidity, and current employment.
Also, even apparently serious red flags, like a prior eviction or poor credit rating, could be easily explained with some follow-up screening questions that provide some all-important context.
Nevertheless, past behavior is the best indicator of future behavior, and the cost of renting to a tenant that fails to fulfill their obligations can be significant.
Therefore, especially if you manage multiple properties, it’s important to build a scalable process for performing tenant background checks that balances risk mitigation with fairness and efficiency.
Running a tenant background check involves several steps to ensure you gather comprehensive and accurate information about your prospective tenant. Here’s a breakdown of what you need to do:
Before you begin, be sure to obtain written consent from the prospective tenant to run the background check. This is a legal requirement and helps to maintain transparency.
You should explain what will be checked and inform them of their right to dispute inaccuracies, use a standardized consent form, and keep a record.
Collect the required personal information from the tenant, including their full name, date of birth, social security number, previous addresses, employment details, and contact information for references. Ensure all data is accurate and up-to-date.
Select a tenant screening service that complies with the Fair Credit Reporting Act (FCRA), or in Europe, the General Data Protection Regulation (GDPR). These services can vary in cost, comprehensiveness, and efficiency, so choose one that fits your needs.
Here are a few options you could consider:
Submit the collected information to your chosen background-check service, complete with the renter’s authorization.
Be aware that the laws governing your landlord-tenant relationship will vary according to your location. For example, in Canada, provincial privacy laws dictate what tenant information can be collected and how it must be handled.
We take a look at some further examples below.
Carefully review all the information provided in the background check report. Consider the tenant's financial stability, rental history, and any criminal or eviction records, as well as possible extenuating circumstances.
At this stage, you may wish to request references or ask some follow-up questions.
Based on the information gathered, make an informed, objective decision about whether to approve or reject the tenant's application. Ensure your decision complies with all relevant laws and regulations. If you opt to reject the application, see this guide on tenant rejection letters.
Your obligations throughout the tenant application process will depend on your jurisdiction, with specific regulations affecting different aspects of the application process, such as what reports your background checks can include, application fees, and disclosure requirements.
Here are some examples:
A thorough tenant background check will help you avoid the common risks of renting to a new tenant, such as late rental payments, property damage, and disruptive behavior.
However, it’s important to balance risk mitigation with a transparent and objective decision-making process that you can apply across all your tenant applications.
Another key consideration are the laws specific to your jurisdiction, which can affect how you communicate with prospective tenants, how you manage application fees and returns, and the kinds of details you’re permitted to review within your tenant screening report.
With this in mind, no screening process is foolproof, so to protect your properties and business further, you should also consider privacy-safe property protection technology.
Minut’s standalone sensor monitors noise and occupancy, and detects cigarette smoke and multiple other rental property risks, like break-ins and alarms. Also, it automates messages to renters, so you can manage your portfolio more efficiently and with peace of mind.
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