If you’re a landlord working with a Kansas City property management company, you may be wondering whether you’ll be the one choosing the tenant who moves into your property.
Unfortunately, it’s not always a good idea.
Fair housing laws are strict, and screening tenants requires an objective, data-driven system. You’ll need some strict qualifying criteria that are consistently applied to every application you screen. It’s very easy to make a legal mistake while you’re screening and choosing a tenant, and that risk can be difficult to navigate. If you’re found to violate a fair housing law, you can be fined around $16,000.
One of the best reasons to work with a professional property manager is to remove yourself from the screening and tenant placement process. When professionals take care of this for you, there’s less risk to you. You’ll also usually end up with a better tenant.
Let’s talk about what you need to know about choosing a tenant. We’ll also discuss the importance of documented systems and offer common sense reasons not to rent to family or friends.
Document Your Rental Criteria
The best way to ensure you’re protecting yourself against unintentional discriminatory practices is by doing solid research on the legalities and establishing some qualifying rental criteria. You probably don’t think that you discriminate from application to application, but it’s easy to let our own inherent biases or preferences take over without us even noticing.
Qualifying criteria helps you prevent that. It keeps your screening process consistent and objective and aligned with how a property manager would conduct screening.
It also delivers a well-qualified tenant for your property.
By establishing this criteria, putting it in writing, and providing it to all potential applicants, you’re really limiting your tenant pool to only those who are likely to qualify.
Always provide the criteria before a prospective tenant fills out an application. Some of the things you’ll want to include in your criteria are:
- Income thresholds. Best practices say you should require a tenant to earn at least three times the rental amount.
- Credit requirements. Maybe it’s a minimum credit score of 650, for example.
- No previous evictions or no evictions in the last 10 years.
- No felony convictions.
Allow prospective tenants to review your criteria and decide whether they’re likely to be approved.
When you are transparent about what you’re looking for during the screening process, you’ll waste less of your time and less of your applicants’ time and money. You’ll also find that the criteria you set up will reduce your eviction rate and cut down the amount of time that’s spent managing bad tenants.
Tenant Screening Best Practices
A good tenant screening process starts with the right application. You want every applicant 18 years of age or older to fill out an application completely. Collect an application fee and make sure the application provides you with permission to run a background check and a credit check. You’ll need their signature to grant you permission to talk with current and former landlords as well.
During the screening process, you will want to obtain a credit report, look for prior evictions and criminal convictions, and make sure all the information that’s on the application matches what you find on the credit report.
Talk to current and former landlords or property managers to get an idea of how the tenant performed while renting a home from them. Some of the things to ask those landlord references include:
- Were there late payments?
- Did the security deposit get returned in full?
- Was proper notice given before the tenant moved out?
- How did the pets treat the property?
Make sure who you are talking to is actually the landlord and not someone posing to be the landlord to cover up problem rental history. Reference checks will give you a clear idea about the tenant’s rental history.
Always verify the income a prospective tenant earns because this will tell you whether they can pay rent every month. Ask for pay stubs, tax forms, or bank statements.
Don’t Rent to Family and Friends
Maybe you’re thinking about renting out your home to a family member or a friend. As professional property managers, we can tell you that this is a bad idea.
Here’s why we don’t recommend it.
- It’s hard to set boundaries. What if your friend who is moving in cannot pay market rents? Do you really want to earn less on your investment property?
- Lines can get blurred between friend and landlord. How will you enforce your lease? What if your cousin wants to move in with five cats, and they scratch up the walls? What if your best friend from college has a huge party and damages your property?
- You’re setting yourself up for potential conflicts and confrontations. You need to hold tenants accountable, even if you know and love your tenants. But, will you be willing to risk the relationship you have with a friend or relative when you’re collecting late rent or arguing about a lease violation?
As professional property managers, we don’t like the idea of a relative or a friend renting out your property. But, we’re also realists. We know it happens and we have seen the problems it creates.
If you’re going to allow a family member or a friend to move into your rental property, make sure you’re working with a Kansas City property management company. Professional management is always a benefit to landlords, but in a situation like this, it’s absolutely essential. You’ll need a buffer between you and your tenant, and you’ll want to make sure you’re leaving behind any emotional baggage that may linger in your relationship.
Your rental property is a business. It’s hard to treat it that way when an uncle or a good friend is the party responsible for paying you rent.
To answer the question in the title of this blog, yes, landlords can pick their tenants. If you are renting out your property on your own, without the benefit of property management, you’ll need to screen and choose a qualified tenant.
It’s better for you and better for your property, however, if the tenant is chosen by a professional who knows what to look for and how to screen within the boundaries of fair housing laws.
We can help you with this. Please contact us at Key Partners Property Management for more guidance on screening tenants and ways to enforce the lease when problems come up.