Some investors hire property managers to find, screen and manage tenants in their investment properties, and that’s certainly a viable way to run a business. But if you’re the DIY type, you may be wondering how to vet tenants in your investment property – and this guide offers five tips that can help you get good ones.

5 Tips for Vetting Tenants in Your Investment Property

First things first: You don’t have to say “yes” to everyone who applies to live in your home. In fact, you can – and absolutely should – screen everyone who’s interested in renting from you.

With that said, you aren’t allowed to discriminate against prospective tenants based on their membership in a protected group. That means you can’t decide not to rent to someone because of their race, color, religion, sex, disability, familial status or national origin – and that’s according to federal law. The state of California additionally prohibits you from discriminating against prospective tenants because of:

  • Marital status
  • Ancestry
  • Familial status
  • Age
  • Medical condition
  • Sexual orientation
  • Gender or gender identity
  • Source of income

However, it’s not discrimination if you refuse to rent to someone who can’t afford to pay the rent, who has a poor reference from a previous landlord, or who has pets if you have a pet-free house. In fact, it’s not discrimination if you decline to rent to someone for any reason other than those considered discriminatory under federal or state law. You can even decline a person with a criminal record if you comply with all federal and state laws on fair housing and criminal background checks.

Now that you know how to steer clear of discrimination, use these five tips for vetting tenants in your investment property:

  1. Use a comprehensive application
  2. Check the tenant’s references
  3. Verify the tenant’s employment
  4. Run a credit check and criminal history check
  5. Hold an interview

Here’s a closer look at each.

Tip #1 for Vetting Tenants in Your Investment Property: Use a comprehensive application

Make sure your tenant application is thorough. Ask for things like previous addresses, the number of pets they have, the number of people who will live in the home (and screen those people, as well), and income-related questions.

Tip #2 for Vetting Tenants in Your Investment Property: Check the tenant’s references

Ask tenants for references and then make sure you check them. You want to talk to previous landlords to make sure that the tenants didn’t leave owing money, or that they didn’t trash their previous home. You can also ask how much they paid in rent, whether they made rent payments on time, and whether the landlord had any issues (such as complaints from neighbors or issues related to the destruction of property) with the tenants while they lived in the home.

Tip #3 for Vetting Tenants in Your Investment Property: Verify the tenant’s employment

The last thing you want to do is rent to a person who’s not honest about having enough money to pay you on time every month, so check your tenant’s employment history. If you can’t verify the tenant’s employment, if their work history is spotty or an employer indicates that there were issues with the tenant in the workplace, you may want to consider renting to someone else.

Tip #4 for Vetting Tenants in Your Investment Property: Run a credit check and criminal history check

Look for past evictions, a credit score and an income that can support paying the rent you’re asking. If an applicant has less-than-stellar credit history, that doesn’t mean they’ll be a bad tenant – but if their financial picture doesn’t match what someone should have to be able to afford your property and pay rent on time, they may not be the best fit for you.

Tip #5 for Vetting Tenants in Your Investment Property: Hold an interview

You can conduct an interview with your prospective tenant to go over the information in their rental application. This can give prospective tenants the chance to explain anything that doesn’t match up with what you’ve found. The key is to ask the same questions of every prospective tenant so you steer clear of violating any fair housing laws.

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