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The Importance of Property Management Services in Tenant Screening

Property Management

Property managers perform various functions to make life easier for landlords and investors and improve their profits from rental income. Top among the key property management service functions is tenant screening.

Tenant screening is crucial to property owners, landlords, and investors because they generate rental income. Therefore, high-quality, long-term tenants are essential in maintaining a steady rental income stream while minimizing administration and maintenance costs.

So, while landlords and apartment building superintendents can conduct tenant screening, property management service providers are better placed to facilitate the process. Below is an overview of the benefits of engaging professional property managers in the tenant screening process.

What is Tenant Screening?

Property managers channel a significant portion of their marketing resources into attracting potential tenants. Tenants are the core of their business because vacant slots in a residential property mean lower profits for the company and low income for the property owner.

Even so, all potential rentals are not made equal. While the pressure is on to meet company income quotas, selecting a high-quality client pays off in the long run. Such benefits include a low tenant turnover rate, zero complaints from fellow clients, and proper care for the property, minimizing maintenance and repair costs.

Therefore, tenant screening evaluates prospective tenants to determine their eligibility to live at a rental property. The process aims to identify high-quality renters while weeding out problem renters.

Most property management companies offer tenant screening services online. Therefore, a search in your area code, e.g., Nashville Tn Property Management, can help you identify property managers offering tenant screening and other services within your locality. Below is an overview of the role property management plays in tenant screening.

Property Management

Advantages of Recruiting Property Managers to Handle Tenant Screening

1. Property Managers Help Create Comprehensive Tenant Screening Criteria

As a property owner or landlord, you may opine that you are within your right to create the persona and criterion for the ideal client to reside in your rental property. It is not always possible to identify a problem tenant at first glance. Also, personal biases may cloud your judgment, causing you to miss out on potential long-term tenants or get in trouble with the law over discrimination.

On the other hand, property management companies are in the business of cultivating a high tenant retention rate. Therefore, they understand the characteristics of a high-quality tenant and have mastered identifying such tenants.

Moreover, they are professionals and refer to evolving tenant screening guidelines as stipulated by the Department of Housing and Urban Development (HUD) and other relevant authorities to avoid individual biases. Below is an overview of HUD’s tenant-screening guidelines property managers implement.

Property Management

2. Tenancy History

A tenancy or rental history is a report featuring highlights of a potential renter’s behavior while residing in previous rental properties, hinting at their capacity to fulfill tenancy agreement obligations. It highlights significant incidences, including late rent payments, evictions, disturbances to neighbors, utility bills payment, and care for rental unit premises.

  • Proof of Income
    Proof of income via an income verification letter is necessary to ensure that the potential tenant has the wherewithal to meet the rental requirement at the property.
  • Creditworthiness
    Besides proof of income, HUD guidelines allow property managers to check a potential tenant’s credit score or history. The Credit history alludes to the tenant’s payment history while highlighting red flags like bad debts, excessive borrowing, and potential bankruptcy.
  • Criminal History
    Criminal history in the tenant-screening process entails convictions for criminal activity likely to compromise the health and safety of other tenants. Such activities include drug-related offenses, sexual assault, violence, and terrorism. However, while HUD acknowledges using criminal history in tenant -screening, it differentiates between criminal arrests and convictions.
  • Landlord References
    Landlord references are similar to professional references in a resume.

3. Adherence to Fair Housing Laws

While the HUD primarily offers guidelines on tenant screening criteria, fair housing laws, like the Fair Housing Act, protect potential tenants from outright discrimination during the tenant screening process.

While landlords may generate tenant screening criteria or include certain clauses in the lease agreement, the Fair Housing Act prohibits them from discriminating or failing to offer housing to protected groups. The protected groups fall under race, gender, sexual orientation, religious beliefs (or lack of), marriage or familial status, nation of origin, and physical or mental disability.

Potential tenants from protected groups who experience overt or covert discrimination during tenant screening may sue you.

The penalty for respondents found culpable in contravening the Fair Housing Act is approximately USD15000 to USD20000 for the first offense; it goes up with subsequent guilt verdicts. However, a property management team can help you overcome biases and avoid legal conundrums. They have experience distinguishing between protected and non-protected groups (like smokers and exotic pet owners).

Property Management

Property Management Teams Have the Resources for Effective and Speedy Tenant Screening

While tenant screening criteria make the process straightforward, executing the screening process is tiring and significantly challenging when done solo. However, property management companies have the resources to obtain accurate tenant information via legal channels within the shortest time possible.

For starters, they use tenant-screening software like integrated property management software to access prospective tenant information. Moreover, they have the labor to dedicate to such tasks.

Tenant Data Protection

Landlords receive plenty of sensitive tenant information during tenant screening processes and must keep such information safe and private. Property management teams can solve this privacy and data protection challenge using the heavily-encrypted cloud solutions in property management software.

Conclusion:

Tenant screening is a crucial business element in the realty business, yet it's also dicey. However, onboarding an effective property management team makes the process hassle-free.

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