One thing I can’t stress enough when it comes to managing an investment property, is that safeguarding your rental should be top priority. Your first line of defense in doing so would be to learn how to screen tenants and conduct rental property inspections. These two elements are the key to protecting the property itself and your cash flow, which, in turn, safeguards your return on investment (ROI).
If you’re new to the game, this might seem a bit overwhelming, but it’s actually simple, as well as routine. It’s just a matter of learning the ropes or having a property manager (PM) take care of these tasks for you. Either way, let’s dive into some specifics so you can become familiar with vetting potential renters and performing inspections.
Tips for Screening Tenants and Performing Rental Property Inspections
There are certain steps that should be taken when it comes to screening a tenant; simply interviewing them wouldn’t be enough to get a full picture of who they are. Also, when it comes to rental property inspections, there are specific events that trigger the need for one, as well as timeframes to be aware of. So, as you can see, there’s a lot to take note of, and with that in mind, I’ll cover everything in detail below, starting with tenant screening.
1. How to Screen Tenants to Ensure You Lease to a Reliable Renter
I’ve been in the rental real estate business for almost two decades now, so it goes without saying that I’ve had a few bad experiences. However, this was at the beginning of my investing journey, when I wasn’t informed on how to take the proper precautions. For instance, I’ve placed some pretty bad tenants who didn’t pay rent for months, all while they were being protected by tenant-friendly laws.
On top of this, I’ve had a few rentals trashed by unreliable tenants, and I had to pay thousands out of pocket. My past experiences has made me wise and now I would never even think about placing a tenant without extensive vetting.
As you can imagine, screening tenants thoroughly is a great way to reduce the risk factor. Related to this, make sure to bookmark my article for additional ways to play it safe – Risk Mitigation Strategies for Real Estate Investors.
I’m sure your interest has been sparked, and you’re eager to hear more at this point, so let’s break this down a bit.
What Does the Tenant Screening Process Cover?
When I was learning how to screen tenants, I found there was extensive vetting involved. You see, when a tenant is screened, it’s a process that ensures they are both a financially and personally reliable candidate.
To determine this, the tenant can be verified through an identity check, criminal background reports and credit worthiness through credit reports which can flag bankruptcies, late payments, canceled debt, and the like. Additionally, the tenant’s rental history may be assessed to see if there are any evictions or other issues, such as breaking a lease.
Job references are often requested to verify current employment and income, as well as verify past jobs listed. Along with this, three personal references are often needed to determine character.
This may all seem a bit much, but it’s well worth learning how to screen tenants in this way, because, believe me, when someone is setting up camp in your property that you invested your hard-earned money into, you’ll sleep better at night knowing a qualified and reliable tenant has been selected.
Vetting Renters Yourself vs Utilizing a Tenant Screening Professional
Unless you’re a hands-on person who only owns one or two rentals, and has extra time on their hands, I recommend utilizing a professional company that knows how to screen tenants. Plus, why would you want to throw yourself into the mix when it comes to such a tedious and crucial process – one mistake or missed element and you could usher in a bad tenant that may cost you thousands of dollars in the long run.
With that said, paying a nominal fee to have the process done correctly is well worth the money spent.
Because of this, I’ll cover the method I recommend, which is utilizing a professional to handle the verification process for you. This would generally be a property manager or a tenant screening company, and I’ll cover them both below. You can also dive into my video that offers insight into the role a PM plays:
Hire a Vetting Company or Utilize Your Property Manager
The best and most reliable type of company to use to sort through possible rental applicants and screen the finalists would be a property management company. They would know your rental property, the local market conditions, and your professional situation better than any outside screening company, which makes them more resourceful as well as interested in doing a good job for you.
A PM manages your rental as a whole, and the tenant screening process is just another part of their job. You’ll find that many property managers have years of experience vetting possible renters. On top of that, they also have extensive experience dealing with tenants, which makes them better qualified to hand-pick the next renter.
Property managers are well worth the cost. If you’re not familiar with their fees, then head over to my article that covers the topic – Understanding Property Management Fees and Why They’re Worth the Cost.
The bottom line is that if you have a property manager, there’s no reason to hire a dedicated tenant vetting company or even learn how to screen tenants yourself. Your PM will handle every aspect of the process for you.
Using a Full-Service Investment Company that Places a PM and a Tenant For You
It’s worth noting that when you invest in a property through Morris Invest, a full-service investment company offering new construction rentals, our team not only assigns an experienced PM, but we also have a thoroughly vetted tenant placed for you. This eliminates the need for you to search for a trusted company that will take on this task on your behalf.
Also, by having Morris Invest place a renter, you’ll be cash flowing from the start. If this sounds like something you’d like to look into, feel free to schedule a call with our team. You can also dive into our article on How to Easily Buy a Rental Property Before the End of the Year to get the ball rolling.
If You Don’t Have a PM Then Hire a Dedicated Tenant Screening Company
Ok, if you don’t want to learn how to screen tenants, you don’t have a property manager, and you’re not using Morris Invest, then your best bet would be to hire a dedicated tenant screening company.
The most reliable way to find a good company is to ask fellow investors to recommend one they’ve used, someone they have a track-record with. You can also refer to this article from U.S. News – 5 Best Tenant Screening Services.
Make Sure the Renter Screening Company is FCRA Compliant
One thing I’d like to mention though is that the screening company you use should be compliant with the Fair Credit Reporting Act (FCRA). The reason why is that when screening individuals, you’re dealing with personal and private information and there are rules and regulations that go along with that. So, to ensure you’re not setting yourself up for legal issues, find a screening company that is FCRA compliant.
For more information on professional tenant screening companies, head over to my article – Safeguarding Your Investment: Understanding Tenant Background Checks and Security Deposits.
Keeping the Tenant You So Diligently and Strategically Placed
I’ll end this section by pointing out that with all the effort placed into finding the perfect tenant, you’ll want to ensure you keep that renter in place! If they leave, you’ll have to start the same process over again.
Additionally, good tenants keep your ROI in check, so they’re worth the effort when it comes to keeping them happy and in place. With that in mind, make sure to bookmark this article I put together for future reading – Keys to Keeping a Good Tenant in Your Rental Property.
2. Conducting Rental Property Inspections – Routine and Seasonal
Once you land the perfect tenant, you’ll want to ensure you’re conducting proper inspections, and that you’re utilizing a rental property inspection checklist during the process.
Ok, let’s get started with the question, “What are the benefits of a rental property inspection?” This is a great question because if you don’t realize what the benefits are, then you may not be motivated to do these inspections.
Benefits of Rental Real Estate Inspections
As you can imagine, a rental inspection can help keep your property in tip-top shape. This is true because it allows you to catch repairs that are needed before they get out of hand. For example, if there was a small water leak that produced mold growth, catching it soon would prevent it from spreading. If it did get out of control and spread, it would not only be costly to clean up, but also hazardous. Additionally, routine inspections, for example, allow the landlord to check for any damage that may have been caused by the tenant. Regarding damages, I’ve included a video on this very topic below:
Keeping a rental in good condition is important for a few reasons, with the first being it keeps the tenant happy. This, in turn, keeps them in place and protects your ROI. Along with this, a property that’s taken care of grows in value, while a rental that’s left to degrade will do the opposite and decline.
If the value drops due to being unkept, then so does your equity, ROI, as well as your cash flow. Lastly, routine inspections will ensure your property is safe without hazardous conditions that can lead to a tenant lawsuit, or even the destruction of your property.
As you can see, not inspecting your rental property on a regular basis would be unwise for multiple reasons. With that in mind, let’s talk about the specifics of rental inspections.
What Should You Inspect and When?
Figuring out when to do an inspection is not too complicated; it’s basically upon move-out, move-in (optional), as well as routine inspections which may be once or twice a year or even seasonal. For example, some landlords prefer to do their annual inspection at the beginning of winter to ensure the heater is working properly, rain gutters are clear, and so on.
Now, since there are specific reasons or times to do an inspection, it makes sense that there are also specific items that should be inspected, and this is where a checklist comes into play.
Utilizing Rental Property Inspection Checklists
Checklists are important and should be used for each inspection. When a list is not used, it can be easy to forget elements that are essential to inspect. Plus, these checklists keep the inspector organized, allowing them to go down the list, one by one, checking off completed items and also adding notes.
I’ll provide an example of what’s included on a move-out inspection list, but I encourage you to head over to this article I created on rental inspections. It provides a breakdown of each list: move-in, move-out, routine, and seasonal – Streamlining Rental Property Inspections by Creating Effective Inspection Checklists.
Example Move-Out Inspection Checklist Items
This list covers tenant damages or worn-out elements that should be taken care of to prepare the rental for the next tenant:
- Condition of Wall Paint
- Carpeting and Flooring
- Kitchen Elements
- Bathrooms
- Plumbing/Pipes/Fixtures
- Alarms: Fire and Carbon Monoxide
- Condition of Electrical Outlets
- Bulbs and Light Fixtures
- Window Glass, Frames, and Blinds
- Ensure Appliances are Working and in Good Condition
- Outdoor Area: Porch, Driveway, Garage, Yard
Don’t forget, if you’re using a property manager, they’ll take care of all the inspections and any needed repairs. They’ll even have a set of rental property inspection checklists ready to go. As far as how to screen tenants, you won’t have to worry about that either; they’ll do that for you as well.
Power Resources for Investors
Before I come to a close, I wanted to share these power resources with you. They’ll provide you with information, inspiration and direction that will take you to the next level in your investment journey:
- Freedom Number Cheat Sheet
- 90-Day Financial Empowerment Bootcamp
- Morris Invest & SDIRA Program Overview
Maximize Returns by Vetting Tenants and Performing Routine Rental Property Inspections
Keeping your ROI on track should be your main goal. I know from experience that learning how to screen tenants, using rental property inspection checklists, and also utilizing a professional company to make it all happen, can protect and even increase your ROI. If you agree, and you’re looking for your next rental property, but feel that it’s too overwhelming to figure this out on your own, know that Morris Invest is here to help.
All you have to do is book a free call with a team member and they’ll be able to answer all your questions, provide an update on the new construction properties that are available, as well as walk you through the process.
We’ll take care of all the steps for you, big and small, from A to Z, basically, making it super simple for you to own a cash flowing rental property where we place a reliable tenant for you.
