About 36 percent of the U.S. population, or 122 million households, rent their home. For many reasons, the renting trend continues to increase. This has made it a lucrative business.
More people renting means more tenant screening for property owners. This can be a headache and consume a great deal of time.
The good news is that there are three simple steps to the process. Once you know what they are, you can get the ball rolling.
Below are the three steps to tenant screening in California. There also is some information on identifying the best tenant screening services. Keep reading to find out how to be well on your way to finding the right renter for your property.
1. Rental Application and Prescreening
The first tenant screening step is creating a rental application. This initial phase helps you collect basic information and gives information to the potential renter. Be sure to ask for:
- Name and contact information
- Social Security number
- Driver's license state and number
- Current employer
- Annual or monthly income
- Pet information
- Smoking information
Depending on where you live, you also might ask about criminal history. Note that some municipalities, including Oakland and Berkeley, do not allow landlords to run criminal background checks on tenants. San Francisco and Richmond have similar restrictions, but only for affordable housing locations.
The application should lay out the rules for tenants. This includes details about the screening process going forward. Being clear about the parameters of an agreement will winnow some would-be applicants.
Also, be sure to state in the application that your screening process abides by the Fair Credit Reporting Act and Fair Housing Act. These, among other requirements, prohibit landlords from discriminating against prospective renters.
2. Credit, Employment, and Criminal Background Checks
Once you receive applications, you can begin running tenant screening reports. These include credit checks. Be sure to use reputable reporting agencies, including Equifax, Experian, and TransUnion.
Besides income and credit score, pay close attention to their debt-to-income ratio. This will give you an idea of whether tenants have the means to make rent each month, regardless of their income. Look for a history of delinquent payments or a large number of open credit cards.
Check their references. If permissible, you also can run a criminal background check. You also can search the state sex offender registry.
Also, verify employment and income. You can do this by requesting recent pay stubs, bank statements, or tax returns.
3. Interview to Get Personal Information
The final step in the screening process is to interview the prospective tenant. You can ask them why they are moving and for a tentative timeline. Ask them if they have pets and how many people will be residing in the unit.
If there were any red flags in the screening, you can inquire about those. For instance, you might ask if they have ever broken a rental agreement and for what purposes.
Note that you are not allowed to ask some personal questions. You may not ask how many children tenants have or if they are planning to have children. Do not inquire if they are religious or attend a particular house of worship.
Also, while you are required to make reasonable accommodations for disabilities, you cannot ask if a tenant is disabled in any way. Other questions, such as where they are from or how long they plan to live in the area, are not permissible.
Learn More About California Tenant Screening in California
Now that you understand the basics of tenant screening in California, you can get started. If any aspect of it seems overwhelming to you, consider hiring a property management company to conduct a screening on your behalf.
At Residential Equity Management, we pride ourselves on being leaders in the local real estate and property management community. We offer myriad services for owners, tenants, and agents alike. Reach out to us today to learn more about how we can help.