Screening renters is an essential part of a property manager’s job. But we’re not going to lie — it can also be a total drag.
The “tenant screening” process tends to be stuck in the dark ages. Too often, the approach is strictly transactional: Forms must be scanned and uploaded, data must be entered manually, and any innovations are few and far between. Property managers and residents alike can find the process cumbersome and frustrating.
This legacy approach isn’t enough in today’s fast-moving experience economy. Companies like Google, Uber, and Amazon have changed how consumers think. Convenience isn’t a luxury anymore; it’s an expectation. And for a property management company, convenience can be a strategy. When approached through the lens of a holistic experience, resident screening is one of the best ways to set yourself apart.
Why is it important to screen residents?
The answer might seem obvious. You can Google “tenant screening,” and you’ll see any number of articles giving the common reasons for screening residents: protecting your property, protecting your financial situation, etc.
And yes, all of that is important. But elite property managers know that protecting yourself is the bare minimum. The best PMs consider the resident screening process the first chance to make an impression and win the best residents. Success is about creating and delivering the best experiences for residents, investors, and property managers.
At Second Nature, we call this the Triple Win. Property managers should be thinking: “How do we design the screening process for a Triple Win?”
Here’s what we mean by that…
A win for investors
What do real estate investors want? Bottom line: To maximize their investment by having all residences occupied by good residents.
But there’s tension when you’re aiming to maximize investment. Investors have two primary needs when filling a rental property, and they can seem opposed:
- How do I select a quality resident who will pay rent on time, stay a long time, take care of the home, and be generally cooperative?
- How do I fill the property as fast as possible? Every day a home is vacant, it generates zero revenue and incurs costs.
Investors win when they have a screening process that can deliver quality residents, fast.
A win for residents
What do residents want? Bottom line: To be approved quickly and easily.
Think about when you’re applying for a job. The employer honestly can’t work too fast to get you in a good seat. The faster, the better.
As we mentioned before, convenience is no longer a luxury; it’s an expectation. Residents want to move quickly toward the lease agreement without too much effort. Therefore, building convenience into the screening process is a crucial strategy for a successful property manager to attract the best business.
A win for property managers
Professional property managers stand out by providing experiences that are consistent, convenient, and rewarding for investors and residents. But they also need to design the process with the experience of their team in mind, too.
PMs focused on a Triple Win can align qualified residents’ desire for convenience with an investor’s desire to be protected from risky applicants and vacancy costs. As if that’s not enough of a challenge, they also need to accomplish this in a way that complies with fair housing regulations.
Therefore, an enterprising property manager will design the screening process to create experiential value and better monetize each property.
Ultimately a Triple Win for resident screening is introducing speed, accuracy, and convenience to a legacy process. Let’s dive into that concept in the next section.
Reimagining the resident screening process for a Triple Win
Like we’ve said – and as most PMs recognize – legacy “tenant screening” systems are the worst. They’re clunky. They’re long and tedious. They require a ridiculous amount of manual work to upload pay stubs or other documents. The process typically includes:
- Rental application
- Verifying income information
- Verifying employment
- Credit report/credit checks
- Background check and criminal history
- Rental history or evictions
Think about how seamless an experience it is to find a listing on Zillow. It works smoothly on desktop or mobile, and the app is clean, easy, and responsive. You can find 3D tours, self-showings, and all kinds of innovations happening in the discovery process.
Then you hit "click to apply.” Whomp whomp. Suddenly, you hit a mediocre (or worse!) experience that feels a decade old or more. It can take days from that initial button click for submission, review, and official approval/declination.
But imagine if this was all designed through an experience lens instead of an accounting or transactional lens. Think of convenience as your primary strategy. PMs who want to stand out will have a screening process that works like an Easy Button.
So how might we make it as easy as possible for the best residents to get approved same-day by the best property managers in the country?
A system that tracks residents holistically
The past decades in property management innovation have primarily focused on accounting and financial transactions. And, yes, accounting platforms have helped us come a long way from taking cash and checks alone.
But the next two decades of screening will be about more than just transactional events. Pro PMs will look for residents with habits and behaviors that make them more attractive. And this is key – they will provide services that make good habits easier.
Think about your current screening system. You can see if a resident paid rent, but can you see if they changed their filters, reported minor maintenance issues, how they treated and communicated with staff, what condition they left the property in, and the security deposit status? Do you have a Resident Benefits Package that attracts residents who care about good habits and supports them in those habits?
The screening process sets the tone and the standard for the rest of your relationship with a resident. Property managers can be part of helping build good habits right from the start.
Faster screening and credit checks
If we’re looking to build convenience into the entire experience, we need to speed up screening. Several companies are innovating in the property management space and developing tools that ease the process.
Some screening providers are leveraging financial data APIs or "open banking" tools to automate income and employment verification. Tools like Plaid, Finicity, Pinwheel, and more are being applied to rental screening and replacing manual document upload and review.
As identity fraud becomes more prevalent, identity verification tools are becoming more sophisticated. Some can even effectively identify past rent transactions in the bank account ledger. Most of these tools are being built for large apartment operators, but more innovation is coming to SFR, too.
The right approach to financial status
A big question on every PM’s mind is how to evaluate a prospective resident’s ability to pay rent. Is what matters the income? Credit history? The cash balance a resident carries? Or just their history for prioritizing rent payments?
Not everyone agrees on this. The traditional (and oversimplified) answer is to slap on the widely accepted income-to-rent ratio of 3-to-1 or to look for a specific credit score. But neither of these tell the whole story of a resident’s ability, or even likelihood, to pay rent and to pay on time.
A much more telling number is a potential renter’s net income. Net income is true spending power. A net income of 2.5 or 3 times the monthly rent is a good starting point. But how do you quickly verify this information? Pay Stubs will work, but experienced property managers know a simple pay stub template is a Google search away.
This is where an automated income verification tool can provide an advantage, reliability, and speed. You’ll have much more accurate insight into residents’ ability to pay rent and get them verified in much less time.
Note: Avoid discrimination in the resident screening process
Of course, we want to mention: All PMs should know their local laws around housing discrimination. Fair housing laws are essential for protecting people with disabilities and preventing discrimination based on race, sex, familial status, etc. With a Triple Win mindset, PMs will seek tools that help them remain objective and fair to all applicants.
The resident screening debate
Of course, property managers are creative people from a massive diversity of backgrounds – which can lead to some thriving debate around every topic.
Plenty of property managers have different opinions about what’s most important in resident screening. For example, do you take the “first-qualified” or “best applicant”? Are credit score even relevant anymore? Explain that there’s lively debate and conversation about what’s most important in resident screening.
You can read more about this debate – or join yourself – in this Facebook Group.
How Second Nature creates a Triple Win
At Second Nature, we approach every interaction as part of the overall experience. Even something as cumbersome as the resident screening process is a chance to set yourself apart as a property manager.
You can attract high-quality residents by offering a high-quality experience and making it easier to do the right things at the right time. This generative cycle creates a Triple Win for investors, residents, and property managers.
That’s why we’ve partnered with professional property managers to build ease into the resident experience. Because – not to repeat ourselves, but we will! – convenience isn’t a luxury; it’s a strategy.
Learn more about how you can attract the best residents in your screening and leasing process at SecondNature.com. Creating a professional resident experience should feel second nature.