Tenant Screening Tips for Property Managers: Streamline Your Process

Screening tenants 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, frustrating, and too impersonal.

It’s also why, at Second Nature, we prefer the term “resident” over “tenant.” Just as too many industry processes are antiquated, so is our language. The term resident dignifies the real people who make their homes in our properties. So while we prefer to honor residents, investors, and PMs alike, for the sake of this article, we’ll use the industry standard term of tenant. 

Even so, the current tenant screening 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, tenant screening is one of the best ways to set yourself apart. 

Related: State of Resident Experience Study

Tenant screening laws 

Every professional PM should be familiar with tenant screening laws in their area. Tenant screening laws are regulations put in place to protect residents from discrimination, unfair eviction, etc. They govern interactions between real estate investors, property managers, and residents. 

One of the best-known regulations is the Fair Housing Act, which protects residents from discrimination on the basis of:

1. Race
2. Color
3. Religion
4. National Origin/Ethnic Background
5. Gender
6. Familial Status
7. Mental/Physical Disability

HUD also has guidelines around screening for criminal background and history. Different jurisdictions have different laws, so it’s critical to know your local laws around housing discrimination and screening. 

With a Triple Win mindset, PMs will seek tools that help them remain objective and fair to all applicants.

Creating tenant screening criteria 

Using your understand of local tenant screening laws, let’s look at how to create a tenant screening criteria that is fair, easy to defend, and benefits your investor and your residents.

Creating tenant screening reports is an important part of the rental property management process. Here are some steps you can take to create effective criteria when screening new tenants:

1. Define your target market: Identify the type of residents you want to attract based on factors such as property location, size, price, and amenities
2. Set minimum requirements: Determine the minimum criteria that all potential residents must meet, such as a certain credit score or income level.
3. Consider additional factors: Think about other factors that may be important to you, such as employment history, rental history, criminal background, and references.
4. Establish a scoring system: Create a system to evaluate potential residents based on the criteria you've established. For example, you may assign points for positive credit history or deduct points for a criminal record, with care to evaluate each personal individually and fairly.
5. Apply the criteria consistently: Ensure that you apply the screening criteria consistently to all potential residents to avoid discrimination and potential legal issues.
6. Review and update regularly: Review and update screening criteria regularly to ensure that they remain relevant and effective for your rental property.

Credit report and tenant background check  

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. Tenant screening services like Plaid, Finicity, Pinwheel, and more are being applied to rental screening and replacing manual document upload and review. 

You can also find tools for getting a full credit report and credit background. Credit reporting should be compliant with the Fair Credit Reporting Act (FCRA).

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. 

Second Nature’s Resident Benefits Package includes a $1 million identity protection program and credit building for residents. These programs protect your residents and help draw people who want to build responsible financial security.

Verify employment and income

A big question on every PM’s mind is how to evaluate a prospective tenants’ 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. 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 scores from TransUnion, Experian, or others 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.

Review rental history and evictions

This requirement is pretty self-explanatory. As a follow-up to background checks, property management companies should have a seat process for reviewing an applicants rental history and potential evictions. 

Don’t just accept a letter from previous landlords – call them up and ask about their experience. If the address was in an area you know, you might even be familiar with the property management company that handled the residence. Getting their perspective is one of the best ways to check on rental and eviction history. 

Questions you should ask potential tenants   

Here is a list of questions that property managers may consider asking potential residents during the screening process:

1. What is your current occupation and monthly income?
2. Have you ever been evicted from a rental property or broken a lease agreement?
3. How long have you been at your current job, and what is your employer's contact information?
4. Do you have any pets, and if so, what type and how many?
5. What is your desired move-in date and lease length?
6. Will you have any roommates or co-tenants, and if so, what are their names and contact information?
7. Have you ever filed for bankruptcy or had any outstanding debts?
8. Do you have a good rental history, and can you provide contact information for your previous landlords and previous addresses?
9. Are you willing to undergo a credit check and background check as part of the application process?

Again, please note that investors and property managers should be careful not to ask discriminatory questions that could violate fair housing laws. 

Additionally, it may be helpful to provide potential residents with information about the property, such as move-in costs, lease terms, and any rules or restrictions that apply to the rental property. After all, the property manager’s goal is to create an experience that caters to residents in order to create the best value for their investors.

How to accept or reject applicants    

First of all, having a consistent and objective set of screening criteria goes a long way to simplifying the acceptance or rejection process. If you treat everyone fairly and use criteria that is going to identify value for everyone – you shouldn’t have to sweat this part too much! You can politely reject applicants who don’t fit your (fair) criteria. And you can welcome those that do!

Here are some steps to follow when accepting or rejecting rental applicants:

1. Evaluate the applicant's information: Review the application and any supporting documentation provided by the applicant, such as credit reports, employment verification, and rental history. You may also charge an application fee.
2. Compare the applicant to your screening criteria: Compare the applicant's information to your established screening criteria and determine if they meet the minimum requirements.
3. Consider any additional factors: Consider any additional factors that may impact the applicant's suitability as a resident, such as their behavior during the application process, their responsiveness to communication, and any references provided.
4. Communicate your decision: Communicate your decision to the applicant in writing, providing clear and specific reasons for your decision. Be sure to also inform the applicant of their rights to request a copy of an applicant’s credit report and to dispute any errors.
5. Keep accurate records: Keep accurate records of your screening process, including copies of all applications and supporting documentation, as well as notes on your evaluation of each applicant.
6. Maintain consistency: Apply your screening criteria consistently to all applicants to avoid any potential discrimination claims.

Remember, it is essential to treat all applicants fairly and to follow fair housing laws and state-specific regulations to avoid discrimination. Have we repeated that enough yet? :)

Example tenant screening checklist   

Here is an example of a comprehensive tenant screening checklist template:

1. Basic Information:

• Full name
• Current address
• Contact information (phone, email)

2. Income and Employment:

• Proof of income (pay stubs, bank statements, tax returns)
• Employment history (length of employment, job title, employer contact information)
• Gross income (should be 3 times the monthly rent)

3. Credit History:

• Credit score (should be above 650)
• Credit report (to check for bankruptcies, late payments, collections)
• Outstanding debts

4. Rental History:

• Previous rental history (landlord contact information, length of stay, reason for leaving, address history)
• Evictions (any prior evictions, eviction records, eviction reports)

5. Criminal Background:

• Criminal history (felony convictions, sex offender status)

6. References:

• Personal references (contact information for at least two personal references)
• Professional references (contact information for at least two professional references)

7. Other Factors:

• Pet ownership (type, size, breed, and number of pets)
• Smoking policy (whether or not smoking is allowed in the rental property)
• Other specific requirements (e.g. credit checks, criminal background checks, rental history checks, etc.)

The criteria on this checklist may vary based on the specific needs and requirements of the investor or property manager – and local laws. 

Why is it important to screen tenants?    

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 tenant 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 tenants.

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 tenant 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 tenant 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.

How does Second Nature help with the tenant screening process?

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. 

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. 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? 

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 tenant 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.

Learn more about what residents are looking for today and how PMs are innovating in response.