Renting out a property or properties can be a lucrative form of wealth management with the potential to provide a long-term income. However, as all successful landlords know, there are challenges to be addressed if the venture is to be fruitful.
Key among these is making sure you secure the right tenants – the right tenants are an essential aspect of successful property rental. This is why screening potential tenants is a must. By conducting background checks, landlords can minimize the risk of late payments, property damage, or even legal troubles down the road.
While doing your own background checks can offer more control and save on costs, it can also present challenges in terms of time and compliance. So, should landlords handle this task themselves or trust the experts? Read on to find out everything you need to know to help you make an informed decision.
Why Tenant Screening is Essential
We touched on this in the intro, but fully understanding the necessity of quality tenants helps to emphasize why care is needed. Getting paid on time is an obvious pre-requisite of solid tenants, but it’s far from being the only benefit.
By conducting background checks, landlords can:
· Avoid problem tenants: Screen for past evictions, criminal records, or financial instability.
· Ensure timely rent payments: Check employment history and credit scores to assess a tenant’s ability to pay on time.
· Protect their property and community: Verify tenant behavior by reviewing rental history and references, helping to maintain a safe and well-managed environment.
Effectively, tenant screening services can be described as the first line of defense in minimizing the potential risks of property rental.
The Pros and Cons of Doing Your Own Tenant Background Checks
As a landlord, it is always tempting to undertake to take control of as much of the rental process as possible. While there are certain aspects of property rental where this is entirely feasible, other aspects require more careful consideration. Perhaps the most important among the latter is tenant screening.
Making an informed judgment on this requires understanding the pros and cons of the decision.
The Pros of Doing Your Own Background Checks
There are several advantages to landlords conducting their own background checks, including:
· Direct control over the process: Landlords can set their screening criteria based on specific needs and preferences. This allows for real-time decision-making without waiting for third-party reports.
· Cost savings: Conducting your background checks can be more affordable, as landlords avoid paying for professional services. Some online tools are free or come at a lower cost, which can be appealing for smaller operations.
· Immediate feedback: Managing the screening process yourself means landlords can get instant updates on a potential tenant’s information, cutting down on wait times that come with external services.
While DIY tenant screening offers flexibility and the chance to save money, it may not be suitable for everyone. There are still significant challenges to consider when handling it alone.
The Cons of DIY Background Checks
Despite the potential benefits, there are several downsides to landlords managing tenant background checks themselves:
· Time-consuming: Landlords must verify employment, contact previous landlords, and check financial information, all of which can be labor-intensive. Handling everything manually may also delay the rental process.
· Legal risks and compliance: Tenant screening laws vary from state to state, and landlords need to ensure they comply with both federal and state regulations. Potentially landlords might have to implement cybersecurity policies to protect tenant rights.
· Limited access to data: Professional tenant screening services have access to comprehensive databases that are not always available to individual landlords. DIY checks may miss crucial information, leading to uninformed decisions.
These factors make DIY tenant screening a riskier choice for landlords, particularly those unfamiliar with legal obligations or those who don’t have time to manage the process effectively.
Benefits of Professional Tenant Screening Services
There are plenty of solid business reasons for opting for professional tenant screening services. Perhaps key among them, is the peace of mind that comes from knowing that all possible due diligence has been applied to the process.
However, an informed decision requires being armed with all the relevant information. To assist, we have compiled a list of the main advantages of professional tenant screening services:
· Efficiency and speed: Professional services streamline the background check process, often delivering comprehensive reports within hours. This allows landlords to fill vacancies faster and with more confidence.
· Access to extensive data: Tenant screening services have access to national databases for criminal records, credit history, and eviction reports that aren’t easily accessible to individual landlords.
· Reduced legal risk: Tenant screening companies ensure compliance with state and federal laws, protecting landlords from potential lawsuits due to discrimination or mishandling of sensitive information.
· Expertise in vetting tenants: Professionals know what red flags to watch for, making it easier to spot potential issues in a tenant’s history. This expertise is invaluable, especially for landlords managing multiple properties.
Ultimately, tenant screening services can greatly reduce the risk of renting to undesirable tenants.
Choosing the Right Tenant Screening Service
If you are tempted by the professional tenant screening option, then the next step is to choose the right service for your needs. There are various options open to landlords:
· Online tenant screening services: These platforms offer easy access to reports like credit checks and criminal records, often at a lower cost and with quick turnaround times.
· Advanced landlord software: Property management tools, like those offering tenant screening services, integrate background checks with features such as rent tracking and maintenance management, creating an all-in-one solution.
· Real estate agency support: Some agencies provide tenant screening as part of their property management services, allowing landlords to outsource the entire process.
By considering your budget, property size, and screening needs, landlords can select the best service to ensure reliable and legally compliant tenant vetting.
Choosing the Right Approach to Tenant Screening
Property rental can be a lucrative path to financial freedom. It can be a major enterprise or simply a successful home business. However, at whatever level, this traditionally “low-maintenance” form of income can quickly turn into a major headache just by selecting the wrong tenants. Tenant screening should never be overlooked, the only question is whether to opt for DIY or professional screening services.
While DIY checks offer more control and cost savings, professional services provide convenience and legal protection. Ultimately, the best advice is always to err on the side of caution. The importance of securing high-quality tenants is such that investing in a reliable screening process will pay dividends in the long run.
