When you invest in a rental property, you’ll need to start advertising it to potential tenants. However, screening tenants requires a considerable amount of research. You need to be confident that they earn enough money to make their monthly rental payments. To find qualified tenants, assess each applicant’s rental history, which involves everything from doing a credit check to contacting former landlords.
The rental verification process should give you all the information you need to determine if you should approve or deny an application. Whether you’re a landlord or property manager, verifying tenant information is essential. In this article, you’ll learn how to ensure a smooth application process with verification.
What Is Rental Verification?
Rental verification mainly involves contacting previous landlords to confirm the rental history that the tenant detailed in their application. While this process can also include background checks and credit verification, learning about the tenant’s rental history offers insight into how they’ll behave and if they’ll make their payments on time.
Landlords typically perform verification of a tenant’s rental history to ensure they don’t make a mistake. If a tenant misses payments or damages the unit they live in, the landlord could be forced to evict them. The main issue with evictions is that they cost a substantial sum of money, which is why it’s best to avoid this process altogether by bringing in the best possible tenants.
A tenant’s previous landlord can provide a lot of useful information. For example, you can gain insight into payment history, potential maintenance concerns, and interactions that the person had with fellow tenants. All this information serves to give you what you need to make a more informed decision.
Key Components of Rental Verification
There are several components that must be handled during the verification process, including everything from rental history to income verification.
Rental History
Along with making sure that a tenant made all their rental payments on time with previous landlords, rental history verification also requires you to learn about the tenant’s behavior.
If you provide past landlords with a rental history form, this document includes sections about how well the property was maintained, if the terms of the lease were adhered to, and if other tenants made complaints. Once you receive this information, you should have a more comprehensive overview of the tenant’s reliability and conduct.
Income Verification
When screening tenants, you’ll also be tasked with verifying income. You can request many types of documents from potential tenants to gain this information. Use a combination of the following documents to learn about the tenant’s current financial situation:
- W2 tax forms, which include info about annual earnings
- Pay stubs from employers
- One to two years of tax returns
- Three to six months of bank statements
- 1099 tax form for self-employed individuals or freelancers
- Employment contracts or job offer letters
- Social Security benefits info
- Workers’ compensation letter
- Bonus payments from employers
- Unemployment benefits details
Credit Check
The third pillar of the verification process is a credit check. A tenant’s credit history is a comprehensive timeline of how long they’ve maintained credit accounts. Credit history can be influenced by the average age of all credit accounts.
When you perform a credit check, you’ll receive information about the applicant’s financial situation, which includes their current credit score. If the tenant has an eviction or late rent payments in the past, you should receive this information when you do a credit check.
Why Rental Verification Matters
As mentioned previously, a single eviction can cost landlords thousands of dollars. Depending on the duration of the vacancy and the number of repairs that need to be made, you could be tasked with paying around $10,000 per unit to resolve an eviction and get someone new into the space. To avoid evictions, you must verify the information that tenants give you.
Verification is beneficial for landlords and tenants alike. If you’re a landlord, this process should make you more confident that the tenant is a good fit. It will also help you identify bad tenants before you approve or deny their applications.
There are many potential risks associated with skipping the verification process. Some landlords also take shortcuts when attempting to verify information, which can lead to serious consequences.
If you don’t verify rental history, you might rent to tenants with a lengthy history of late payments or property damage. In this scenario, there’s a higher risk that you’ll suffer considerable financial losses from repairs, missed late payments, and evictions. Many renters who have a history of damaging property will repeat this behavior when moving to a new unit.
How Rental Verification Works
The verification process can be completed in a few steps. First, it’s a good idea to use property management software to collect information and pre-screen applicants. You can start this process by requesting a rental application, which you can send to a potential tenant’s previous landlord. If you don’t want to spend time waiting for the landlord to send this document back to you, consider contacting them directly by phone or email. Ask for details about the tenant’s rental history and behavior.
The second step of this process involves reviewing the answers the landlord gave you. You can use this information to verify the details the tenant listed on their application. If you have further questions, consider calling the tenant to speak with them directly about their rental history and other aspects of their application.
Common Challenges in Rental Verification
When you attempt to verify a tenant’s rental history, there are several challenges that might arise. The main issue that often presents itself during this process is getting prompt responses from a potential tenant’s previous landlords. If you send a form for landlords to fill out, it can take days for them to respond.
You may also run into a problem where you’re unable to get complete information. For example, it may be impossible for you to contact a previous landlord. These obstacles might delay the screening process and cause you to make decisions that aren’t as informed as you’d like them to be.
There are, however, steps you can take to address these challenges effectively. For example, make sure you set clear expectations with landlords about how quickly you need to have verification forms returned to you. It’s also highly recommended that you provide them with an efficient method for returning this info. Previous landlords may be more receptive to responding quickly if you provide a digital form that they can fill out and send back immediately.
If you’re dealing with an unresponsive past landlord, there are ways to cover gaps in a person’s rental history. If you don’t have information about a potential tenant’s previous rental payments, consider asking them for more bank statements. By securing bank statements that stretch back 12 months or longer, you could verify if the tenant made their rent payments on time.
Tips for Tenants
When preparing for the verification process, a tenant must focus on presenting a strong rental application. Tenants can bolster their application by including:
- Three or more references from landlords, employers, or friends
- Pay stubs and other proof of ability to make timely payments
- Any residence or rental info from the past five years
- Comprehensive pet information, including breed, weight, and size
- Financial information, which can include numbers for checking and savings accounts
- Proof of liquid funds
Tips for Landlords and Property Managers
If you’re a landlord or property manager, there are several things you need to do to conduct thorough verification. While collecting tenant information, make sure you respect their privacy. Be transparent with potential tenants about the types of information you need to collect. By doing so, you’ll build trust with them before they even move in.
To streamline the verification process, make sure you use standardized forms to maintain consistency with how you receive this information. It’s crucial that all tenant information is handled and stored with secure methods. You can simplify this entire process with property management software.
Legal Considerations
During the verification process, there are some legal aspects you’ll need to contend with to ensure you comply with fair housing laws. These laws prohibit discrimination based on factors like religion, national origin, disability, race, color, sex, or familial status. The verification process you employ needs to be applied consistently to every applicant.
Your methods for collecting and storing tenant information must also comply with local and national privacy laws. If you make a mistake in this area, you could face significant financial penalties and costly legal challenges. Your reputation would also be hurt among prospective tenants. It’s highly recommended that you hire legal professionals to help you navigate the screening process and avoid compliance issues.
Conclusion
Rental verification is an important process that must be thorough when screening any tenant. By conducting a comprehensive verification process, you can learn about a tenant’s payment history and their behavior around other tenants.
Without this information, you can’t be confident that the tenant will make their payments on time and leave their apartment without causing damage. To ensure a successful rental application process, use property management software to streamline verification and get the information you need to make the right decisions.