Once you’ve prepared your Detroit property and gotten it ready for renters, it’s important that you get the right tenants in place. Obviously, real estate investors need people in their properties who will pay on time, every time. With the housing market continuing to favor sellers, you’ll probably find yourself dealing with more and more applicants who are looking for a rental home in Detroit.
Tenant screening is arguably the most important part of the process of performing your due diligence. Successful landlords are those who do their homework and choose the right tenants. However, the tenant screening process is one that must be performed correctly and legally. Here are six tenant screening tips that you can use to help you get the most out of your rental property.
Make Sure You’re Compliant
If you’re going to be a successful Detroit landlord, you’re going to need to be compliant in every step. There are countless laws in place, both at the state and federal levels, that dictate everything that you do as a landlord. These laws apply heavily to the tenant screening process. The Fair Housing Act is a lengthy, intricate set of laws that protects potential renters from being discriminated against. It’s important that you keep these laws in mind during the tenant screening process, as even the appearance of impropriety could leave you dealing with litigation and investigations. Even if the claims are proven untrue, it’s crucial that you protect your reputation. You don’t want to become known as a landlord who discriminates, and unfortunately, perception is often reality. The Fair Housing Act prevents landlords from discriminating against renters based on seven factors:
• Race
• National Origin
• Color
• Sex
• Disability
• Familial Status
• Religion
It’s a good idea to work with a real estate attorney when setting up your application and screening process, as they can also help you make sure that you’re not breaking any state or local laws.
Require a Rental Application
While it’s easy to assume that you can trust certain people as potential renters, it’s crucial that you start a paper trail early in the rental process. The application process allows you, the owner of the property, to set the minimum requirements for prospective renters. For instance, you may want to include income level, employment history, and minimum credit scores. When you have these requirements in writing, it protects you against unfounded discrimination claims if someone doesn’t get the rental. When considering income, most experts agree that you should choose an applicant whose monthly income is around three times the amount of the monthly rent, though that rule isn’t set in stone.
You should also require a valid form of identification with the application. While it’s true that not everyone has a driver’s license, you should only be willing to review applications from applicants willing and able to provide a valid government-issued ID.
The Importance of Following Through
Don’t assume that the information that the applicant provides is accurate. Unfortunately, there will always be people who lie on rental applications, which means that you need to be ready to verify the information provided. In Michigan, it’s illegal for you to run a background check or credit check without the written consent of the applicant. With this in mind, you can easily include a consent form in the rental application.
If you require the applicant to list where they work, be prepared to call that business and verify that they work there. Once you’ve received written consent, run a credit check on the applicant. Contact their current landlord and make sure that they pay their rent on time. The more information that you legally obtain, the better off you’ll be in the long run.
Schedule an Interview
You wouldn’t hire someone to work at a business that you own without taking them through the interview process, and the same concept applies to renting your property to someone. The interview process allows you to discuss any discrepancies between the information on the application and what you find during the verification process. This is also your opportunity to verify some of the other information, such as the number of people who will be living in the property, and to make sure that the applicant understands your policy on things like pets. Finally, the applicant interview is a chance for the prospective renter to ask questions about utilities, rent structure, the ability to pay rent online, and more.
Have a Written Code of Conduct
A code of conduct primarily involves what’s expected of the renter should he or she rent the property. As a landlord, you’re probably going to be responsible for a lot of the maintenance and repairs that come up from time to time. However, you can put items in the code of conduct that protect you against destructive behavior by the tenant. For instance, in Michigan, you have the right to evict a tenant with 24 hours’ notice if they are found to be manufacturing, delivering, or possessing illegal drugs. Having all of this in writing at the beginning of the landlord-tenant relationship is crucial if the worst-case scenario comes to pass.
Making the Right Decision
What do you do if you have multiple tenants who are equally qualified to rent your Detroit property? The safest route is to go with a first-come, first-served approach. If you have multiple applicants, each of whom has something on their application that is a cause for concern, you’ll need to decide what matters most. For instance, you may be willing to overlook a low credit score if an applicant’s previous landlord says that they’ve paid their rent on time each month for the last year. In those situations, you’ll need to decide what matters most to you.
Finding the Best Renters for Your Detroit Property
Whether you’re just getting started with your first property, or you’ve been in the Detroit rental property game for a while, the process of finding the right renters is never an exact science. However, you can follow these six tips to put yourself in the best possible position to succeed.
