signing a tenancy agreement to receive keys to house

How to Make Tenant Background Checks More Useful

The last thing any real estate business needs is a bad tenant. It doesn’t matter if you own apartment complexes with hundreds of units or if you’re renting out a second house for the first time. Bad tenants cause destruction or they don’t pay their own way. Usually, it’s a combination of both. But you can’t refuse tenants just because you have a bad feeling about them. That violates any number of fair housing laws, and that might even be worse for your business than a string of irresponsible tenants.

So the go-to solution is to run tenant background checks. But these checks don’t come back with a guarantee of ‘good tenant’ or not. They just present the facts that you’re entitled to know. Here’s how to make the most use out of those facts.

1. Establish the Type of Debt the Tenant Has

If you’re in the real estate business, you know the importance of leveraging your mortgages and not keeping the capital locked up. That means not all debt is bad debt. Sometimes there’s good debt: a parent could be co-signing their new graduate’s first lease because the tenant themselves doesn’t have a credit history. Sometimes there’s neutral debt: college debt isn’t always avoidable, and it might be the compromise between no debt and an inability to regularly pay their rent or high debts but a higher salary to match.

Credit card debt is usually the bad red warning you need to look for, though. That – not always but often – implies a lot of spending without control.

2. Don’t Just Say No to a Criminal History

In 2016, HUB created new guidelines about fair housing, and you can’t just turn down a potential tenant because of a criminal record. So measure the factors as a whole. Was it a crime that really impacts the property? Did it happen long ago? You have to consider the application. You don’t always have to say yes, but you can’t blanketly refuse. In fact, an applicant with a criminal history but good credit is likely to be a long-term tenant.

TruDiligence and Tenant Background Checks

Contact TruDiligence to find the right tools to power quick turnaround on your open properties. TruDiligence uses state-of-the-art technology to analyze the background data collected against customizable criteria. This powerful tool will revolutionize the way you evaluate a prospective tenant’s eligibility.

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