How to Screen Tenants and Protect Yourself

If you are a landlord the last thing you need is the tenant from hell.  They cost you a fortune in unpaid rents, they damage your property and you have to go to court to try and recover losses.  There are things you can do to prevent all of this but you need to know how to screen tenants and protect yourself against future losses.  Here are some red flags and how you can avoid them.

Check Employment References

Most landlords only check to verify that a prospective tenant has a job and makes enough money to pay the rent.  You can also ask supervisors if the potential tenant is reliable, do they show up and finish work on time.  Do they show up late all the time and reek of last night’s party?  A good employee is often a good tenant.

More than Just a Credit Score

Credit scores are just a number and don’t even come close to telling the whole story.  You’re better off looking at the type of debt they have and the payment history.  Some debt is constructive, almost everyone has a car loan or a student loan they are trying to pay off.  We have also all been in financially tight situations, that being said someone with large amounts of credit card debt may not be a great risk.

Honesty is the Best Policy

If you find a potential tenant lying on their application for any reason then move on to the next applicant.  Little white lies have no place on a rental application and they aren’t trustworthy.  Lies on applications are often in regards to income, many will inflate the amount of money they earn.  It is still a red flag and you need to pass.

Have they Ever Been Evicted

If they have been evicted before then pass on the application.  While most landlords will only check credit and employment history you are far better off checking to see if a tenant has been evicted in the last 5 years.  At the same time you want to check with previous landlords to see if they have been a good tenant or not.  Paying the rent on time isn’t the only thing that makes a good tenant you also need someone who will keep your property clean and well maintained.

Renting to a new tenant is always risky so do whatever you can to protect yourself from bad tenants.  Screen carefully each and every tenant that moves into your building you will thank yourself for it down the road.

Should You Hire a Property Management Company

Many property owners are hesitant to work with a property management company thinking that they can easily handle all of the maintenance tasks and collections on their own.  They think it is only a couple of hours out of their life, until things start to break and tenants stop paying the rent.  If you want to grow your portfolio of properties then at some point you are going to need some help.  Should you hire a property management company?  Yes, as a matter of fact you should.  Let’s look at why.

Dealing with Tenants

This is the biggest reason to hire a property management company and that is to deal with tenants so you don’t have to.  Screening tenants, taking rental applications, or showing apartments none of that would be your responsibility anymore.  Even having someone to screen tenants for you makes a property management company worth the cost.  They would also be responsible for collecting rents and enforcing the terms of the lease, leaving you free to run your business.

Pricing Your Rentals

If you don’t have a background in real estate and owning property is an investment strategy for you then you probably have no idea how to price them or what market rent is.  If you price too high then you will be left with a bunch of vacant units, price the units too low and you lose money.  Both situations are bad for you.  A property management company keeps a very close eye on the local markets and can help you price your units correctly.  You can still attract good tenants while turning a profit.


Do you really want to handle 3am phone calls because a toilet won’t flush, that is part and parcel of being a landlord.  Not to mention the cleaning and painting of units every time a tenant moves out.  None of that is fun nor is it a good use of your time.  A property management company will handle all of that for you along with getting the right contractors in for the job.  The more units you buy the more maintenance headaches you will have to deal with, let someone else deal with that.

There will come a point where hiring a property management company just makes sense and you should do it sooner rather than later.  Yes, they will cost money but your time is valuable and it could be better spent looking for your next deal rather than dealing with tenant issues constantly.  Delegating responsibilities will be the best decision you make as a business owner.

Is Rental Property Right for You?

Owning real estate is one of the fastest and easiest ways to build wealth, that being said it is not an investment that works for everyone.  Despite all the claims to the contrary being a landlord isn’t creating passive income, there is work involved in being a landlord.  That being said it can be incredibly lucrative for the right person.  Is rental property right for you?  Let’s look at what’s involved in being a property owner and you can determine if this is the investment that you are looking for.

The Down Payment

Buying rental property is not like buying your primary residence, the banks and loan companies have much stricter rules for rental properties.  If the property is bigger than a triplex and you have no intention of living there then you can expect to put down at least 20%.  You are also going to run up against some stricter loan requirements even with the bigger down payment.  You will have to demonstrate the property is in good enough condition to be rentable and you may also need some cash reserves for things like repairs and upgrades.

Property Financials

Aside from your own personal finances that need to be in order to buy rental property you also need to have the financials of the property in order as well.  The rental income needs to cover not only the mortgage but the other expenses associated with the property, that can include the taxes, maintenance, heat, hot water and have a little left over for unexpected expenses.  There are formulas for determining whether a property is worth buying or not and you can check them out here.  You plug in the rents and expenses and it will do the rest for you.

Maintenance Issues

Things break down, tenants will leave their apartments in a mess and your phone will ring in the middle of the night.  Are you ready to deal with all of that?  You can hire a property management team to handle it but that will eat into your profits.


Dealing with tenants can be a huge pain.  It is up to you to collect the rent, make sure they adhere to the terms of the lease, evict when necessary and there are the usual personality conflicts you may also have to deal with.  Will you be comfortable doing all of that.

Rental property is a great way to build wealth but it is not without some work on your part.  Weigh the pros and cons and decide carefully if rental property is for you.