Being a landlord can be a lucrative business if done correctly. One of the biggest challenges property owners face is finding reliable tenants who pay rent on time and take care of the space. Poor tenant selection can lead to problems such as late rent payments, damage to the property, and even eviction. Conducting background checks is an essential way to minimize the risks and maximize the success of your rental property business.
What are background checks?
Background checks are the process of verifying an individual’s criminal record, credit history, and rental history to determine their eligibility to rent a property. This involves the use of public records, credit bureaus, and tenant screening services to gather information about the prospective tenant.
Why are background checks important?
Background checks are essential for several reasons:
- Protecting the property: A background check can help landlords identify any red flags that may cause damage to the property, such as criminal activity or history of eviction. This ensures that the property is well-maintained and in good condition.
- Reducing risks: A comprehensive background check can help landlords reduce the risks associated with renting out a property to the wrong candidate. It can prevent potential damage to the property and even costly lawsuits.
- Choosing the right tenant: A background check can provide a landlord with enough information to make an informed decision about whether a prospective tenant is responsible, reliable, and will pay rent on time.
What information can be obtained from a background check?
There are three main types of background checks which include criminal background checks, credit checks, and rental history checks. The information that can be gathered from these checks include:
- Criminal background check: This type of check helps landlords identify whether a prospective tenant has a criminal history. Information such as convictions, felonies, and misdemeanors can be obtained.
- Credit check: A credit check provides valuable information about a tenant’s financial history, including bankruptcy filings, late payments, and outstanding debts.
- Rental history check: This type of check provides information about a tenant’s rental history, including past evictions, unpaid rent, and property damage.
When should a background check be conducted?
A background check should be conducted before signing a lease agreement, and after the initial meeting with the prospective tenant. This allows landlords to make an informed decision on whether or not to rent to the individual.
How to conduct a background check
A landlord can conduct a background check through a variety of means, including:
- Online background check services: These companies offer comprehensive background check services that can include criminal record searches, credit checks, and rental history checks.
- Public records searches: This involves manually searching through public records to obtain information about the individual’s criminal history, bankruptcy filings, and other legal actions taken against them.
- Tenant screening services: These services provide landlords with tenant applications that include background checks and other necessary information.
FAQs
1. Can landlords conduct background checks on every applicant?
Yes, landlords can conduct background checks on every applicant as this can help reduce the risks of renting out a property to the wrong candidate.
2. Can landlords use criminal records to discriminate?
No, landlords cannot use criminal records to discriminate against any applicant. However, they can use criminal records to identify potential risks to property and residents.
3. What is included in a rental history check?
A rental history check includes information about an individual’s past rental properties and their performance as tenants, such as payment history and whether or not they have any history of evictions.
4. Should landlords charge potential tenants for background checks?
It is common practice for landlords to charge potential tenants for the cost of the background check. This is usually outlined in the lease agreement.
5. Can landlords make leasing decisions based on results of a background check?
Yes, landlords can make leasing decisions based on the results of a background check. However, they need to ensure that they are not violating any fair housing laws.
Conclusion
Conducting background checks is an essential way to minimize the risks and maximize the success of your rental property business. It can provide landlords with valuable information about a tenant’s rental history, financial history, and criminal record, allowing them to make an informed decision about whether or not to rent to the individual. By conducting a background check, landlords can protect their property, minimize risks, and choose the right tenant for their rental property.
