I've been doing property management and tenant screening since 2011; that's a long time!!
What I've learned is this: finding the perfect tenant for your rental property is a game-changer; finding the wrong one is an absolute nightmare. A great tenant ensures you'll enjoy a steady income stream with someone who will take care of your property like it's their own.
That being said, the process of selecting an ideal tenant is not always straightforward. It requires a strategic approach and an effective screening process to minimize risks and maximize benefits.
Understanding the Importance of Tenant Screening
In Ontario, the eviction process is a long and costly ordeal. By conducting thorough screening, landlords can identify trustworthy tenants who are more likely to pay rent on time, take care of the property, and keep you away from the Landlord and Tenant Board.
Here's what I do to protect my clients from deadbeat tenants.
Pre-Screen Your Applicants
I use this all the time with our inbound leads from Facebook Marketplace and all the other rental listing platforms. I send each prospect a short survey with some basic info about themselves to see if they are a fit for our landlords. Things like how many occupants, family income, and preferred occupancy and so forth.
In addition, I like to clearly define the requirements for income, credit score, and other relevant factors to accepting a tenant before showing the property to anyone.
This step saves everyone time and avoids inconveniencing the existing tenants unnecessarily.
Demand a Detailed Rental Application
This application is a legal document that goes with your lease and is a crucial tool for gathering essential information about prospective tenants. The application should include sections for personal details, employment history, income verification, rental history, and references.
By requesting this information upfront, you as the landlord will gain valuable insights into the potential tenant's background and assess their suitability for the property.
Conducting Thorough Background and Credit Checks
A thorough background check is a vital component of effective tenant screening. This process involves verifying the applicant's identity, checking all aspects of their public online activities and most importantly, examining their credit report.
I've had so many fake credit reports submitted to me that I hardly even look at the reports the tenant submits anymore. I pay for a service that allows me to pull my own reports directly from Equifax. That way I know they are legit.
A good credit score reflects a tenant's ability to manage their finances which usually correlates well with them paying rent on time.
NOTE: Rent payments are not reported to Equifax so you may also want to research to see if the tenant has ever had the Rental Tribunal deliver a judgement against them.
Contacting Previous Landlords for References
This step of the process is often the most poorly executed by landlords screening new tenants. If there is going to be a red flag with the tenant, it will likely occur here.
Get more than one landlord reference. Sometimes the most recent landlord may want the tenant out and will say anything to get them out. I find previous landlords will give you the straight goods more so than the existing landlords.
Before contacting the landlord, do some background research on the landlord's property. If the name given on the rental application doesn't match the name on the title to the property, you NEED TO FIND OUT WHY. I include free title searches for my clients free but you can pay $33 and do it yourself online.
The discrepancy may be something honest like a realtor or family member manages the property but nine times out of ten, when the landlord's name on the application doesn't match the name on title, there's something fishy going on.
Assuming there's nothing fishy going on, go ahead and call the landlord and be sure to have a list of questions in front of you. There are certain questions you are allowed to ask a tenant or past landlord so make sure you're complying with the Human Rights Code.
Employment and Income Verification
Stable employment and a reliable source of income are critical factors when assessing a tenant's ability to meet their financial obligations. Be sure to verify the applicant's employment status, including the length of employment and the stability of their income.
Does there employment history jive with their credit report and LinkedIn profiles? That's a good place to start.
I've picked off a lot of fraudulent employment letters that have toll free numbers to bogus companies. Be very careful and diligent when verifying employment.
In-person interviews provide landlords with the opportunity to directly interact with potential tenants and assess their overall compatibility. Most people don't do this but I have had some great landlord/tenant relationships evolve by meeting in-person during the screening process.
First, don't discriminate against applicants. It's just not a cool thing to do to someone.
Secondly, you may be held accountable for discrimination under the Ontario Human Rights Code. Discrimination in Ontario if you've refused to tenancy based for any of the following reasons:
- Race, skin color, or cultural background
- Religious views or practices
- Place of birth
- Citizenship, including refugee status
- Gender, pregnancy, or gender identity
- Family situation
- Marital status or sexual orientation
- Age, particularly for individuals aged 16 or 17 living independently.
Of note, many landlords are unaware that they cannot discriminate against someone with pets. That wasn't always the case.
A tenant getting a pet is not grounds for eviction (even if they agreed to not having pets) unless the pet is causing excessive damage, disruption to the neighbours, or it's deemed an exotic or dangerous breed. Otherwise, the landlord has no recourse unless they live in the same building and can prove severe allergies.
Making A Decision
Sometimes a tenant is a slam dunk for acceptance but other times it's not so cut and dry.
Sometimes a great tenant had trouble paying back student loans 5 years ago and their credit score sucks because of it.
Sometimes you get a great applicant has a landlord from hell that gives them a bad reference. Should you punish the applicant because of a bad review from a slumlord? Of course not! Take everything into consideration before making a decision and check with your gut to make sure you're okay to proceed.
In the end, the cost of removing a deadbeat tenant is far more costly than losing a month of rent searching for the right tenant. I hope this helps.
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