One of the most critical steps in choosing new tenants to let your place out to is tenant screening. Tenant helps you to better spot red flags and early warning signs of nightmare tenants and also allows you to select the best fit from a behavioral and financial point of view.
As good as this practice is, there are vital technicalities that go along with it. To conduct a good and fair tenant screening process, you must know how to interpret financials and meet the proper legal requirements. This article compares the merits of doing this yourself and outsourcing your tenant screening.
Outsourcing in General
Even if all you do for a living is work for a paycheck, you still operate like a small business selling work hours to your employer. With this framework in mind, it's easy to see how outsourcing your tenant screening to a property management company can come with significant benefits.
You get to access specialized tenant screening skills at a fraction of the cost (the alternative being the time and money investment into your own tenant screening software). Moreover, it costs no time, allowing you to focus entirely on your main gig.
The Financial Benefits Weighed Up
For outsourcing to be worth it, the time you save must be worth more than the service's price. Alternatively, the service's value needs to be worth more than if you did a DIY screening (ideally, both are true simultaneously).
Dealing with the latter first, a professional screening service is excellent for avoiding a tenant who will become an eviction risk. The cost of tenant screening is far lower than that of an eviction.
Secondly, the vast majority of property owners work the types of jobs that make their time valuable. If you do own property, chances are that it's in your best financial interest to devote those extra hours to work (or resting from work, which is also valuable time).
Tenant Screening Laws
The most technical element of tenant screening is adherence to tenant screening laws. You are allowed to charge a fee to screen a tenant, but you must receive written consent before running the check. You can also use criminal records as part of your decision-making criteria.
However, you aren't allowed to make blanket policies against all people with criminal records. You have to weigh each case's merits and be consistent throughout your time as a landlord.
The same goes for any other inalienable trait. Federal Fair Housing laws ban unfair discrimination.
Lastly, be very careful when communicating and building relationships with prospective tenants. You don't want to set yourself up for a false advertising claim.
Getting Great Tenants
Tenant screening is one of the best tactics to get great tenants. This process allows you to spot red flags, narrow the tenant pool, and give you more quality time with great prospective tenants.
Tenant screening costs, methods, and laws make it a technical process. You can maximize the benefits and minimize the costs by outsourcing to a tenant screening or tenant placement service. Some owners even outsource the entire landlord job to a property management company.
At PMI Central Florida, we have over 20 years of expertise with all these processes. Find help getting great tenants through us today.
