What is Rental Verification?

It’s no secret that ensuring property managers and landlords have reliable renters is paramount to the smooth management of their businesses and the protection of their hard-earned investments. In this post, we delve into why rental verification matters and highlight helpful tips for implementing a robust rental verification process.

What is rental verification?

In a nutshell, rental verification helps landlords and property managers mitigate risks associated with leasing their property to an anonymous renter.

By verifying the prospective tenant’s rental history, you can make more educated decisions and lessen the likelihood of future issues like late rent payments, property damage or lease violations. 

Why rental verification matters for property managers and landlords

Rental verification is an essential tool for minimizing risk. By verifying a potential renter’s rental history, income, and employment status, you can assess the likelihood of timely rent payments and a responsible tenant.

Here are three reasons why rental verification matters:

1. Protects Your Property. A comprehensive verification process helps safeguard your property from possible damage or tenant neglect. Knowing an applicant’s rental history can uncover insights into their past behavior as a renter, helping to identify any big red flags.

2. Legal Compliance. Rental verification ensures compliance with fair housing laws and regulations. By applying consistent screening criteria to all prospects, you can keep away from potential legal issues and discrimination.

3. Maintaining Renter Satisfaction. Verifying renters benefits property owners and enhances your current tenants’ overall satisfaction. Screening applicants can help maintain a safe, trusting, and transparent community by ensuring that newcomers meet the same standards across the board.

How to set up a rental verification process

The first step in setting up a rental verification process is to define clear, consistent screening standards. Your criteria may include minimum credit score requirements, income-to-rent ratios, rental history, and criminal background checks. Keep in mind that these standards must comply with fair housing laws to avoid discrimination issues.

Below are additional steps in the rental verification process:

Request Necessary Documents. When prospective renters submit their applications, request crucial documents, including pay stubs, bank statements, and photo IDs. These can help verify their income, employment status, and identity.

Verify Employment. Contact the prospective renter’s employer to confirm their employment status and income. Ask for a verification letter or talk directly with them to ensure the information provided is accurate.

Contact Previous Landlords. Reach out to the applicant’s former landlords to confirm their rental history. Ask about their payment history, if they adhered to the lease, and if they encountered any issues when they rented. Also, verify the authenticity of the landlord’s contact information to circumvent any fraudulent activity.

Run Credit and Background Checks. Use reputable reporting services to run credit and background checks on potential renters. Watch for any red flags like evictions, bankruptcies, or criminal convictions.

Evaluate the Application. Once you obtain the necessary information, carefully evaluate the applicant’s suitability based on your screening criteria.

Communicate with the Applicant. Keep the prospective tenant updated throughout the verification process. If any concerns arise, always give them a chance to provide clarification or additional documentation.

Make an Educated Decision. Make an informed decision based on the findings of the rental verification process. If everything checks out, ensure necessary lease agreements and documentation are completed promptly.

Document the Process. Always maintain detailed records of the rental verification process, including all communications, documents, and screening results. This can provide evidence of fair and consistent screening practices for disputes or legal challenges.

Questions to ask in your rental verification form

When creating a rental verification form, gathering information that helps evaluate a prospective tenant’s suitability for your rental property is crucial.

Here are nine categories to get you started:

1.     Tenant Details:

• Full name of the tenant(s)
• Contact information (phone number, email address)
• Current address

2.     Landlord Information:

• Name of the landlord or property management company
• Contact information for the landlord/property manager
• Relationship with the tenant

3.     Rental History:

• Duration of tenancy at the current address
• Previous addresses (if applicable)
• Reason for leaving previous residences
• Payment history (on-time payments, late payments, etc.)

4.     Rent Payment Verification:

• Monthly rent amount
• Payment method (direct deposit, check)
• Any instances of late payments and the reasons behind them

5.     Property Condition:

• Condition of the property upon move-in and move-out
• Any damages or repairs needed during the tenancy

6.     Lease Agreement Details:

• Start and end dates of the lease agreement
• Any violations of the lease agreement

7.     Behavior and Interaction:

• Renter behavior during the lease (think noise complaints, conflicts with neighbors)
• Tenant communication (responsiveness, clarity)

8.     References:

• Personal or professional references
• Contact information for references

9.     Employment and Income Verification:

• Current employment status
• Length of employment
• Monthly income

Risks of not verifying rental history for prospective tenants

When you don’t verify rental history for prospective tenants, you risk exposing yourself as a landlord to numerous risks, such as:

Financial Risk. Without verifying rental history, landlords may rent to tenants who have a history of late payments, non-payment, or property damage, leading to financial losses due to missed rent payments, eviction costs, and repairs.

Property Damage. Renters with a history of property damage may repeat such behavior in your unit. Lack of verification increases the likelihood of unknowingly renting to someone who will not take proper care of the property.

Legal Issues. Leasing to renters with troublesome rental histories could result in legal disputes, including eviction proceedings, breach of lease agreements, or disputes over security deposits.

Disruption and Instability. Renting to unreliable individuals can disrupt your cash flow and create an uptick in turnover rates and vacant units. In fact, constant turnover can be disruptive to your business, leading to lost income.

Safety and Security Concerns. Insufficient screening can result in renting to people with criminal backgrounds or histories of disruptive behavior, posing safety risks to other renters and surrounding neighbors.

What if an applicant doesn’t have a rental history?

If a prospective tenant doesn’t have a rental history to share, it’s vital to assess other parts of their background and financial situation to make an informed decision.

Here are a few steps to take in this type of scenario:

Employment and Income Verification. Verify the applicant’s employment status, income stability, and monthly earnings. A steady income stream indicates their ability to pay rent consistently.

Credit Check. Conduct a credit check to evaluate the prospect’s financial responsibility. A favorable credit history can point toward their reliability in meeting financial obligations.

References. Ask for personal or professional references like employers, colleagues or personal acquaintances to provide insights into the potential renter’s character, reliability and suitability as a dependable tenant.

Co-Signer or Guarantor. If the applicant lacks a rental or has a limited credit history, consider requiring a co-signer. This individual agrees to assume responsibility for the lease agreement if the tenant fails to meet their obligations, providing an additional layer of security.

Interview and Screening Process. Conduct an interview to assess the applicant’s suitability as a tenant. Ask why they are renting, about their lifestyle any other relevant information that can help you evaluate their compatibility with your property.

Security Deposit. Request a higher security deposit from prospects without a rental history or limited credit history. This can mitigate the possible risk of renting to someone with less established rental experience.

Probationary Period. Consider offering a shorter initial lease term (or a probationary period) to assess the potential renter’s reliability and suitability properly.

The bottom line

By implementing a thorough rental verification process, you can minimize your risk as a landlord or property manager, protect your investments, and maintain a high standard of tenant satisfaction. The bottom line: investing time and effort into screening prospective tenants pays off over time by ensuring a stable, peaceful rental community.