It sounds like a no-brainer, right? When you’re renting out your Loveland home, you want to ensure that those who will be living in it will take care of it. The scary part is that many landlords forgo this step entirely, using a credit report alone, or choosing not to thoroughly screen potential tenants at all and relying on their “gut instinct.” Let’s just say this is a recipe for disaster. Property damage, late or no payments, evictions, you name it! And while you can’t screen for everything (it’s no crystal ball, we assure you!) completing a rental history report provides valuable insight that will better help you decide on whether or not to approve a potential applicant. So let’s dig into why rental history reports are important and the necessary steps to evaluate and approve potential residents.
What is a Rental History Report?
Think of a rental history report as a potential tenant’s track record. Many list their previous addresses, payment history, number of late payments, damages, evictions, etc. Essentially, it’s exactly what the name says: a tenant’s rental history. Use these in conjunction with credit and criminal history reports to help assess potential applicants. The key part of this is that previous landlords have to report these items at the end of their tenancy for the information to show on the report, so don’t be alarmed if you run across applicants who have no rental history. This isn’t necessarily a red flag and could just mean they’re new to the rental market.
Why Run a Rental History Report?
Rental history reports contain valuable information you may not find in a regular credit report, including evictions or judgments, whether or not their security deposit was returned, and how many late payments they had. They reveal red flags that could indicate the applicant may not be a good fit for your property. Alternatively, they show what a reliable tenant looks like as well. Use them and the information they provide to make a clear and informed decision when it comes to approving tenants for your rental property. Just remember to stick to your approval criteria set prior to collecting applications and use the same standard for all applicants.
Creating a Thorough Screening Process
So what should you consider when screening tenants? The best combination for creating a thorough tenant screening process involves collecting several variables, documents, and reports to make an informed decision. And it all starts with your application. Have potential applicants complete and submit an application that collects all the necessary information to run credit, background, and rental history reports. Along with this, ask for proof of income in order to confirm that they meet the financial requirements necessary to afford the rent. Just remember Colorado has protections regarding source of income that prohibits a landlord from discriminating against a tenant based solely on how they’ll pay for the rent. Colorado also limits the rent-to-income ratio that landlords can use to approve applicants to two times the rent, so be aware of that requirement when setting your approval criteria.
Tenants in Colorado can also provide their own rental history report in lieu of having a landlord or property manager do it separately so long as it meets certain criteria and is pulled in the last 30 days. Make sure you’re aware of these laws and requirements when collecting applications for your property.
When it comes time to pull or review those reports, choose either a service that pulls all of the necessary information in one report or use a combination of reports. The key piece here is to review their credit, criminal background, and rental history and compare it to your approval criteria. Avoid snap judgments and comb through all of the information provided in order to make an informed decision. And if push comes to shove, stick to your set approval guidelines. Doing so ensures you avoid a potential Fair Housing violation and helps you remain compliant with local, state, and federal laws.
The Value Of Professional Insight
Screening tenants is time-consuming and requires resources, knowledge, and a level of expertise. And while all of these things and more are available for DIY landlords, there’s no disputing the value that comes with hiring a professional property management company like Real Property Management Colorado to help you through this process. Professional property managers already have an established approval criteria and screening processes to help vet tenants while remaining compliant with all of the laws governing real estate and property management. They have the resources, including how to pull and verify rental history reports, already at their disposal, making it easy to find qualified and reliable tenants for your property.
Information can be invaluable when it comes to efficiently managing your rental property and finding qualified tenants. Utilize rental history reports in conjunction with other verifiable information and reports to help you make an informed decision and evaluate each potential applicant carefully.
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