The biggest nightmare of property managers is what if their tenant damages the property? What if they fail to pay on time? Worse, what if poor screening leads to criminals getting on the property? What if a new tenant poses a threat to other residents of the building? It is important for property managers to take tenant screening seriously in order to avoid legal repercussions and reduce turnover rates.
First, let us define the tenant turnover rate. The turnover rate of tenants refers to the frequency with which tenants leave rental properties and are replaced by new tenants. The vacancy rate is calculated by dividing the number of vacant units during a given period by the total number of units in the property. In the event of a high tenant turnover rate, landlords may experience increased vacancies, loss of income, and increased costs associated with the process of finding and screening new tenants.
In this blog, we will discuss the importance of tenant screening in reducing turnover rates:
1. Identifying potential red flags: When it comes to tenant screening, property managers should be able to identify potential red flags with tenants before they move in, for example, a history of disruptive behavior or damage to the property. By doing this, you will be able to prevent problematic tenants from moving in and causing issues that could set off a costly tenant turnover process. A thorough tenant screening process can help you identify reliable tenants who will be a good fit for your rental property.
Reference: Read this blog to learn about the general fair housing guidelines for property owners and managers.
2. Decrease risk of non-payment: The biggest risk for property managers is non-payment and inconsistent payments. In order to solve this problem, managers should carefully screen tenants by checking their credit scores and payment history. You can determine whether an applicant can afford the rent by checking their income and doing employment verification. You can do this by asking the applicant for their tax returns to make sure that their employment is long-term and that he/ she can easily pay rent in the future. In addition, managers can check the applicant’s credit history and financial habits to see if they consistently pay rent and are debt-free.
3. Weeds out the bad tenants: Usually, the landlord does not accept applications from applicants who have a history of evictions, criminal charges, bad credit, or missed or late rent payments in the past. This is due to the fact that this kind of tenant poses a higher risk of delayed rent payments, damaging property, troubling neighbors, or being evicted-all of which lead to higher turnover in the property. You can avoid the risk of bad tenants by screening and interviewing. When you screen out risky tenants, you increase your chances of finding a long-term tenant who is stable and will stay with you for a long period of time.
Reference: Check this out if you want to know about the do’s and don’ts of tenant interview:
Take a look at the latest news regarding HUD’s new regulations for tenants who have criminal histories.
4. Maintenance and repair cost: Tenant screening helps lower the chances of property damage by checking an applicant’s rental history. Rental history helps determine if the applicant has any history of damaging property. You can also ask the applicant the references from their previous landlords if they were good at maintaining the rental properties in the past. By doing this, you can reduce the costs of maintenance and repair.
5. Cost saving: A high tenant turnover rate can be a costly problem for property owners and managers since it requires a lot of time, effort, and money to find new tenants and prepare the rental unit for their move-in. With proper tenant screening a property manager can save resources by reducing tenant turnover rates, thus reducing the amount of time and energy that would otherwise be used to find new tenants. This is also beneficial for tenants, as it allows them to stay in the same rental unit for longer, helping them to build a sense of community and stability. Property owners and managers should therefore take tenant screening seriously and ensure they select the right tenants.
6. Lease renewals: When an applicant is thoroughly screened using references, rental history, credit score, and proof of income, the information provides insight into their reliability and suitability. This results in tenants signing long-term leases rather than short-term agreements. Property managers can reduce the likelihood of tenant turnover and increase profitability by selecting tenants who are more likely to renew their leases. The property owner can thus ensure a stable source of rental income. By maintaining the continuity of rents and avoiding vacancies, property managers can reduce turnover costs.
Reference: Check this out to learn more about lease renewals.
https://www.investopedia.com/terms/r/renewal-option.asp
7. Selection of the best candidates: You can evaluate applicants objectively based on their qualifications with thorough screening including employment/income verification, credit checks, background checks, and previous landlord references. Choose long-term renters who have the strongest and most stable histories to ensure a long-term rental relationship. There will be fewer turnovers in your properties if you have tenants who are qualified and responsible.
Reference: Check this out if you want to know what HUD’s tenant selection criteria are.
Final words
To conclude, tenant screening plays an important role in reducing tenant turnover. Even though tenant screening may require some extra effort and expense, it can ultimately save landlords and property managers time and money by reducing turnover rates. Additionally, tenant screening can also help to ensure that landlords are selecting tenants who are not only financially responsible but also respectful of the property and their neighbors. By taking proper precautions, landlords can rest assured that they are selecting trustworthy tenants. Check out Compliance Prime to learn everything about budget, turnover, and fair housing from the experts in the industry.
