As a landlord, improving your tenant retention ratio is key to maximizing your rental income. You see, when you are able to retain tenants for much longer, you’re able to save on many costs, including vacancy, advertising, and screening costs. Consequently, this means that you are able to shield your bottom line from
potential losses.
But while renewing a lease for another term seems like a no-brainer, make sure to do your due diligence. Rushing into a lease renewal can lead to certain potential issues down the line like
holdover tenants.
And that’s where renewal screening checks come in! They are an easy way to protect yourself from costly disputes, drawn-out issues with residents, and even possible evictions.
By conducting a renewal screening check before lease signing, you’re able to see how a tenant has fared over the duration of their stay. As such, you are able to make an informed decision on whether or not to continue leasing to the tenant.
Be that as it may, screening tenants multiple times can raise certain questions. Is the exercise even worth the effort? Would screening the tenant again damage the existing relationship you have built with them?
Luckily for you, this post is here to address every concern you may have regarding renewal screening checks. The following is everything you need to know in this regard.
Benefits of Renewal Screening Checks
It can be quite understandable for a landlord to skip a renewal screening check in certain situations. Especially, if the tenant has always paid rent on time, cared for their rented premises, and adhered to all lease terms.
But while a tenant’s rental background can reassure you to continue with the relationship, it doesn’t always give the whole picture.
That’s why an effective tenant screening exercise goes beyond checking references. Even if a tenant has glowing references, a savvy landlord will always want to know more. Including, the prospective tenant’s income level, credit rating, and criminal status.
The same applies with renewal screening checks. During the course of the initial lease signing, a lot could have changed. And this is where a renewal screening check can come in handy.
The following are the benefits of conducting a renewal screening check.
- You are able to check the financial stability of a tenant by checking their employment history, credit scores, and income
- You are able to identify any potential repair issues before they can become major issues
- You will have peace of mind knowing that your home is rented by a quality tenant
Things to Look for When Conducting a Renewal Screening Check
As already mentioned, a renewal screening check is almost akin to new resident screening, only that it is a bit easier to do. The following are some of the things that you should be looking for when conducting a renewal screening check.
Credit Report
As a landlord, it’s in your best interest to rent to a
great tenant that has a high credit rating. A high credit rating indicates that the renter will be more likely to pay rent without struggling.
You can check the tenant’s credit rating using credit ranking agencies like Experian, Equifax, and TransUnion. Advisedly, only consider tenants that have a credit score of at least 630. A score lower than this may indicate that the tenant may have certain financial difficulties, which may translate to late or missed rent payments.
Income Verification
You will also want to verify the tenant’s income level to ascertain whether they can still afford to make rent payments reliably every month.
One way in which you can
verify a tenant’s income level is by asking for proof of income. This can be by asking for a pay stub or a W2 tax form. Another way would be to require the tenant to have a cosigner who can be held responsible should the tenant default on rent payments.
And as a general rule of thumb, only consider renewing their lease if they still make an income of at least 3X the monthly rent amount. For instance, if the monthly rent is $1,200, then require the tenant to make a monthly income of at least $3,600.
Past Criminal Convictions
However unlikely this may be, it should be part of every renewal screening check. But before running the criminal
background check, make sure to obtain the tenant’s permission.
You can do this in either of two ways. One, by having a section on the lease renewal form that explicitly asks for their consent; or two, by creating a separate document that asks for permission.
Next, choose a reputable background-checking service that has backing from the Federal Trade Commission. The background check can reveal an important set of information that includes:
- Convictions for violent crime, property crimes, drug-related offenses, and sex offenses
- Parole and probation status
- Incarceration history
In addition to conducting these screening checks, do a “soft check” as well. Consider the history you have had with the tenant. Is there anything to write home about? Has the tenant always paid rent on time? Have they had issues with neighbors? Have they ever disrespected you? Are they hard to deal with?
Things to Keep in Mind when Conducting a Renewal Screening Check
- Comply with the
local fair housing laws. Treat all tenants fairly and equally regardless of classes such as race, color, religion, nationality, and sex.
- Make a disclosure of renewal terms in the lease agreement so the tenant knows what to expect if they consider renewing their lease
- Hire a property management company to do the renewal check on your behalf
Bottom Line
On the surface, renewal screening checks may not seem necessary. Especially, if the tenant has been good all along. That said, things change over time, and the tenant may be grappling with issues that may come to haunt you in the future.
If you have a question or need expert help in managing your rental property, look no further than
Dawson Property Management. We provide comprehensive property management solutions in Charlotte, NC, and the surrounding areas. Get in touch to learn more!
