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How To Properly Screen Tenants

Are you a new landlord who just started the search for a new tenant? Maybe a seasoned real estate expert who once experienced a nightmare tenant?


Many landlords, especially new ones, can feel the pressure of sitting on a vacant unit that is costing them every day and may settle on the first person that accepts to rent their unit on their terms.


But properly screening a tenant is a critical step and deciding who gets to live in your investment is one of your most important responsibilities as a landlord.


Trust me when I say, a nightmare tenant can wreak havoc on your life. Constantly thinking about what they're breaking in your unit or when another tenant is going to call with an issue can rapidly destroy your morale, dig into your pockets and stress you out to no end.


So let's make sure that doesn't happen.


Now these steps will obviously depend on what kind of market that you're in and what kind of tenants that you are targeting.


For instance, a strong rental market means that you'll have applicants lining up and begging you to rent to them whereas a smaller market with higher vacancy might require more work to actually reach potential applicants.


Generally, these are the steps that you are going to want to follow.


STEP 1: ADVERTISING THE UNIT


First things first, you need to get the word out that you have an available unit.


First things first, you need to get the word out that you have an available unit.


We typically advertise our rentals on both Kijiji and Facebook Marketplace. Reason being, they're both free platforms (or cheap if you have a professional Kijiji account) but allow you to reach the highest number of people.


Most people searching for their next unit will be on those platforms.


In your advertisement, we recommend adding as much detail as possible into the pre-determined fields as well as a comprehensive description of the unit and the terms in the free form field.


Here is an example of a unit that we recently rented.

2022_07_04 - ReDeal - Listing
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Download PDF • 2.57MB

STEP 2: PRE-QUALIFY TENANTS


In a high-vacancy market, you may have to overlook this step but generally, before spending time and effort to screen tenants, you'll want to send out a quick questions to weed out applicants that might already not be a good fit.


Generally, the goal with the pre-screening questionnaire is to make sure that everyones expectations are aligned.


Typically, we will ask general questions to learn more about the applicant. Questions regarding topics such as number of people who will be living in the unit, pets, move-in dates, recent evictions and etc.

  1. How long have you lived at your previous rental?

  2. How many people would be living with you? (this can significantly increase your utility bill)

  3. Does anyone living with you smoke?

  4. How many pets do you have?

  5. How many parking spaces would you need?

  6. What kind of work do you do?

  7. Do you think your current landlord would give you a positive reference?

  8. Have you ever been evicted?

  9. Why are you moving?

  10. When do you hope to move-in?


STEP 3: SHOWING THE UNIT


Once you've screened out the first batch of applicants with the pre-screening, it'll be time to show the unit to the remaining ones.


Depending on your market, you may be able to host an open house. As opposed to individual showings, it'll be easier to schedule and it might add some pressure onto the interest applicants if they aren't the only ones there.


While that can be a great option, especially if you don't have a lot of availability, we generally stick to individual showings.


During individual showings, we take the time to have a discussion with the applicants and ask inquisitive questions. Usually, it's pretty easy to read them just by their behaviour and their responses to some basic questions. It also gives you a chance to talk about their expectations and review any questions that you might have about their application.


We also always provide the option for a virtual showing. It allows us to reach a greater market, namely people who are just moving to the city and haven't arrived yet. We record these videos right when we purchase a building and keep them on file so that they can be sent out anytime in the future.


STEP 4: THE FORMAL APPLICATION


The Province of Ontario and many other provincial and state governments have downloadable templates from their websites that can be used as an application form.

2022_07_13 - Province of Ontario - Ontario Residential Property Application Form
.pdf
Download PDF • 95KB

We generally recommend using this template because it is quite comprehensive, will save you time and will help you avoid asking any unnecessary questions.

In addition to the application form, you'll want to collect the following information and documents. Proof of employment, pay stubs and a soft or hard credit check.


On top of making sure that your unit is in good hands, your responsible to make sure that these prospective tenants will be able to meet their new financial obligation (paying you rent!).


That means verifying the source and amount of their income to make sure that their income stable as well as predictable so that they will pay rent on time. We generally follow a 30% rule – that is, a renter typically spends roughly 30% of their gross income on rent but any more than 35% without a co-signer could start to raise flags.


Once you know that they're able to afford the rent, you need to figure out how likely they are to pay on time every month. This is where you'll want to either ask for a soft credit check (through their online banking portal or a service like Credit Karma) or a hard check through Equifax for instance.


STEP 5: CHECKING REFERENCES


Just like a job application, you'll want to be sure that the people living in your property are respectful, responsible and won’t cause you too many headaches.


Requesting 2-3 references is a good way to get a feel for the potential renter. We typically ask for a personal reference as well as a past landlord.


While speaking to the past landlord, ask questions about the tenants behaviour, their payment history, if they caused any damage, and why they moved out.


In my experience, most landlords will be happy to have a quick 5-10 minute chat if it means that they can help out a fellow landlord and save you a few headaches.


Be mindful that the references might be fake. It's quite easy for an applicant to ask a friend if they can act as a past landlord and give a good reference.


While it is nearly impossible to verify these references, asking questions in a certain manner can give you a better indication as to whether the reference is in fact a previous landlord or not.


Rather than introducing yourself as a landlord, say that you are calling on behalf of your company and that you would like to speak about their experience with the applicant.


Start by asking how they know the person before going into specific questions about their tenancy.


STEP 6: CHOOSE YOUR TENANT


Now that you've gone through the process, you might have a number of qualified applicants. This is becoming more and more common as the housing shortage becomes worse so you'll need to know how to select the best one.


Stick to the application and the financials rather than following your gut because that can be a costly mistake. Which tenant is the most qualified, has the lowest chance of being disruptive or causing extra work or which one is willing to give you the best terms.


In some cases, desirable units at the right price will bring in dozens of applicants and some of them may offer to pay more, increase the deposit, offer to pay a chargeback for utilities or etc. To make things fair, we always go on a first come first serve basis when there are multiple qualified applicants with the same terms.


Once you've made your decision, it is important to notify the remaining applicants that their application was not successful. They may ask that you keep their information on file in case any of your other units become available. Doing so can save you time and effort in the future since they were already screened.


STEP 7: SIGN THE LEASE


When it comes to the lease, we always use and we recommend you use the standard Province of Ontario lease template. Most other provinces and states will offer similar lease templates for free.

2018_04_30 - Province of Ontario - Ontario Residential Tenancy Agreement
.pdf
Download PDF • 228KB

The template is self-explanatory, however, in the case that you need to add additional conditions as part of the lease, you'll want to attach and appendix to the lease and refer to it under section 15.


CONCLUSION


While it can be quite a laborious process, making sure that you follow all the steps to finding the right tenants is an important financial decision.


It's important that you collect all the right information such as the letter of employment, the 2 most recent pay stubs, the credit check and finally the references to make sure that you aren't missing anything as part of the application.


As you start renting out more and more units, you will become familiar with the process and you'll quickly notice how efficient finding a new tenant can be when you already have all the processes in place.


If you still have questions, please don't hesitate to contact us directly and one of our investment specialists will be more than happy to answer any of your questions about screening tenants. Alternatively, if you are interested in reaching your financial goals sooner, they will be more than happy to explain how you can do by investing on autopilot.

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