With real estate prices at historic lows, more and more people are becoming real estate investors. These novice investors feel the biggest obstacle is finding a “great deal” that makes sense. Once they find this “great deal” they believe the money will just start rolling in. I have had several novice investors in the last month say, “just put someone in the home, I need the rent money to pay the mortgage.” I can say without any hesitation, this is a very bad move. Needing rent money to pay the next mortgage payment causes stress and can lead to bad decisions!
The purpose of tenant screening is to acquire a clear picture of the renter’s background. Specifically, landlords can explore the tenant’s rental history, credit report, criminal background and employment. This then allows the landlord to make an appropriate decision as to whether or not the tenant will make a proper fit for their investment property. Again, this is no minor point. Signing a lease agreement with a “bad prospect” comes with many serious problems best avoided. For example, a potential renter that has an extensive history of not paying his bills clearly would not be a safe bet to make his rent obligations on time. Such a renter can turn an lucrative real estate venture into an unstable one within a few months.
Then, there are those tenants that could be labeled even worse renters. Renters that allow their dwellings to fall into complete disarray can create a number of repair costs and other expenses. However, a quick call to their previous landlords could reveal such problem renters with a single phone call.
If there was a moral to this story it would be this: don’t let mortgage payment cloud your judgement, perform a tenant screening prior to renting your Investment property. It will eliminate many hassles and problems long before they even start.
