5 Ways Thorough Tenant Screening Lowers Risk
When it comes to owning a property for rental purposes, the stability of your rental property is significantly influenced by the tenants you attract and retain. Our property managers recognize the critical importance of tenant screening can safeguard their clients’ assets and even boost ROI. Here are 5 compelling ways that thorough tenant screening contributes to less risk and steady cash flow.
A high tenant turnover can be the bane of any rental income strategy. Not only does it incur additional costs in the form of property advertising and potential refurbishments, but it also leads to lost rental income during vacancy periods. It is undeniable that there will be maintenance costs between tenants, even if the tenants leave the home in excellent condition. There will always be painting touch ups or updating to be completed so that the property holds its rental value. Holding costs for vacancy is by far the easiest way to wipe out any sort of equity an owner has in a home. Currently, the San Antonio market is sitting at 62 days on market for single family rental homes. That’s over 2 months of income that the property owner is missing out on while still having to cover the mortgage and upkeep. By practicing a comprehensive tenant screening, a property manager can identify applicants who are more likely to be long-term, stable renters, hence minimizing tenant turnover and its associated costs. Hendricks Property Management’s screening process includes checking for past rental history, consistency in employment, and records on the applicant’s credit report.
2. Mitigating Property Damage
A tenant's previous behavior is often the most reliable indicator of future conduct. Our tenant screening includes positive referrals from previous landlords. A rental verification that uncovers history of property damage or negligence is a significant red flag during the selection process. Generally speaking, reputable tenants take better care of their homes, which means lower maintenance costs and preservation of the property’s value over time. This approach is not merely about reducing expenses; it’s an investment into the longevity and appeal of the property within competitive market conditions.
3. Ensuring Reliable Cash Flow
An exhaustive tenant screening process, including verification of income and employment stability, ensures that tenants have the ability to regularly pay rent, thus maintaining reliable cash flow. One of the greatest risks to a landlord's profitability is the disruption caused by tenants who fall behind on rent. By setting clear income criteria and verifying these details with due diligence, we improve the likelihood of timely, consistent rent collection.
4. Avoiding Legal Expenses
Evicting a tenant is an unpleasant and costly process for all parties involved and is best to avoid with preventive measures. Proper screening reduces the risk of renting to a tenant who may end up violating lease terms necessitating legal action for eviction. Leveraging services that perform thorough background checks can preemptively identify potential risks and save landlords from future legal headaches and financial losses.
5. Maintaining Reputation and Property Value
Your rental property's reputation in the market directly affects its desirability, and ultimately, its value. Committing to a meticulous tenant selection procedure ensures that we attract high-quality tenants. This can elevate the status of your property in the market, making it more attractive to prospective tenants and, should the time come, buyers.
By instituting a methodical and thorough tenant screening process, landlords can significantly increase their profitability and ROI. It’s a critical step in protecting your investment and securing long-term financial stability. While the process requires time and effort, the assurance of having reliable, responsible residents is invaluable. It not only strengthens the immediate financial performance of your rental income but also underpins the enduring value of your real estate assets.
We encourage landlords and real estate investors to view comprehensive tenant screening as an indispensable component of leasing. Fostering relationships with tenants who respect your property and fulfill their financial commitments will reinforce the stability and prosperity of your rental investments. Persistently sophisticated tenant screening is not just about safeguarding; it's about strategically enhancing the income potential of your property.
If you are ready to take the next step with your rental property, contact us to discuss how our screening process can help you be successful in the long game of real estate investing.