October 21, 2024 • 24 mins
Tenant screening software is becoming more and more popular now that landlords are working to improve their applicant vetting processes.
In this episode, we will cover what tenant screening software is, why it matters, and how it compares to other options like using property management software or hiring a property manager.
We’ll also cover a couple real-life horror stories about tenant screening gone wrong and the legal liabilities landlords need to be aware of.
So, whether you're using screening software or not, by knowing the risks, the best practices, and the best tools can make or break your rental business.
Of course, we will also compare some of the top software options out there.
LINKS
👉 Episode 49: Analyzing Credit Reports for Tenant Selection
👉 Our FREE Landlord Verification Form
👉 SmartMove Tenant Screening Software
👉 Tenant Alert, Tenant Screening Software
👉 RentPrep Tenant Screening Software
👉 My Rental Tenant Screening Software
👉 The Top 5 Prescreening Questions We Always Ask and WHY
Connect with Us:
🌎 Visit our website
📧 Subscribe to our newsletter.
👆Click HERE for our FREE Landlord Forms and Doc’s
🤳Text Us: 650-489-4447. We love questions and love letters!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Stacie (00:00):
On the flip side, if you don't screen your tenants at all
(00:03):
and things go south, say theydamage your property or commit a
crime on the premises, you couldbe liable for negligent
screening.
In some states courts have ruledthat landlords have a duty to
thoroughly vet tenants,especially when it comes to
safety concerns.
So not screening your tenants isrisky, but using inaccurate and
(00:25):
incomplete screening reports canbe just as dangerous.
And that's why you need to usereliable software that complies
with the Fair Credit ReportingAct and other state regulations.
You're protecting yourself asmuch as you're protecting your
property.
Welcome to your landlordresource podcast many moons ago.
(00:48):
When I started as a landlord, Iwas as green as it gets.
I may have had my real estatelicense, but I lack confidence
in the hands on experienceneeded when it came to dealing
with tenants, leases,maintenance, and bookkeeping.
After many failed attempts, fastforward to today.
Kevin and I have doubled ourdoors and created an organized,
professionally operated rentalproperty business.
(01:10):
Want to go from overwhelmed toconfident?
If you're an ambitious landlordor maybe one in the making, join
us as we provide strategies andteach actionable steps to help
you reach your goals and thelifestyle you desire.
All while building a streamlinedand profitable rental property
business.
This is your landlord resourcepodcast.
(01:33):
Hey everyone, welcome back to the Your Landlord
Resource Podcast.
I'm Stacie Casella, and asalways, I'm here with my co host
Kevin Kilroy
Kevin (01:42):
Hey there, landlords.
We hope you're all doing wellbecause we've got a great
episode today, all about a topicthat's critical for all of us
self managing landlords.
Because today we are discussingtenant screening software.
Stacie (01:58):
Yep.
So today we're going to coverwhat it is, why it matters, and
how it compares to other optionsthat are out there like using a
property management software orhiring a property manager to do
your tenant screening for you.
We'll also cover some real lifehorror stories about tenant
screening gone wrong and thelegal liabilities landlords need
(02:20):
to be aware of.
So whether you're usingscreening software or not, by
knowing the risks, the bestpractices, and the best tools
can make or break your rentalproperty business.
We will also compare some of thetop software options out there
as well.
Kevin (02:37):
Alright, so let's start by breaking down why tenant
screening is so important forlandlords.
And at the core, tenantscreening is about minimizing
risk, right?
You want tenants who are goingto pay rent on time, take care
of your property, and not causeany problems.
Screening can help you avoidtenants with a history of late
(02:59):
payments, evictions, or evencriminal backgrounds.
I mean we've all heard thenightmare stories of landlords
who ended up with tenants thatdidn't just miss a month's rent,
but destroyed the property inthe process.
So tenant screening helps youspot these red flags before they
move in.
It's all about using data, youknow, like credit reports,
(03:22):
eviction history, criminalrecords to make an informed
decision.
But there are a few wayslandlords can go about this.
Stacie (03:30):
Yeah, you can certainly do it yourself using tenant
screening software, which iswhat we choose to do.
You can use property managementsoftware that includes tenant
screening features.
Or, you can hire a propertymanager and they can handle
everything for you.
Each option has its pros andcons.
So let's go ahead and breakthose down for you.
(03:52):
First, let's look at usingtenant screening software on its
own.
And the big pro here is thatit's usually very cost
effective.
You're in control, and you canpick a service that fits your
budget.
The data is usually availablefairly quickly, sometimes within
minutes, depending on theservice that you choose.
The downside, though, is thatyou need to know what you're
(04:16):
looking for.
And some landlords may not feelconfident interpreting credit
scores or deciding what types ofcriminal records are deal
breakers.
Kevin (04:24):
Let me jump in here real quick and remind all of our
listeners that we've done acouple of podcast episodes on
both how to read a creditreport, and understanding Fair
Housing and criminal backgroundchecks.
We will link those in the shownotes for you to reference.
Stacie (04:39):
Oh yeah.
Perfect.
Thank you for that.
Uh, those both will be veryhelpful to listen to along with
what we're talking about today.
Now it's important to rememberthat even the best tenant
screening software has itslimitations.
For example, it won'tnecessarily tell you if a tenant
is difficult to work with ormaybe they're a nuisance to
(05:00):
their neighbors because you'restill missing that human
element, which for us, is wheredoing a full background check,
including calling the currentand past landlords, is crucial.
And remember, if the currentlandlord wants them out, they
may lie to you and tell you thatthey're great.
You'll get your best informationfrom the previous two landlords
(05:21):
who have nothing to lose bytelling you the truth.
And for a quick side note, wehave a free landlord
verification form that you candownload and use when you're
making those calls.
So, we'll link that in the shownotes too.
Kevin (05:33):
All right.
So, getting back to missing thathuman element.
That's where property managementsoftware comes in.
Now, many of these platformslike TurboTenant or Avail
include tenant screening as partof a larger suite of tools.
So you're not just gettingbackground checks, you also get
rent collection features,maintenance requests tracking
(05:55):
and more.
Which sounds great, but thosecosts can add up.
And just like with tenantscreening software alone, you
still need to make the finalcall on whether to accept the
applicant as a tenant.
Sometimes, actually speakingwith an applicant's landlord,
employers, and personalreferences can help you make
(06:16):
your decision to accept or denythem.
Now for us, just relying oninformation that a computer
software spits out, it's reallynot advisable.
This is also why our acceptanceprocess usually takes at least
two days and sometimes longer.
I would guess many, if not mostself managing landlords, don't
(06:36):
take the time necessary toprocess an application, to
gather all the informationneeded to make an informed
decision.
Which brings us to the thirdoption, hiring a property
manager.
They can take care ofeverything, tenant screening,
maintenance, rent collection.
But that service comes with ahefty price tag.
(06:57):
And we're talking about anywherefrom 5 to 12 percent of your
rental income, depending on themarket and the size of your
rental property.
However, you can hire a propertymanager to just do the tenant
placement, which usually costssomewhere in the range of one
month's rent.
Again, the amount they chargedepends on the market.
Keep in mind that if you onlyhire them to place the tenant
(07:20):
and not manage the property,they really do not have a stake
in it.
If you hire them for fullmanagement, you should feel
confident that they will place awell vetted applicant in there
just for their own peace ofmind.
Stacie (07:33):
Yeah, you still have to trust that the property manager
is doing a thorough job.
You know, sometimes landlordsassume that hiring a property
manager means they don't have toworry about anything, but
mistakes can still happen.
So now that we have discussedthe three options, you can see
that there's a balance to bestruck here, right?
(07:53):
Tenant screening software givesyou control and can be
affordable, but you're doing thework yourself.
Property management softwarehelps automate some of those
processes and hiring a propertymanager is the most hands off
option, but at a much highercost.
Alright, so let's talk aboutwhat can go wrong.
Unfortunately, even the mostdiligent landlords can run into
(08:16):
issues, and tenant screeninghorror stories are more common
than you think.
Like, there's a story of alandlord who used a basic
screening service that didn'tcheck for an eviction history.
Everything looked great on thecredit report, but it turns out
the tenant had been evictedmultiple times.
And that landlord did not findout about those eviction issues,
(08:37):
until they had to start aneviction proceeding themselves a
few months later.
Kevin (08:42):
Which goes back to the human side of tenant screening
and making sure you are callingand checking with the
applicant's previous landlordsand their current employer.
Bottom line guys, you do notwant to cut corners when it
comes to screening.
Stacie (08:56):
Yeah, and it's not just about bad tenants.
Landlords also need to becareful because tenant screening
can lead to lawsuits.
There have been cases wherescreening software had
inaccurate or outdatedinformation.
Like maybe it showed a criminalconviction that had been
expunged, or flagged someone foran eviction that was actually
dismissed.
(09:16):
As we mentioned in our lastepisode about criminal
background checks, so that wouldbe episode 83 I believe,
landlords who rely solely onthat faulty information can face
discrimination lawsuits.
For example, under the FairHousing Act, if a tenant claims
that they were rejected based oninaccurate criminal background
(09:37):
information, and that decisiondisproportionately affects a
protected class, it can lead tolegal trouble.
So let's talk a little bit aboutthe liability of using, or not
using, tenant screeningsoftware.
First off, landlords areresponsible for complying with
the Fair Credit Reporting Act.
And the acronym of that is FCRA.
(10:00):
That means you need the tenant'swritten permission to run a
background check.
And if you decide not to rent tothem based on that report, you
have to provide an adverseaction notice.
This gives a tenant a chance todispute the information that you
used to deny them.
Kevin (10:16):
And you guys, this isn't just about being courteous, it's
a legal requirement.
If you fail to provide thatnotice, you could be hit with
fines and the tenant couldpossibly even sue.
Stacie (10:28):
Yeah, on the flip side, if you don't screen your tenants
at all and things go south, saythey damage your property or
commit a crime on the premises,you could be liable for
negligent screening.
In some states courts have ruledthat landlords have a duty to
thoroughly vet tenants,especially when it comes to
safety concerns.
(10:48):
So not screening your tenants isrisky, but using inaccurate and
incomplete screening reports canbe just as dangerous.
And that's why you need to usereliable software that complies
with the Fair Credit ReportingAct and other state regulations.
You're protecting yourself asmuch as you're protecting your
property.
Kevin (11:09):
All right.
So now that we've covered therisks, let's look at some of the
best tenant screening softwareoptions for self managing
landlords.
These are tools that not onlyhelp you stay compliant, but
also give you accurate, reliableinformation when doing your
background checks on applicants.
And per usual, we will link eachof the four softwares we are
(11:29):
discussing today in our shownotes.
Alright, first up is TransUnionSmartMove.
This is one of the most popularoptions out there and for pretty
good reason.
It was built specifically forlandlords.
It's powered by TransUnion, oneof the major credit bureaus.
So you're getting real time datathat's incredibly accurate.
(11:51):
You get credit reports, criminalbackground checks, and eviction
history all in one place.
it is great for landlords whowant quick results because you
usually get the full report in24 hours or less and a lot of
times they say within minutes.
And the cost is prettyreasonable, about$40 per
screening.
It's FCRA compliant, so youdon't have to worry about legal
(12:14):
issues.
And it's easy to use.
Another solid option is MyRentalby CoreLogic.
And if you're unfamiliar withthem, CoreLogic is a company
that provides data and analyticsfor the real estate, mortgage,
insurance, and other industries.
MyRental is known for itsaccurate eviction history
reports, which is huge forlandlords who want to avoid
(12:36):
repeat offenders.
It also has a great userinterface and offers criminal
background checks acrossmultiple jurisdictions.
And MyRental offers flexiblepricing.
You can pay by report, whichadds up pretty fast, or just get
the Premium Tenant ScreeningReport, which at the time of
(12:56):
this episode runs around$38, Ibelieve.
It's affordable and gives youdetailed data.
Stacie (13:04):
So the one thing that I want to note about MyRentals
Tenant Screening is that theyhave what is called a TU score.
Just as a credit score predictsthe likelihood that a loan will
be paid, the TU rental scoreassesses risk by helping to
predict the likelihood that atenant will fulfill a lease
obligation.
This score is engineered forrental screening and is designed
(13:27):
to provide a better estimationof the risk to your future
rental property income than atypical credit score will.
Now, let me talk a little bitabout RentPrep, which is powered
by Stessa Property ManagementSoftware.
Now what sets RentPrep apart isthat they offer manual reviews
of the reports.
(13:48):
So real human experts arelooking at the data, especially
the criminal background checksto make sure that everything is
accurate and that nothing isoverlooked.
It's a little more expensive,but that extra layer of
protection may be worth it foryou.
It's around$50 for their premiumpackage.
And for an extra$10 they will goahead and verify the income for
(14:09):
you.
They say you get the report backa few hours after submitting it
but not sure how that works withthe income verification part.
My guess is it's closer to 24hours, which is still a pretty
quick turnaround.
But the peace of mind that youget with the manual review makes
it a really great option.
Especially for landlords whohave had bad experiences with
(14:31):
automated reports in the past.
And lastly, we have TenantAlert,which we have mentioned earlier
in other podcasts as well, andthat is a software that we use.
We started out using a softwarethat was available to us as part
of the Sacramento Rental HousingAssociation, but that software
was bought out by tenant alert.
(14:52):
So here we are now.
We have been using them foryears and have been very happy
with the results so far.
So TenantAlert is another FCRAcompliant service that provides
quick, reliable results.
It's ideal for landlords whowant to keep costs low.
And where a couple of the othersoftware have this option as
(15:13):
well, It has an option wheretenants can pay for the report
themselves.
Pricing starts around$24.95 andgoes as high as$49.95, which is
still pretty affordable.
Here's the thing, TenantAlertprovides the only instant tenant
screening service with what'scalled a lease guarantee.
(15:34):
You can select from a number ofreports, including credit
background checks, and here'sthe key, nationwide criminal and
nationwide eviction.
Some of them are only in theareas in the state of where
you're at.
You can add up to fourapplicants in one order to
screen multiple roommates, whichhas been really nice for us in
(15:56):
our two bedroom units.
You can use your own applicationor you can send off their tenant
alert application when you'revetting the tenants.
You can pay for the creditscreening or you can send a link
to the applicant for them to payfor the service.
And their reports are reallyeasy to read.
Uh, they have summaries to helpyou determine if the applicant
(16:19):
meets your qualifications ornot.
So the other thing they do isthey rate the applicant on a
scale of a hundred and offer alease guarantee for up to$10,000
of protection, and that'sagainst damages, lost rent or
legal fees.
And that starts at$199 a yearthat you or the tenant can pay.
(16:40):
So essentially that leaseguarantee can replace having to
ask your tenant to get aguarantor or a co signer should
the reports come back with suchissues as credit issues or late
rent payments.
You know often we will getrecent graduates coming to work
at the California capital whichis a couple miles away from our
Sacramento complex.
And those graduates usually havelittle or no credit history and
(17:03):
have a hard time finding a placeto rent.
So in order to give them achance, we generally will ask to
have a family member to be aguarantor on their lease just in
case they default or in case ofany major damages.
This lease guarantee thatTenantAlert offers is pretty
much the same thing.
It's like an insurance policythat covers a tenant for lost
(17:26):
rent, damages, and even somereimbursement on eviction fees.
And you don't have to go throughand do credit and background
checks on that guarantor orcosigner like you would have to
do.
You could just pay the$199 orwhatever the amount comes to and
get that lease guarantee.
Kevin (17:44):
And hey, so far so good on our end with TenantAlert.
So to sum up, if you're lookingfor the best combination of
speed, accuracy, andaffordability, TransUnion Smart
Move, My Rental, Rent Prep, andTenantAlert are all solid
options.
Each one has its strengths, soit's really about what fits your
(18:08):
needs as a landlord.
Okay, we have talked about whateach software can offer, now
once you get these screeningreports, how can you be sure the
information is accurate?
This is especially importantwhen it comes to criminal
records or eviction history.
And like Stacie mentionedearlier, one step you can take
is to double check references.
(18:30):
Contact previous landlords oremployers to verify the
information on the application.
Make sure everything matcheswhat's in the report.
Another thing you can do is toask for pay stubs or bank
statements to verify income.
A credit report will give you asense of their financial
responsibility, but you know,seeing actual proof of income
(18:50):
can give you that extraconfidence and allow you to
evaluate their net income versustheir gross income.
Some employees have a lot ofdeduction for things like,
medical benefits, uh, 401k orretirement investments that can
be several hundred dollars amonth.
When you compare that actual netincome to the credit report, it
(19:11):
does appear the applicant willhave enough money to pay your
rent each month.
You know, it's just some thingslike that to think about.
And you guys, this was alldiscussed in episode 49 and it
was called Analyzing CreditReports for Tenant Selection and
we break down how to read acredit report.
So, check it out.
It's really a great companionepisode to today's.
(19:34):
And if you're really concernedabout accuracy, using a service
like Rent Prep where humanexperts review the data might be
a good option for your peace ofmind
Stacie (19:45):
Yeah, I definitely agree with that.
If you don't feel that you havethe time or want to make the
effort needed Rent Prep is agreat option.
You just need to be certain thatyou have all the information you
need to make your decisionbecause it's different for all
of us.
All right, let's wrap up withsome important legal
considerations because this issomething every landlord needs
(20:06):
to be aware of.
Tenant screening laws can varyfrom state to state, and it's
critical that landlords staycompliant.
So as we say in nearly everysingle episode, know your
landlord tenant laws for thestate and area where your
rentals are located.
For example, in California,there's a cap on how much we can
(20:27):
charge for tenant screeningfees, and you have to follow
strict rules when it comes tocriminal background checks.
New York has similarrestrictions, especially in New
York City where they've passed aFair Chance Housing Act limiting
when you can check criminalhistory.
Kevin (20:43):
Yeah, that's right.
And in Washington State,landlords are required to accept
what are called portable tenantscreening reports if a tenant
provides one.
Meaning you can't make thetenant pay for another report if
they already have one that'srecent and meets the criteria.
So that means you now are outthat money paying for any
reports you may want.
(21:04):
Which means what?
You should be selective aboutprocessing applications.
Not accepting applications,processing them.
The best way to weed out thoseapplicants that may not qualify
is pre screening them.
You may also interview thembefore accepting their
applications.
Essentially, you're telling themwhat your criteria is and if
(21:27):
they cannot meet them, they willremove themselves from your
applicant's pool.
We do offer a free download ofsome of the pre screening
questions we ask and why we askthem.
We will link them in the shownotes if you'd like to grab
them.
Getting back to the landlordtenant laws, those are just a
few examples.
Each state has its own rules, solandlords need to be careful and
(21:51):
make sure they're following bothstate and federal laws,
especially when it comes to theFCRA compliance.
So to wrap it up, tenantscreening is a crucial part of
running a rental business.
But there's really no one sizefits all solution.
Whether you use tenant screeningsoftware, property management
(22:12):
software, or hire a propertymanager, it's important to
understand the pros and cons ofeach method and make sure you're
staying legally compliant.
Stacie (22:21):
Absolutely.
And remember, you're not justprotecting yourself from bad
tenants, you're also protectingyour business from legal risks.
And hopefully, if you decide toinvest in reliable tenant
screening software, like theones we discussed today, you can
save yourself a lot of headachesin the long run.
So that's it for today's episodeof Your Landlord Resource.
(22:45):
If you found this informationhelpful, don't forget to
subscribe or follow on yourfavorite podcast platform and
leave us a review.
If you have any questions orsuggestions for future episodes,
we have a couple ways you cancontact us.
The best and easiest way is toemail us.
We can be reached at Stacie atyourlandlordresource.
(23:05):
com.
That's Stacie with an I E.
Or Kevin at your landlordresource.
com.
You can also text us at 6 5 0 48 9 4 4 4 7.
Or you can click a link in theshow notes to text us too.
If you use that one, pleaseleave your email for us to
(23:28):
respond because that is a oneway only texting service.
And of course, you can reach outto us on social media.
Instagram and Facebook are theones that we use most often.
And all the links will be in theshow notes for you to access as
well.
If you'd like to download any ofthe free forms that we offer,
like those prescreeningquestions, or if you want to
(23:50):
sign up for our free weeklynewsletter, you can access all
of those links in the show notestoo.
I think that's it.
Thank you so much for taking thetime out of your busy day to
listen to what we have to sayabout self managing your rental
properties.
We sincerely do appreciate eachand every one of you.
Until next time, you've got thislandlords.
On the flip side, if you don't screen your tenants at all
(00:03):
and things go south, say theydamage your property or commit a
crime on the premises, you couldbe liable for negligent
screening.
In some states courts have ruledthat landlords have a duty to
thoroughly vet tenants,especially when it comes to
safety concerns.
So not screening your tenants isrisky, but using inaccurate and
(00:25):
incomplete screening reports canbe just as dangerous.
And that's why you need to usereliable software that complies
with the Fair Credit ReportingAct and other state regulations.
You're protecting yourself asmuch as you're protecting your
property.
Welcome to your landlordresource podcast many moons ago.
(00:48):
When I started as a landlord, Iwas as green as it gets.
I may have had my real estatelicense, but I lack confidence
in the hands on experienceneeded when it came to dealing
with tenants, leases,maintenance, and bookkeeping.
After many failed attempts, fastforward to today.
Kevin and I have doubled ourdoors and created an organized,
professionally operated rentalproperty business.
(01:10):
Want to go from overwhelmed toconfident?
If you're an ambitious landlordor maybe one in the making, join
us as we provide strategies andteach actionable steps to help
you reach your goals and thelifestyle you desire.
All while building a streamlinedand profitable rental property
business.
This is your landlord resourcepodcast.
(01:33):
Hey everyone, welcome back to the Your Landlord
Resource Podcast.
I'm Stacie Casella, and asalways, I'm here with my co host
Kevin Kilroy
Kevin (01:42):
Hey there, landlords.
We hope you're all doing wellbecause we've got a great
episode today, all about a topicthat's critical for all of us
self managing landlords.
Because today we are discussingtenant screening software.
Stacie (01:58):
Yep.
So today we're going to coverwhat it is, why it matters, and
how it compares to other optionsthat are out there like using a
property management software orhiring a property manager to do
your tenant screening for you.
We'll also cover some real lifehorror stories about tenant
screening gone wrong and thelegal liabilities landlords need
(02:20):
to be aware of.
So whether you're usingscreening software or not, by
knowing the risks, the bestpractices, and the best tools
can make or break your rentalproperty business.
We will also compare some of thetop software options out there
as well.
Kevin (02:37):
Alright, so let's start by breaking down why tenant
screening is so important forlandlords.
And at the core, tenantscreening is about minimizing
risk, right?
You want tenants who are goingto pay rent on time, take care
of your property, and not causeany problems.
Screening can help you avoidtenants with a history of late
(02:59):
payments, evictions, or evencriminal backgrounds.
I mean we've all heard thenightmare stories of landlords
who ended up with tenants thatdidn't just miss a month's rent,
but destroyed the property inthe process.
So tenant screening helps youspot these red flags before they
move in.
It's all about using data, youknow, like credit reports,
(03:22):
eviction history, criminalrecords to make an informed
decision.
But there are a few wayslandlords can go about this.
Stacie (03:30):
Yeah, you can certainly do it yourself using tenant
screening software, which iswhat we choose to do.
You can use property managementsoftware that includes tenant
screening features.
Or, you can hire a propertymanager and they can handle
everything for you.
Each option has its pros andcons.
So let's go ahead and breakthose down for you.
(03:52):
First, let's look at usingtenant screening software on its
own.
And the big pro here is thatit's usually very cost
effective.
You're in control, and you canpick a service that fits your
budget.
The data is usually availablefairly quickly, sometimes within
minutes, depending on theservice that you choose.
The downside, though, is thatyou need to know what you're
(04:16):
looking for.
And some landlords may not feelconfident interpreting credit
scores or deciding what types ofcriminal records are deal
breakers.
Kevin (04:24):
Let me jump in here real quick and remind all of our
listeners that we've done acouple of podcast episodes on
both how to read a creditreport, and understanding Fair
Housing and criminal backgroundchecks.
We will link those in the shownotes for you to reference.
Stacie (04:39):
Oh yeah.
Perfect.
Thank you for that.
Uh, those both will be veryhelpful to listen to along with
what we're talking about today.
Now it's important to rememberthat even the best tenant
screening software has itslimitations.
For example, it won'tnecessarily tell you if a tenant
is difficult to work with ormaybe they're a nuisance to
(05:00):
their neighbors because you'restill missing that human
element, which for us, is wheredoing a full background check,
including calling the currentand past landlords, is crucial.
And remember, if the currentlandlord wants them out, they
may lie to you and tell you thatthey're great.
You'll get your best informationfrom the previous two landlords
(05:21):
who have nothing to lose bytelling you the truth.
And for a quick side note, wehave a free landlord
verification form that you candownload and use when you're
making those calls.
So, we'll link that in the shownotes too.
Kevin (05:33):
All right.
So, getting back to missing thathuman element.
That's where property managementsoftware comes in.
Now, many of these platformslike TurboTenant or Avail
include tenant screening as partof a larger suite of tools.
So you're not just gettingbackground checks, you also get
rent collection features,maintenance requests tracking
(05:55):
and more.
Which sounds great, but thosecosts can add up.
And just like with tenantscreening software alone, you
still need to make the finalcall on whether to accept the
applicant as a tenant.
Sometimes, actually speakingwith an applicant's landlord,
employers, and personalreferences can help you make
(06:16):
your decision to accept or denythem.
Now for us, just relying oninformation that a computer
software spits out, it's reallynot advisable.
This is also why our acceptanceprocess usually takes at least
two days and sometimes longer.
I would guess many, if not mostself managing landlords, don't
(06:36):
take the time necessary toprocess an application, to
gather all the informationneeded to make an informed
decision.
Which brings us to the thirdoption, hiring a property
manager.
They can take care ofeverything, tenant screening,
maintenance, rent collection.
But that service comes with ahefty price tag.
(06:57):
And we're talking about anywherefrom 5 to 12 percent of your
rental income, depending on themarket and the size of your
rental property.
However, you can hire a propertymanager to just do the tenant
placement, which usually costssomewhere in the range of one
month's rent.
Again, the amount they chargedepends on the market.
Keep in mind that if you onlyhire them to place the tenant
(07:20):
and not manage the property,they really do not have a stake
in it.
If you hire them for fullmanagement, you should feel
confident that they will place awell vetted applicant in there
just for their own peace ofmind.
Stacie (07:33):
Yeah, you still have to trust that the property manager
is doing a thorough job.
You know, sometimes landlordsassume that hiring a property
manager means they don't have toworry about anything, but
mistakes can still happen.
So now that we have discussedthe three options, you can see
that there's a balance to bestruck here, right?
(07:53):
Tenant screening software givesyou control and can be
affordable, but you're doing thework yourself.
Property management softwarehelps automate some of those
processes and hiring a propertymanager is the most hands off
option, but at a much highercost.
Alright, so let's talk aboutwhat can go wrong.
Unfortunately, even the mostdiligent landlords can run into
(08:16):
issues, and tenant screeninghorror stories are more common
than you think.
Like, there's a story of alandlord who used a basic
screening service that didn'tcheck for an eviction history.
Everything looked great on thecredit report, but it turns out
the tenant had been evictedmultiple times.
And that landlord did not findout about those eviction issues,
(08:37):
until they had to start aneviction proceeding themselves a
few months later.
Kevin (08:42):
Which goes back to the human side of tenant screening
and making sure you are callingand checking with the
applicant's previous landlordsand their current employer.
Bottom line guys, you do notwant to cut corners when it
comes to screening.
Stacie (08:56):
Yeah, and it's not just about bad tenants.
Landlords also need to becareful because tenant screening
can lead to lawsuits.
There have been cases wherescreening software had
inaccurate or outdatedinformation.
Like maybe it showed a criminalconviction that had been
expunged, or flagged someone foran eviction that was actually
dismissed.
(09:16):
As we mentioned in our lastepisode about criminal
background checks, so that wouldbe episode 83 I believe,
landlords who rely solely onthat faulty information can face
discrimination lawsuits.
For example, under the FairHousing Act, if a tenant claims
that they were rejected based oninaccurate criminal background
(09:37):
information, and that decisiondisproportionately affects a
protected class, it can lead tolegal trouble.
So let's talk a little bit aboutthe liability of using, or not
using, tenant screeningsoftware.
First off, landlords areresponsible for complying with
the Fair Credit Reporting Act.
And the acronym of that is FCRA.
(10:00):
That means you need the tenant'swritten permission to run a
background check.
And if you decide not to rent tothem based on that report, you
have to provide an adverseaction notice.
This gives a tenant a chance todispute the information that you
used to deny them.
Kevin (10:16):
And you guys, this isn't just about being courteous, it's
a legal requirement.
If you fail to provide thatnotice, you could be hit with
fines and the tenant couldpossibly even sue.
Stacie (10:28):
Yeah, on the flip side, if you don't screen your tenants
at all and things go south, saythey damage your property or
commit a crime on the premises,you could be liable for
negligent screening.
In some states courts have ruledthat landlords have a duty to
thoroughly vet tenants,especially when it comes to
safety concerns.
(10:48):
So not screening your tenants isrisky, but using inaccurate and
incomplete screening reports canbe just as dangerous.
And that's why you need to usereliable software that complies
with the Fair Credit ReportingAct and other state regulations.
You're protecting yourself asmuch as you're protecting your
property.
Kevin (11:09):
All right.
So now that we've covered therisks, let's look at some of the
best tenant screening softwareoptions for self managing
landlords.
These are tools that not onlyhelp you stay compliant, but
also give you accurate, reliableinformation when doing your
background checks on applicants.
And per usual, we will link eachof the four softwares we are
(11:29):
discussing today in our shownotes.
Alright, first up is TransUnionSmartMove.
This is one of the most popularoptions out there and for pretty
good reason.
It was built specifically forlandlords.
It's powered by TransUnion, oneof the major credit bureaus.
So you're getting real time datathat's incredibly accurate.
(11:51):
You get credit reports, criminalbackground checks, and eviction
history all in one place.
it is great for landlords whowant quick results because you
usually get the full report in24 hours or less and a lot of
times they say within minutes.
And the cost is prettyreasonable, about$40 per
screening.
It's FCRA compliant, so youdon't have to worry about legal
(12:14):
issues.
And it's easy to use.
Another solid option is MyRentalby CoreLogic.
And if you're unfamiliar withthem, CoreLogic is a company
that provides data and analyticsfor the real estate, mortgage,
insurance, and other industries.
MyRental is known for itsaccurate eviction history
reports, which is huge forlandlords who want to avoid
(12:36):
repeat offenders.
It also has a great userinterface and offers criminal
background checks acrossmultiple jurisdictions.
And MyRental offers flexiblepricing.
You can pay by report, whichadds up pretty fast, or just get
the Premium Tenant ScreeningReport, which at the time of
(12:56):
this episode runs around$38, Ibelieve.
It's affordable and gives youdetailed data.
Stacie (13:04):
So the one thing that I want to note about MyRentals
Tenant Screening is that theyhave what is called a TU score.
Just as a credit score predictsthe likelihood that a loan will
be paid, the TU rental scoreassesses risk by helping to
predict the likelihood that atenant will fulfill a lease
obligation.
This score is engineered forrental screening and is designed
(13:27):
to provide a better estimationof the risk to your future
rental property income than atypical credit score will.
Now, let me talk a little bitabout RentPrep, which is powered
by Stessa Property ManagementSoftware.
Now what sets RentPrep apart isthat they offer manual reviews
of the reports.
(13:48):
So real human experts arelooking at the data, especially
the criminal background checksto make sure that everything is
accurate and that nothing isoverlooked.
It's a little more expensive,but that extra layer of
protection may be worth it foryou.
It's around$50 for their premiumpackage.
And for an extra$10 they will goahead and verify the income for
(14:09):
you.
They say you get the report backa few hours after submitting it
but not sure how that works withthe income verification part.
My guess is it's closer to 24hours, which is still a pretty
quick turnaround.
But the peace of mind that youget with the manual review makes
it a really great option.
Especially for landlords whohave had bad experiences with
(14:31):
automated reports in the past.
And lastly, we have TenantAlert,which we have mentioned earlier
in other podcasts as well, andthat is a software that we use.
We started out using a softwarethat was available to us as part
of the Sacramento Rental HousingAssociation, but that software
was bought out by tenant alert.
(14:52):
So here we are now.
We have been using them foryears and have been very happy
with the results so far.
So TenantAlert is another FCRAcompliant service that provides
quick, reliable results.
It's ideal for landlords whowant to keep costs low.
And where a couple of the othersoftware have this option as
(15:13):
well, It has an option wheretenants can pay for the report
themselves.
Pricing starts around$24.95 andgoes as high as$49.95, which is
still pretty affordable.
Here's the thing, TenantAlertprovides the only instant tenant
screening service with what'scalled a lease guarantee.
(15:34):
You can select from a number ofreports, including credit
background checks, and here'sthe key, nationwide criminal and
nationwide eviction.
Some of them are only in theareas in the state of where
you're at.
You can add up to fourapplicants in one order to
screen multiple roommates, whichhas been really nice for us in
(15:56):
our two bedroom units.
You can use your own applicationor you can send off their tenant
alert application when you'revetting the tenants.
You can pay for the creditscreening or you can send a link
to the applicant for them to payfor the service.
And their reports are reallyeasy to read.
Uh, they have summaries to helpyou determine if the applicant
(16:19):
meets your qualifications ornot.
So the other thing they do isthey rate the applicant on a
scale of a hundred and offer alease guarantee for up to$10,000
of protection, and that'sagainst damages, lost rent or
legal fees.
And that starts at$199 a yearthat you or the tenant can pay.
(16:40):
So essentially that leaseguarantee can replace having to
ask your tenant to get aguarantor or a co signer should
the reports come back with suchissues as credit issues or late
rent payments.
You know often we will getrecent graduates coming to work
at the California capital whichis a couple miles away from our
Sacramento complex.
And those graduates usually havelittle or no credit history and
(17:03):
have a hard time finding a placeto rent.
So in order to give them achance, we generally will ask to
have a family member to be aguarantor on their lease just in
case they default or in case ofany major damages.
This lease guarantee thatTenantAlert offers is pretty
much the same thing.
It's like an insurance policythat covers a tenant for lost
(17:26):
rent, damages, and even somereimbursement on eviction fees.
And you don't have to go throughand do credit and background
checks on that guarantor orcosigner like you would have to
do.
You could just pay the$199 orwhatever the amount comes to and
get that lease guarantee.
Kevin (17:44):
And hey, so far so good on our end with TenantAlert.
So to sum up, if you're lookingfor the best combination of
speed, accuracy, andaffordability, TransUnion Smart
Move, My Rental, Rent Prep, andTenantAlert are all solid
options.
Each one has its strengths, soit's really about what fits your
(18:08):
needs as a landlord.
Okay, we have talked about whateach software can offer, now
once you get these screeningreports, how can you be sure the
information is accurate?
This is especially importantwhen it comes to criminal
records or eviction history.
And like Stacie mentionedearlier, one step you can take
is to double check references.
(18:30):
Contact previous landlords oremployers to verify the
information on the application.
Make sure everything matcheswhat's in the report.
Another thing you can do is toask for pay stubs or bank
statements to verify income.
A credit report will give you asense of their financial
responsibility, but you know,seeing actual proof of income
(18:50):
can give you that extraconfidence and allow you to
evaluate their net income versustheir gross income.
Some employees have a lot ofdeduction for things like,
medical benefits, uh, 401k orretirement investments that can
be several hundred dollars amonth.
When you compare that actual netincome to the credit report, it
(19:11):
does appear the applicant willhave enough money to pay your
rent each month.
You know, it's just some thingslike that to think about.
And you guys, this was alldiscussed in episode 49 and it
was called Analyzing CreditReports for Tenant Selection and
we break down how to read acredit report.
So, check it out.
It's really a great companionepisode to today's.
(19:34):
And if you're really concernedabout accuracy, using a service
like Rent Prep where humanexperts review the data might be
a good option for your peace ofmind
Stacie (19:45):
Yeah, I definitely agree with that.
If you don't feel that you havethe time or want to make the
effort needed Rent Prep is agreat option.
You just need to be certain thatyou have all the information you
need to make your decisionbecause it's different for all
of us.
All right, let's wrap up withsome important legal
considerations because this issomething every landlord needs
(20:06):
to be aware of.
Tenant screening laws can varyfrom state to state, and it's
critical that landlords staycompliant.
So as we say in nearly everysingle episode, know your
landlord tenant laws for thestate and area where your
rentals are located.
For example, in California,there's a cap on how much we can
(20:27):
charge for tenant screeningfees, and you have to follow
strict rules when it comes tocriminal background checks.
New York has similarrestrictions, especially in New
York City where they've passed aFair Chance Housing Act limiting
when you can check criminalhistory.
Kevin (20:43):
Yeah, that's right.
And in Washington State,landlords are required to accept
what are called portable tenantscreening reports if a tenant
provides one.
Meaning you can't make thetenant pay for another report if
they already have one that'srecent and meets the criteria.
So that means you now are outthat money paying for any
reports you may want.
(21:04):
Which means what?
You should be selective aboutprocessing applications.
Not accepting applications,processing them.
The best way to weed out thoseapplicants that may not qualify
is pre screening them.
You may also interview thembefore accepting their
applications.
Essentially, you're telling themwhat your criteria is and if
(21:27):
they cannot meet them, they willremove themselves from your
applicant's pool.
We do offer a free download ofsome of the pre screening
questions we ask and why we askthem.
We will link them in the shownotes if you'd like to grab
them.
Getting back to the landlordtenant laws, those are just a
few examples.
Each state has its own rules, solandlords need to be careful and
(21:51):
make sure they're following bothstate and federal laws,
especially when it comes to theFCRA compliance.
So to wrap it up, tenantscreening is a crucial part of
running a rental business.
But there's really no one sizefits all solution.
Whether you use tenant screeningsoftware, property management
(22:12):
software, or hire a propertymanager, it's important to
understand the pros and cons ofeach method and make sure you're
staying legally compliant.
Stacie (22:21):
Absolutely.
And remember, you're not justprotecting yourself from bad
tenants, you're also protectingyour business from legal risks.
And hopefully, if you decide toinvest in reliable tenant
screening software, like theones we discussed today, you can
save yourself a lot of headachesin the long run.
So that's it for today's episodeof Your Landlord Resource.
(22:45):
If you found this informationhelpful, don't forget to
subscribe or follow on yourfavorite podcast platform and
leave us a review.
If you have any questions orsuggestions for future episodes,
we have a couple ways you cancontact us.
The best and easiest way is toemail us.
We can be reached at Stacie atyourlandlordresource.
(23:05):
com.
That's Stacie with an I E.
Or Kevin at your landlordresource.
com.
You can also text us at 6 5 0 48 9 4 4 4 7.
Or you can click a link in theshow notes to text us too.
If you use that one, pleaseleave your email for us to
(23:28):
respond because that is a oneway only texting service.
And of course, you can reach outto us on social media.
Instagram and Facebook are theones that we use most often.
And all the links will be in theshow notes for you to access as
well.
If you'd like to download any ofthe free forms that we offer,
like those prescreeningquestions, or if you want to
(23:50):
sign up for our free weeklynewsletter, you can access all
of those links in the show notestoo.
I think that's it.
Thank you so much for taking thetime out of your busy day to
listen to what we have to sayabout self managing your rental
properties.
We sincerely do appreciate eachand every one of you.
Until next time, you've got thislandlords.
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