Owning investment property can be very worthwhile. It is important to know that there are risks associated with being a Landlord, as there are with any rewarding venture. Knowing how to properly screen and prequalify Tenants will help you reduce your risks and give you piece of mind.
We suggest that you implement a few valuable requirements for all Tenant inquiries. Start by always using a rental application, requiring a letter of employment, checking credit scores and interviewing anyone you may consider renting your property to. This will provide you with plenty of information to make an educated decision and allow you to know as much as possible about prospective Tenants before you allow anyone to move into your property.
Use a Rental Application
First of all, implement using a mandatory rental application. A rental application is a submission through which a potential Tenant gives a potential Landlord information about themselves so that the Landlord may decide whether this is the best Tenant for their property.
The first step is to have a good application for them to fill out. It should include:
- Full Name
- Current Residential Address
- Two Phone Numbers
- Personal Email Address
- Social Insurance Number
- Previous Addresses *including Landlord references
- Emergency Contacts
- Employment & Income Information
- Marital Status
- Driver’s Licence Number & Licence Plate Number
- Type of Vehicle, Year
- Professional References
- Consent to a Credit Report
- Signed & Dated
Require a Tenant to complete all fields on the rental application. If spaces are left blank, such as previous address or social insurance number, they may have something that they want to hide from you. You are saving yourself time and money by refusing to accept applications with blanks, as it will typically deter anyone who is trying to hide the truth about their social or financial situation.
The residential history portion should list previous locations and time resided there, together with the prior Landlord’s name and contact information. Be sure to take the opportunity to contact previous Landlords and ask them the following:
- Did this person always pay their rent on time?
- If they were delinquent, please elaborate
- Did they maintain the property in good condition, free of damage?
- Were there any difficulties with this Tenant?
- Would you recommend this person as a Tenant?
Obtain Proof of Employment
The proof of employment portion of the rental application offers some valuable information. It is wise to request a current dated employment letter from the Tenant, printed on company letterhead and signed off by a manager or the human resources department. It should outline their specific information such as duration of time employed, position, approximate wage, a supervisor’s name and contact information. This will offer you some financial assurance. Ask yourself if the Tenant’s income is sufficient to comfortably pay the rental rate in addition to other lifestyle necessities.
Run a Credit Report
Have your prospective Tenant consent to you checking their credit score when completing their rental application. You typically require a person’s full name, current address, birthdate and SIN to access this information. A credit report will reveal their overall credit worthiness through a total score as well as delinquency habits, action taken by creditors and listing all open and closed loans. This will help you get a very good idea of the person’s financial history.
Meeting with a prospective Tenant and interviewing them is suggested. Ask about marital status and/or partners with name and address. Find out if there are any plans for anyone else to move in. It is wise that all occupants be named on a lease and that all occupants sign and be bound by the terms of the lease.
Aside from the questionnaire, it is wise to ask Tenants if they have pets and if so, which animals, what size and how many? The Residential Tenancies Act states unless this is a condominium whose declaration prohibits pets, there is little the landlord can do to force removal of a pet. The Ontario Residential Tenancies Act also states that any term of a lease preventing pets is unenforceable. Find out in advance if your prospective Tenant has plans to get a pet, if they have existing pets, and if they are suitable to you.
The year and type of vehicle a person drives may tell a lot as well.
We believe in asking lots of questions face to face.
- Why did they choose this property?
- Why are they moving?
- Have they given proper notice to previous Landlord?
- When would they like to move?
Questions like these will bring more out of someone than you might expect. If excuses about their luck or previous Landlords come into the conversation this might be a sign of things to come.
Finally, always ask for three references from existing and prior Landlords and a supervisor at work. Personal references are not good to go by!
Remember this is an investment so take the time needed to find the right Tenant. The more information you can get the better ALWAYS.