In 2022, evictions in Mecklenburg County increased to around 2,500 per month, exceeding 2019 levels. This places Charlotte among the leading cities nationwide for evictions.
Evictions aren't just bad news for tenants; they're a nightmare for you as a landlord, too. If your tenant appeals the process, you could be without any rental income for months while the necessary procedures run their course.
Carrying out a tenant background check is your best defense against bad tenants and costly evictions.
Tenant Background Check Basics
You must carry out tenant background checks on all rental applications for your investment property. If you don't, you could end up with bad tenants who don't pay their rent, damage your property, or conduct illegal activity on the premises.
It's illegal to conduct a background check on anyone without their written permission.
You can hire a property management company to conduct tenant screening or reach out to a business that specializes in background checks. You can also DIY tenant screening if you have the time and resources.
If you hire a professional, you're liable for the costs involved in tenant screening. You can charge a rental application fee to cover these costs.
These are the most important things to check when screening a prospective tenant:
Criminal History
Although it's not always a deal-breaker in the case of insignificant offenses in the distant past, it's vital to check a prospective tenant's criminal history.
Recent convictions or arrests could impact how they're likely to behave as tenants. You can get information about someone's criminal history from local or state law enforcement agencies.
Rental Performance
Reviewing information about a tenant's rental history proves whether they pay rent on time. You can get this information from their previous landlords or property managers who've dealt with them before.
This research will also reveal how well the tenant took care of properties in the past, whether they broke leases, or if their landlord evicted them.
Credit History
Everybody goes through occasional financial difficulties, but a credit check can reveal a history of habitual non-payment. Things like unpaid debts, liens, regular late payments, bankruptcies, and collections are the red flags you should look out for.
You can run a credit check via the three major credit bureaus, namely Experian, TransUnion, or Equifax. You must have the tenant's permission to carry out a credit check, and you must do so within the bounds of the Fair Credit Reporting Act.
Employment Status
Without a regular income, a tenant is bound to struggle to pay their rent. The general rule for calculating whether they can afford rent is that the rent should not exceed 30% of their monthly income.
While reviewing their employment report, you should also look for inconsistencies in their work history as well as gaps in employment. A tendency to switch jobs regularly can affect their earnings from time to time.
Some landlords ask for additional deposits when they come across tenants with an irregular employment history. This extra money can help fill in the gaps if needed.
Legal Considerations For Tenant Screening
Screening a tenant is a time-consuming and sometimes complicated process, but it's vital for your peace of mind. There are several laws governing how you can carry out background checks.
These include federal laws like the Fair Housing Act, which protects tenants from unfair discrimination, as well as state-specific laws.
In North Carolina, there are no additional laws related to criminal history checks. Landlords may not discriminate against tenants based on the source of their income and must provide the tenant with a copy of the credit report.
Additionally, landlords must apply the same criteria for each tenant and provide a written explanation if they deny the tenant's rental application.
The best way to ensure you comply with these laws is to hire a property manager to carry out tenant screening on your behalf.
Steps Involved in a Tenant Background Check
The first step in tenant screening is getting written consent from the rental applicant. The consent form must include:
- Applicant's name
- Date of birth
- Most recent address
It must outline the steps involved in the background check and include a statement that the applicant is aware of their rights in this regard. This document usually forms part of the rental application, and the applicant should sign it.
Once you have the signed form, you can proceed with the next steps, as follows:
Gather the Necessary Information
Your rental application form is the source of the voluntary information provided by the tenant. You'll need all the information provided in the consent form, as well as their social security number, employment status, and financial status.
You can also ask for references from previous landlords.
Verify the Information Provided
The easiest way to verify the information provided in the application form is by calling previous employers and landlords. They can confirm their tenant and employment history.
Run the Credit Check
A credit check is the most important step in tenant screening. It can protect you from financial losses due to renting your home to habitual late payers.
You must use an FCRA-compliant background investigation service to carry out these checks.
Run a Criminal History Check
You can get a certified criminal background check through the clerk of the superior court office. This only provides information for the country in question, and there is a small fee attached.
If you want to conduct a statewide search, you must approach a third-party company that's licensed with the NCAOC. While the NCAOC can vouch for the accuracy of the information they provide, they don't vouch for the information provided by their licensees.
Get Professional Help Finding Good Tenants
When you work with property management services, they provide a range of services to make your life as a landlord easier. These include an extensive, legal, and accurate tenant background check on every prospective renter.
These services also include property maintenance and inspections. This ensures your investment property stays in good condition.
Are you ready to enjoy the benefits of being a landlord without the stress and hard work? Get in touch for assistance with all your Charlotte property management needs.
