The Importance of Tenant Screening: How to Find Quality Tenants

The rental market in Santa Clara County is attractive to real estate investors despite the relatively high acquisition cost of properties. The median rent in the county is about 40 percent higher than the national median rate, so the potential for solid monthly income is certainly there.

But no matter how much rental income a property owner can earn, selecting and retaining quality tenants remains an essential factor in a property’s profitability. Tenants who don’t pay rent on time, don’t take good care of the property, or are uncommunicative when issues arise can substantially drain a rental owner’s finances.

That’s why tenant screening is so important. Even in an area with high demand for rentals, property owners need to know how to find quality tenants.

Consequences of Poor Tenant Selection

Picking the wrong tenant for a rental property can have meaningful consequences. Unpaid rent and property damage can take money out of the owner’s pocket. And it can be stressful. If someone owes you $3,000, for example, and won’t pay it when they promised, you won’t be happy about it.

But tenants can also cause other problems. A rental owner who must evict a tenant must deal not only with the underlying cause for the eviction but also will likely incur time and money costs due to legal proceedings.

Further, any San Jose property management company would probably attest that frequent evictions and/or constant repairs put the property’s reputation — and its owner’s reputation — at risk. A high-demand property can quickly be deemed less desirable when word gets out about constant problems.

Santa Clara County Demographics

Despite some job losses in the technology sector, Santa Clara County remains a highly employed area with above-national-average income levels.

According to U.S. Census Bureau 2022 numbers, about 60 percent of the county’s population is between the ages of 18 and 64, and the median individual annual income at that time was about $140,000. The average household size was just under three persons. When selecting tenants, it’s relevant to know these numbers, as age, income level, and family size help determine candidates for renting vs. home buying.

Younger households with fewer children tend to be renters, so understanding the demographics of your pool of renter candidates is an excellent first step toward setting appropriate rental rates and selecting the right tenants. It’s good to understand what your market consists of.

If, for example, you own a rental property in Sunnyvale and are considering hiring a property manager who provides tenant-screening services, an experienced Sunnyvale property management company will have insight into Sunnyvale’s market of potential renters.

Best Practices in the Tenant-Screening Process

Probably the most critical piece in the tenant-screening process is income verification. First and foremost, you want to rent your property to people you know can afford the monthly rent. It sounds simple, but many rental owners managing their property fail at this essential step.

Income verification is achieved by asking rental applicants for pay stubs, tax returns, and bank statements to ensure they can afford the monthly rent. But it’s also wise to ask for other information.

An applicant’s credit history provides insight into how good they are at paying bills on time. A criminal background check could give you an idea of how an applicant has behaved in the past. And previous landlord references let you know how they’ve performed as tenants. A good tenant-screening process gathers as much information as possible.

Fair Housing Laws

There are state and federal laws when it comes to fair housing. The last thing you want to do as a rental owner is run afoul of the law, so if you manage a rental property on your own, it’s best to brush up on discrimination statutes.

One important thing to remember is to maintain consistency in the interview process. You can’t ask one tenant applicant to provide a piece of information that you don’t require from all applicants. A good San Jose property management company should give uniform applications with appropriate questions and know how to avoid potential fair housing violations.

Communication

One of the biggest pitfalls in landlord-tenant relationships is a lack of communication. Good communication starts with the tenant-screening process.

Expectations for both parties to a lease must be clearly laid out before anybody signs a document. It’s difficult to overstate the significance of communication during tenant screening and in the language of a lease.

Leveraging the Expertise of a Property Management Company

A property management company can remove much of the guesswork for rental owners regarding the tenant screening process. They tend to have proven marketing strategies that attract tenant applicants and can streamline tenant screening by providing uniform forms and a vetting process that complies with local, state, and federal regulations.

Partnering with an experienced, professional property management group such as Valley Management Group can help put the right tenants in place, who play a significant role in a property’s profitability. If you own a rental property in Santa Clara County, contact Valley Management Group for a free property management quote and one free month of property management services when you sign up for services.