A tenant background check is an important element of the renter screening process. While there’s certainly a need for compassion—should a youthful indiscretion keep you from renting forever?—criminal checks provide important takeaways.

If a person has a criminal background, they may not care about an eviction on their record. That means they may not be conscientious tenants. (Although, again, compassion is important.) This is especially true for multifamily landlords, who must consider the impact on the other tenants, too.

Many newer real estate investors—and even some experienced ones—struggle with background checks decisions. Oftentimes, this can be a sticking point, causing paralysis. Can you legally perform background checks on tenant applicants? Should you? Or is it a waste of time that is killing your occupancy rates and real estate returns?

Renter Background Check Regulations

The real estate industry lacks a consistent position on background checks. You can get a real estate, mortgage, or securities trading license in many places even with a criminal background. In some states, you can qualify for a license while on probation.

But not all states regulate laws for the tenant screening process. In Seattle, for example, regulations outline the reasons landlords can accept or deny tenant applicants. Some places ban background checks entirely or prevent you from using them to make a rental decision.

Ultimately, knowing your local laws is vital. Work with an attorney to make sure you’re going about tenant screening legally.

Are Tenant Background Checks Truly Valuable for Landlords?

What’s the value in running background checks for landlords? The most common reason is to look for past evictions, which is absolutely fair. However, others might argue that criminal checks identify renters who may cause property damage. Additional concerns may be sexual predators and drugs dealers.

Before launching your own background check policies, decide where you, personally, draw the line. At a misdemeanor? A felony? A certain type of offense? If it was yesterday or 10 years ago? A one-time thing or a lifelong rap sheet? What if individuals have paid their dues and done their time? What if it was a bogus case?

You’ll need to enforce these decisions consistently to avoid violating discrimination laws, so consider outlining them in your policies.

Here’s what to consider when drawing your personal boundaries:

• How does running background checks improve your responsibility as a landlord?
• What greater issues might be caused by refusing housing to anyone with past interactions with the law?
• How can you avoid discrimination?
• What will the impact on your investment property performance be?

Certainly, credit and income may be greater predictors of likely tenant performance. In many cases, reformed criminals may be better tenants than those who simply haven’t been caught yet.

How to Run a Tenant Background Check

Most landlords do not have the slightest clue how to do a criminal background check. Many property managers are at a loss too—like running a Minnesota criminal check on tenants that were moving in from Nebraska.

Skip the national check (most of the time)

One of the most common mistakes is running a “National Criminal Background Check” on everyone that submits a rental application. You might think, “How much better can a check be?” It checks all 50 states, plus Washington DC, and you find out all of the dirt on your tenant. Right?

If your tenant is squeaky clean, this is an okay method, but a waste of money. Keep in mind that the national criminal check system is only as accurate as the data it receives, and some states are two years behind in sending information. Other states don’t provide misdemeanor violations. And some states put a violation “on ice” for a while, and then dismiss it if there are no further violations. A national check won’t reveal any of that information.

During a tenant background check, you might find information about infractions from a state the applicant never lived in (or said they never lived in). Perhaps they were traveling on a drug run and got stopped along the way. Maybe they were at an after-hours party during spring break and things got out of hand. Odds are, these might be in the national database, but it might take a year or so before it shows up.

Start with Google

Google prospective renters’ names before dropping $40 on a tenant background check. Add the words “arrest,” “sex offender,” or “mug shot” to the search term to get more specific. You may also want to search their phone number or look through the image search results.

Do they hang out with questionable characters? Do they post videos of themselves revving up their motorcycles in front of their rental? Look for outrageous items that could be a detriment to your rental. Maybe you’ll find a “Screw the Landlord” party posted on Craigslist with the tenant’s phone number and previous address. Maybe they are selling puppies, or snakes, and they don’t have a pet listed on the application.

If you are more creative with your searches, you can find your tenants hobbies, and extracurricular activities. Ideally, you’ll connect the limited information that you already know about your tenant with what actually exists. If they say they write church bulletins and you find a church bulletin they wrote online, it establishes truthfulness.

Look for arrests and convictions

Not all arrests and convictions will show up on a simple Google search. Next, try your state’s Bureau of Criminal Apprehension. It’s an okay source for major criminal events, and a reasonable place to stop your background check—unless you decide you want to go further.

You’ll also want to run a sex offender search on your potential tenant.

Consider court searches

Some states offer a court search site that contains all the smaller items for which anyone has paid a fine or been to court. You’ll find everything from speeding tickets, DWI, and murder charges—anything that touches the court system, including civil and criminal records. It is a wealth of information.

In states like Minnesota, going to an actual courthouse to review their public terminals will lead to even better information. You can find street address information, open cases, dismissed cases, and non-public cases. You’ll also find more detail and court documents for each case.

Use tenant screening services

Background checks can be a lot of work. If you’re serious about knowing the full history of your applicants, but lack the time to perform a thorough search, there’s no shame in using a background check money. But do not wait to engage their services—if it takes a week to complete the check, and you then decline the tenant, you are a week behind.

Ask the tenant background check company to run a county-level criminal check everywhere the applicant has lived in for the past seven years, as evidenced on the credit report. (Some states only hold information for seven years, so going back further might not be cost-effective.) The tenant screening reports will have valuable information to help you make your decision.

Your rental property management company may have a preexisting relationship with a tenant screening service.

Pair with a tenant credit check

If you’re not used to reviewing tenant background checks, you might not be sure what to look out for, beyond “a criminal history”—or when to know if a background search is necessary. First, review their credit history. Here are some non-scientific red flags:

• Tenants with credit scores below 620 generally have more criminal issues than a tenant with a higher score—and people with a 700+ credit score rarely have any criminal issues.
• People in professional careers rarely have criminal issues.
• An applicant with a DWI likely has several other license violations, such as no insurance, driving after suspension, or other DWIs.
• Men have more criminal events than women, regardless of the credit score.
• People without a credit score and with collection accounts generally have several criminal events in their history.
• Renters with multiple DWIs will likely become a problem tenant.
• Tenants with evictions generally have more criminal events.

Question previous landlords

Asking the right questions of previous landlords is invaluable for a tenant background check. For example, you will want to know prospective tenants’ eviction histories, as well as any interesting details former landlords might have that can affect your decision. Paired with a background check, this is an excellent way to gain a good understanding of future renters.

In many states, it is your choice whether to run a background check or pull eviction records and how to interpret those results. However, staying ahead of the regulation game ensures your processes don’t break the law. You can’t unfairly discriminate, and you have to know your local landlord-tenant laws.

Here’s a basic rule: Create a flat, fair tenant background check policy and run with it. Then, watch your performance, keep an eye on the laws and market trends, and adjust it in writing over time. This will ensure you have great tenants—and consistent income.

What about you? Have you had issues with tenants you rented to? What applications standards do you have? Have you ever had issues with tenants who had clean background histories?

CTTO Article Source: www.biggerpockets.com