Property Management Blog

5 Reasons Why a Tenant Background Check is Essential

5 Reasons Why a Tenant Background Check is Essential

Real estate investors need to find tenants for their properties. However, rushing to choose tenants can backfire. Some tenants turn into squatters and eat into your profits.

A tenant background check increases personal and property safety. Quality tenants make real estate more enjoyable and profitable. 

Some people skip the tenant background check because it's too cumbersome. However, it's a vital part of the process. 

A property management company can screen tenants for you. Hiring out this work will save you time and result in higher-quality tenants.

Wondering why you should conduct a tenant background check? Let's explore some of the top reasons.

1. Reduce Tenant Turnover

Tenant screening processes help you determine quality tenants. Higher-quality tenants will live in your rental longer and cause fewer problems. 

Long-term tenants reduce turnover across your real estate portfolio. Your cash flow becomes more predictable with the right tenants on your premises. 

2. Increase Cash Flow

Lower tenant turnover means more money rent payments. Each rent payment increases your cash flow and helps you pay off the mortgage. Once you fully pay off the mortgage, you'll get access to even more cash flow. 

You can raise rents based on a tenant's ability to pay rent. If tenants have room in their budget, you can increase rent by a few percentage points to expand your cash flow.

Cash-strapped tenants may look for another rental. Raising your rents at a low percentage will increase your cash flow. Selecting tenants who can comfortably make payments will reduce turnover from rent hikes.

3. Peace of Mind

A tenant background check makes you feel more confident about the incoming tenant. You'll gain greater peace of mind knowing a quality tenant lives in your property.

Peace of mind assists with mental health. Your mental health affects every area of your life.

A property management company can add more peace of mind to your real estate portfolio. Not only can they screen tenants, but they also manage your property and find tenants.

4. Protect Your Other Tenants

It takes months to build a relationship with new tenants. It takes years to turn those new tenants into long-term tenants.

However, a single tenant can destroy all of your progress. If a tenant participates in criminal activity or presents a danger, others will flee.

Not only will you eventually lose the new tenant, but you also lose great long-term tenants. A tenant background check reduces the likelihood of this scenario.

5. Liability Protection

If you fail to run a tenant background check, you can get sued for negligence. Court proceedings cost considerable money and will scare away existing tenants. 

Conducting a tenant background check gives you liability protection. You can save time with screening tenants by delegating this role. A property management company can assist you.

Conduct a Tenant Background Check for Every Tenant

A tenant background check gives you extra clarity and confidence. You learn more details about each tenant to make an appropriate decision.

You can only welcome one tenant per unit. Make sure you select the best one.

Want assistance with tenant screenings? Our property management company can help. Contact us today to learn about our services.