Choosing the right tenant is about the most important part of the tenancy. If you find the right tenant the tenancy will in essence manage itself. There are many tools these days to check a tenant's financial and credit history, we all know that we should call all references, we can do criminal checks with the proper permission and of course there is always that "gut feeling" or "sixth sense" that tells us when people are being genuine.
Let's take this step-by-step:
1. Credit Checks:
These are available to most people online with the properly signed consent from the tenant and a small fee. The problem with this service is that you need to understand how to read a report and decide if this is someone who will be responsible to pay the rent.
2. Calling References:
When checking references make sure that the information that the tenant gives you matches the information on the credit report. The oldest trick in the book is to give a friends name and number as a landlord to avoid the bad reference the real landlord might give. You also need to ask the right questions of the landlord to make sure that he/she is not just giving a great reference to get rid of a bad tenant.
3. Criminal Checks:
These are rarely required. I always say that if you feel the need to do a criminal check you should probably just decline the application. The only time a criminal check could be useful is if you have a very forceful potential tenant and you need to have a firm reason not to rent the property.
4. "Gut Feeling" :
We all know what it's like when we meet someone and we don't know why but we just don't trust them. Beware of making this kind of judgment especially if it's too good to be true usually it is. Do not make a decision about someone based on the idea that "you like them", "they seem so nice" or the worst "they were desperate and needed a home". We all want to help those that need it, and we all want to get along with our tenants but a rental property is a business and should be treated as such.
For these reasons your best option is to hire a professional property management company. It is our job to spot those potential tenants who are trying to take advantage of a situation. We screen tenants a number of times every month and know what to look for in a successful tenancy. We do not become emotionally attached to tenants and are able to make good decisions based on solid evidence and facts. After years of reading credit checks and speaking to references we know what answers we are looking for and what questions to ask to paint a clear picture of who the person is that we are going to trust with our clients' $1 M property.