Passive Tenant Screening for Better Property Management
March 6, 2019
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How To Passively Screen Your Tenants
Active Screening vs. Passive Screening
Odds are, you aren’t familiar with the term passive tenant screening. When you think about “tenant screening,” you’ve probably got active screening on your mind. Active screening is the process by which landlords and property managers evaluate applicants, accept those that fit their requirements, and reject those that do not. Active screening processes include running a criminal check, pulling eviction history, and requesting a credit report. Evaluating an application form, following up with references, contacting past landlords, and verifying employment are also all activities that fall under the umbrella of active screening.
As we’ve noted again and again, active screening is absolutely critical to managing a successful rental property portfolio. But if you don’t have good applicants, you won’t have good renters. That’s where passive screening comes in.
Passive Tenant Screening Brings Better Applicants
Passive tenant screening is the summation of your rental marketing behavior – it is the result of finding renters from the right kinds of sources or, when things go badly, attracting them from the wrong ones. The definition of passive screening may feel elusive, but that’s because passive screening won’t ever provide you a score for your tenants or tell you who to accept and who to reject. Passive screening is, well… passive. If active screening is about avoiding bad tenants, passive screening is about finding good ones.
Here’s an example: let’s say, in your town, there are two websites that everyone uses to find rental properties. One of the sites is managed by the local newspaper and is curated to ensure each advertisement is real and verified. It’s called The Burchtown Gazette. The other site is an open platform where folks can post anything they like – we’ll call it Joeslist.
The Burchtown Gazette costs money to list while Joeslist is totally free. As a result, Joeslist gets more listings, more traffic, and produces more applicants. But you noticed something strange: almost all of your evictions have been Joeslist tenants. With this information, you decide to stop posting on Joeslist and use exclusively The Burchtown Gazette. Less applicants come through, but you still have enough to maintain full occupancy and your evictions have been entirely eliminated. This is passive tenant screening.
Better Information, Better Tenants
As a landlord, you likely have more than one advertising channel available to you and you’re probably taking advantage of this. In the rush of managing your tenants, applicants, and properties, you may not pay much attention to where your best tenants are coming from, but this is a mistake. Marketing resources should not just be judged by the number of tenants they provide you but by the quality of those tenants.
A simple and easy way to improve your passive screening is to require applicants to include the source by which they found you. Anytime you have an issue with a tenant or you need to evict, check where they came from. If one source is proving to attract a disproportionate number of your problem renters, stop using it. You don’t know until you’ve tried.
Passive Tenant Screening Techniques
There are two keys to better passive screening. The first is simple: ask tenants where they came from on your application and refer back to this data when problems arise. Easy enough. If one source is worse than others, stop using it. If another is markedly better, concentrate more resources in that direction.
The second item takes a bit more creativity. First, you must determine your ideal tenant, but remember to be realistic. If you own a beat-up house next to campus in a college town, your odds of renting to a thirty-five-year-old husband and wife with a few young kids are slim to none. Chances are, you’re renting to students. But not all students are created equal so figure out the type of student that works best for you.
Once you’ve determined your ideal renter, brainstorm some out of the box ways of attracting these tenants. Maybe your neighborhood is really walkable and yard signs prove to bring in the best renters. Or, suppose your ideal (and realistic) tenant is a young family so you start advertising at high school football games. Put on your marketing hat and find ways to get in front of the tenants you want.
One note of warning here: Although you want to attract your ideal renters, you should NOT change the language you use in your listings to exclude certain populations or imply that a certain group of people are unwelcome to apply. This behavior would be in violation of the Fair Housing Act and could result in severe penalties.
Passive Tenant Screening for Better Management
If you’re not already employing active screening techniques, it’s important that you start right away. You’ll immediately notice the significant improvement it can have on the quality of your renters and the amount of time you waste managing those renters. And with many modern online tenant screening tools, implementing an improved process won’t impact your bottom line.
But if you’re not attracting the right renters, no background check is comprehensive enough to ensure your properties are filled with good tenants. Employ passive tenant screening techniques both formally and creatively to bring in renters that will honor their contract with you and treat your properties with respect.
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