The real estate rental market receives an estimated $485 billion annually. If you were looking for one more reason to join the industry, that 12-figure sum should be motivation enough.
But before you start raking in from rental properties, you must have a strategy poised to assist your clients in finding the perfect tenant. How do real estate agents pick tenants? They use a five-step process that uncovers a tenant’s ability to pay rent and care for the rental unit.
Every agent’s primary concern with rentals is ensuring that the tenant is satisfied with the property and service and that the landlord reaps the full returns of their investment.
This piece will dive into the five steps real estate agents may take to ensure they select the right tenant for their client’s property. So, let’s jump right in!
For aspiring agents wondering who pays real estate agents for rentals, check out this comprehensive guide.
Step 1: Application Review
The first step in the tenant selection process is the application review. In this stage, real estate agents meticulously go over all submitted applications.
They examine each applicant’s details to ensure they meet the specific requirements set by the landlord.
Once an agent has sifted through these submissions, they then narrow down their list to include only suitable applicants for further consideration. This refined pool of potential tenants forms the basis for more detailed checks and assessments as part of subsequent steps in this vetting process.
Step 2: Background or Identity Check
With the pool of potential tenants narrowed, realtors move on to step two: conducting a background or identity check. This stage is crucial in verifying that each prospective tenant is indeed who they claim to be.
The tools help ascertain whether an applicant has any undisclosed criminal history that could potentially impact their tenancy.
This process is not just about legal compliance. It’s also about establishing trust between all parties involved, from the landlord and agent to the potential tenant themselves. By confirming identities, agents can provide landlords with peace of mind knowing they are renting their properties to reliable individuals.
But remember to inform the prospective tenants of your intentions and obtain written consent from them.
Step 3: Financial Stability
Here, real estate agents dive deep into an applicant’s financial status to ensure they have the means to consistently pay rent throughout their tenancy period.
For instance, a realtor may request proof of employment from potential tenants as one way of ensuring there’s a consistent stream of income flowing in monthly. This could be anything from recent payslips to bank statements showing regular salary deposits.
Realtors also delve into prospective tenants’ monthly expenses. They aim to understand whether these costs, coupled with rental payments, would stretch beyond the tenant’s means and potentially lead them into financial hardship.
Step 4: Credit Check
This stage aims to ensure financial responsibility, providing insight into a potential tenant’s past and present financial behaviors.
During this phase, real estate agents scrutinize a prospective tenant’s credit history for inconsistencies or lapses. These include missed payments to defaults on loans or a bad credit score, factors that paint a picture of an applicant’s ability to manage their finances effectively.
However, the task is not only about identifying red flags. It involves recognizing remedial efforts made by applicants who may have had previous lapses in their credit history.
For example, if an individual has consistently paid off debt after defaulting on a loan years ago, that signifies commitment and responsibility toward rectifying past mistakes.
Agents should take note of these actions as they demonstrate the potential renter’s willingness to improve their financial standing over time.
Step 5: References
The final step in the tenant selection process is checking references. Agents reach out to a prospective tenant’s previous landlords or property managers for perspective into their past behavior.
Estate agents are particularly keen on understanding how these individuals conducted themselves during prior tenancies.
Some key questions to ask include:
Were they respectful of rental properties?
Did they maintain cleanliness and orderliness within their units?
Were there any instances of disruptive behavior that could potentially pose risks for future landlords?
Such behaviors can be indicative of future issues and may prompt an agent to reconsider whether a particular applicant is indeed suitable for a landlord’s property.
Streamlining the Process
Selecting the right tenant for a rental property is a comprehensive process that involves various steps. At the end of the day, a realtor works to ensure that whoever occupies a client’s property is best suited to care for it.
Next Steps If you’re an aspiring real estate agent looking to make your mark in the industry, here are some actionable steps:
1. Understand: Familiarize yourself with local laws and regulations regarding tenant selection. 2. Develop: Gain a clear understanding of each step involved in selecting tenants. 3. Research: Always conduct thorough checks before making decisions. 4. Communicate: Maintain open communication with both landlords and potential tenants throughout the process.
What has been your experience as an estate agent selecting tenants? Have you encountered challenges during this process? Or perhaps there’s something else you’d like us to discuss related to real estate rentals? Share your thoughts below or reach out directly!
