Tenant engagement plays a key role in the success and profitability of rental property, especially in Houston, TX. It is also one of the most challenging aspects of running and managing real estate. Serious issues with tenant engagement can lead to significant losses for property managers. When tenants are unhappy or problematic, they are difficult to retain and could affect the profitability of the property. Replacing tenants can also equate to certain expenses, such as advertising and marketing to attract new tenants, repairs and renovation work for damaged or worn spaces, and payment of commission to brokers.
Thorough and proper tenant screening is the best way to prevent and avoid issues with rental property in Houston. By qualifying tenants, property owners and managers can protect the property by ensuring that it is only made available to qualified applicants. Doing so will also help protect and maintain your investment so that the property remains profitable for many years.
Establishing Rental Criteria
As a pre-emptive measure, rental property criteria for any type of property must be established before it is marketed in Houston. The criteria must be fair, reasonable, and legal according to Texas state laws. It should also put into consideration the safety and protection of the property. The rental criteria are essentially a screening method to attract and target the right tenants for your property. It establishes the minimum desired qualifications that tenants must meet before they are approved. The same criteria must be applied to all applicants.
The list for basic tenant criteria should include:
– Verifiable identity
– Verifiable income (the minimum of which should be three times the monthly rent)
– Verifiable documents, such as photo IDs
– Zero evictions (or a minimum number within reason)
– Criminal background checks
– Rental references
To ensure that your screening practices are fair and consistent in Houston, make sure you are in compliance with Fair Housing laws and regulations in Texas. Fair Housing regulations are set to establish the legal boundaries within which landlords and tenants can operate. These regulations also help prevent you from creating subjective criteria which could later lead to discrimination issues.
Credit and Financial Checks
All tenants must undergo credit and financial checks to determine their financial capacity. The landlord may ask for a credit check to determine the tenant’s credit score and history, often using the tenant’s actual credit information as a reference. In general, FICO credit scores above 670 are considered good creditworthiness, but the actual credit score that the landlord may consider will depend on the type of property, the cost of rent, the local rental market in Houston, and the tenant’s income. Note that a FICO score will not include income as part of its calculation, so you might want to consider this. With the tenant’s credit data, focus on payment history and the ratio of the tenant’s monthly income to monthly rent.
Of course, all proofs provided to show income and employment must be verified carefully in Houston, which means you will have to make calls and perform background checks. Some claims regarding employment and income can be falsified, which means that you will have to resort to speaking directly with individuals who are an authority above the tenant in their place of employment. These people include Human Resources departments, supervisors, managers or owners. Other important documents to check are pay stubs, W-2 or 1099 tax forms from Texas state taxes if applicable), Social Security statements (if they apply), worker’s compensation statements (if they apply), and/or bank statements. The tenant’s employer may also provide a proof of income letter.
Background and Reference Checks
A good landlord-tenant relationship is based on trust; this can be established by ensuring that either party can be relied upon in Houston. As part of screening criteria landlords must perform background checks on tenants using their criminal history and publicly-accessible records. A criminal background check must have the tenant’s records at the state and local level in Texas and may include custodial arrest/s without charges, past or pending criminal charges that do not have a conviction, and criminal convictions including sentences. Criminal records may appear on the tenant’s file for as long as seven years after conviction under Fair Credit Reporting Act rules but in most states, the record may remain indefinitely.
Running a criminal background check on a tenant is legal in Houston, but keep in mind that HUD has a blanket policy on the issue of rejecting an application due to the tenant’s criminal record because this could be in violation of the Fair Housing Act.
Another way to determine qualifications of tenants is to get in touch with their former landlords and speaking with people who appear on their personal references. Former landlords will be able to vouch for tenants’ payment history and how well they maintained properties.
Reviewing Rental History
The tenant’s rental history is an important record of their paying habits and will reflect their financial capacity and responsibility in Houston. A history of late payments and past evictions are fairly common but must be assessed based on the circumstances at the time of occurrence. Issues with payments and evictions that occurred as a result of the tenant losing their job or having health problems, for example, are different from those that occurred for no acceptable reason.
The tenant’s rental history could also help you identify whether or not there are patterns of responsible or irresponsible tenancy. Records that show consistent and minimal payment problems are usually a good indication that the tenant is reliable. On the other hand, a history showing multiple missed payments and evictions with no good reason to back them up may be red flags.
Fair Housing and Legal Compliance
All landlords and tenants in Houston are covered by the Fair Housing Act, which helps address problems with discrimination. The Act aims to prevent landlords from rejecting tenant applications due to sex, color, race, religion, familial status, disability, and national origin. Landlords must be very careful about instituting rules that might violate the Fair Housing Act in Houston. Note that there are lease rules that might still be in violation of the Act. Rules that limit children’s activities within the property, for example, may be considered in violation of familial status protection. Restrictions on tenants with service dogs may be illegal as well because service animals are not considered pets. This means that even if your property prohibits pet animals in Houston, you will have to allow service animals. Always refer to regulations set by the Fair Housing Act; if unsure talk to an agency representative, professional property management specialist or lawyer.
Conclusion
Tenant screening is a critical component of rental property protection in Houston because it does not only ensure that the right tenants are accepted but also maintains safety and reputation of properties. It also helps improve tenant experience tremendously, thus preventing problems down the line. Tenant screening can also create a more habitable environment in properties, ensure legal compliance, reduce financial risks and give you peace of mind.
There are multiple tasks involved in managing rental property in Houston, and it might be difficult to be on top of things. If this is the case, consider hiring a professional property management service that has the know-how and experience in performing effective tenant screening. Professional specialists in this field have access to the right tools and information to streamline the process, obtain the right information, and ensure legal compliance.
If you’re looking for professional property management services in Houston, TX, contact Specialized Property Management today! Our team of experts will help you with all aspects of managing your rental property while ensuring a smooth tenant screening process. Don’t wait – reach out now for exceptional service tailored to your needs!
