Tenant Screening Tips for Commercial Property Leasing

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Before signing a lease agreement to a prospective renter, be sure to conduct an extensive background check and to ask about past properties leased and business history.

As a commercial or industrial property owner, there should be a plan of action that includes a due diligence process of screening each new tenant when lease agreements expire. In doing so, this will help prevent fraud, reduce income loss, and make investments more successful. Every landlord and property management company needs to understand the importance of tenant screening, as this could determine the overall success or failure of an investment property.

Performing a tenant background check should include the following:

  • Address and credit history
  • If prospective tenant has ever been evicted and why
  • Any previous criminal activity
  • Past and present business status

An in-person interview and a property walk-through should be conducted as well before signing an agreement.

Tenant Screening Services

There are many tenant screening services available to landlords, property management firms, and others in the real estate leasing business. By making the most of these services, it will make your job easier and your selection process more accurate.

Screening processing costs can be passed along to the prospective tenant so that you can avoid any out-of-pocket expenses. Some reputable tenant screening service companies that can be utilized include Transunion SmartMove Rental Screening, E-Renter.com, and TVS Tenant Screening.

As a landlord or property manager, using a tenant screening service is a valuable tool to minimize the risk of renting to bad tenants and losing significant money down the road.

In-person Interview & Walk-through

The last part of your tenant screening plan should include a home walk-through and a person-to-person interview. There are many things that just can’t be communicated by a tenant screening report, application, or telephonic discussions. Looking at characteristics, such as demeanor and friendliness, can be a great indicator as to whether or not a tenant can be trusted to uphold their end of the agreement. If, for example, a prospective tenant shows up late without calling or appears to be inebriated, these may be signs that he/she cannot be trusted.

We cannot single out or discriminate against any qualified tenant, but a sensible business person with a bit of commonsense and know-how can easily use an effective tenant screening policy to select the best rental and leasing applicants. So by taking the time to properly screen applicants using the tools that are readily available, we can reduce the risks and maximize the profits of our investment properties.

Tenant Screening Checklist

Questions to ask your prospective lessee:

  1. Who is the intended tenant and who is guaranteeing the lease?
  2. What is your business background (i.e. how many years in business)?
  3. How do you plan on operating your business?
  4. What is your target market and who are your customers?
  5. Can you present the past 5 years of financial statements for your company?
  6. Can you present a personal financial statement?
  7. Can you present prior period tax returns for you business?

 

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