Renting out an owned property is a popular way to monetize any real estate investments, and as long as you have good tenants it can be a reliable source of income. Large property management companies typically screen prospective tenants as a matter of course, but smaller and private owners tend to be less formal about the process. Here’s why it’s important to at least conduct a criminal background check before giving out the keys to your precious investment.
You’re Responsible for What Happens
Landlords carry a degree of responsibility for whatever happens on premises they own. This is particularly relevant when it applies to criminal activity, or anything that could cause the property to be unsafe for neighbors or other tenants. From tenants who don’t keep their areas clean enough, to a renter who is dealing drugs out of your basement, landlords are responsible for many of the outcomes of poor tenants. The only way to protect yourself against these events is to screen your tenant carefully, and that is based on knowing precisely who you’re dealing with.
Risk of Identity Fraud
In these days of online-everything, identity theft is rampant. Unless you know exactly who your tenant is, you’re at risk for a number of issues:
Rental Non-Payment: A person posing as someone else very likely has multiple things to hide. These can include their true financial situation, which might be far worse than you imagine. Without identity confirmation, it’s impossible to conduct either a criminal background or credit check on a potential tenant. You could end up with a tenant who is in fact unemployed, or one with a history of incurring debts. This could result in not receiving the rental payments required when you expect them.
Criminal Activity: In most states, it’s illegal to refuse to rent to a person with a criminal background. That’s all well and good, but at least if you know who your tenant is you can conduct a criminal record check and evaluate your risk. Knowing the history of the tenant in your rental allows you to take steps such as increasing your insurance, specifying certain rules that need to be followed or even conducting more frequent inspections than you might otherwise do. All these factors improve your chances of avoiding a problem in the long term.
Property Damages: Without a criminal background check, you can’t possibly anticipate how your tenant will take care of your rental property. Neither will you have any recourse if you sustain property damages as a result of their actions (or lack of them). Sure, your insurance will likely cover the cost of most repairs, but if the insurer discovers you had no idea who was renting the premises you could expect both a hefty deductible and a premium increase.
Potential for Damages
The potential for damage doesn’t apply only to problems with the physical premises. Unverified tenants who commit any form of fraud or injury, whether it includes neighbors, other tenants, workers on the premises or anyone else could easily result in charges being laid against the landlord. If you can’t prove you’ve done your due diligence to confirm the identity of all tenants, you could face a civil court in which you’re fined or sentenced to pay damages to other parties.
Most landlords are in the business of renting to generate revenue, whether it’s for a huge apartment building or a home basement apartment. To do this successfully you need to manage your costs and ensure income outweighs the expenditure. If you incur high costs as a result of tenant evictions, damages paid to others, repairs and renovations needed to the premises, or representation against legal charges, it eats into the profitability of your venture.
Identity verification can prevent almost all of these problems from occurring in the first place, so it’s the cornerstone of a good tenant screening process.
For more information on obtaining a criminal background check for your tenants, please contact us at +1 (800) 295-7109.