When a rental property is turned over, the owner must pay for all necessary repairs and updates to make the property rentable and appealing again.

Landlords can’t afford vacancies, which is why reducing tenant turnover is in their best interests.

Screening applications stands as an essential part of this process, and it has a substantial impact on tenant retention rates. Therefore, it is important to be creative with it.

Fortunately, there are screening measures that owners can use to effectively reduce property vacancies and lower turnover rates. Continue reading to learn more about them and other important information.

Why Does the Screening Process Impact Turnover?

Analyzing a tenant’s ability to remain at a rental property helps reduce tenant turnover. Before renting a unit, a property owner should verify that their tenant has sufficient income, which is three times the rent, a good credit history, and no prior evictions from previous landlords to assess long-term tenancies. This occurs when you can identify tenants who have established a payment history through good references. Reviewing these documents provides the property owner with sufficient information to determine whether a particular tenant has the potential to be a reliable and responsible tenant. Bay Property Management Group Texas uses clear criteria to help landlords avoid rushed application approvals.

While the standard method of checking references has improved, it is still inadequate in identifying whether a tenant will remain long-term and avoid the need for eviction. In fact, the industry standard for calculating eviction risk is to use a ratio of rent due and rental period. However, this method has been improved by using renter-optimized scores to predict eviction risks 15% better than the standard credit check.

The average cost of turnover ranges from $1,750 to $5,000 per unit, with lost rent typically equaling two months of rent, as well as costs for cleaning, repairs, and marketing the unit. The expected average turnover rate in the rental industry is approximately 40-50%. However, many owners don’t realize that consistent apartment screening in Texas can protect them from fair housing complaints while still lowering vacancy rates. With proper screening requirements in place, property owners can see turnover rates drop to less than 10%, resulting in a more stable cash flow.

Importance of Transparency to Improve Applicant Quality

Providing transparency in the tenant screening process yields better quality applicants, as serious and knowledgeable people have already assessed their suitability before applying. This lessens the increase in low-quality applications and, consequently, prevents application fraud. Transparency fosters trust regarding what applicants can expect from the screening process, how to approach it, and how long it will take to complete. As a result, applicants will feel confident in applying and be more likely to assist in decreasing the number of applicants who do not meet the criteria for that property.

Understanding and complying with the Fair Credit Reporting Act (FCRA) and other relevant housing legislation is important for landlords. This ensures that the tenant screening procedure respects tenants’ rights and avoids legal issues. Compliance entails obtaining applicants’ express consent before conducting screenings and appropriately managing the collected data.

The landlord-tenant relationship can also experience considerable improvement when landlords are transparent with applicants regarding the screening standards and decision-making procedure. Potential misunderstandings and disagreements are decreased when applicants are aware of the facts that will be considered and the decision-making process. It’s also important to remember that, as a best practice and a legal requirement under the FCRA, providing a clear explanation and, if necessary, instructions for challenging mistakes in the screening report is essential if a tenant is rejected based on it.

The Role of Property Managers in Documenting and Auditing Screening Steps

To begin with, maintaining an organized and thorough history of the tenant screening process is the responsibility of property managers. These thorough records will show compliance with fair housing laws, including the Fair Credit Reporting Act (FCRA), and reduce the risk of liability from discrimination claims and inappropriate denials.

Property managers also need to create a comprehensive tenant application package that includes the following: a tenant application, a tenant consent form, proof of tenant identification, proof of income, such as a pay stub, a credit report, a criminal background check, an eviction history report, and any relevant references. Property managers can use digital solutions to generate consistent and standardized reports, including tenant application income-to-rent ratios, risk scores, and tenant verification summary reports. This enables them to evaluate tenants objectively and fairly.

Auditing benefits is another job duty for property managers. Regular auditing proves the diligence of property management by confirming that the criteria have been applied consistently, identifying potential biases or gaps in the criteria, and adjusting the processes to make better matches between tenants and property managers. This enhances the likelihood of tenants staying at the same property for a longer period, which improves cash flow and reduces the risk of fraud.

Final Thoughts

Reducing tenant turnover is undoubtedly one of the most effective strategies to increase your rental income. Because tenant turnover is costly and disruptive, you lose rent while the apartment is empty and have to invest time and money in locating a new tenant. Fortunately, you can manage a lot of the factors that contribute to turnover. You can also create an environment where tenants desire to stay by addressing typical challenges, such as screening applicants to select suitable tenants.

It’s not so far-fetched to have some turnover. However, if you use the tactics we’ve covered above, you’ll be well on your way to retaining excellent renters for extended periods of time and reducing those expensive vacancies.