Tenant screening must include nationwide background checks because gone are the days of knowing most of the people in our communities and getting referrals from those same people – trusted friends or family – to fill our properties
By David Pickron
For the first 100 years of being a country, the United States was comprised of small, rural family or ethnic groups that thrived upon sharing resources to support their entire communities. Over the last 100 years of our history and with the massive population growth in our major cities, many of us have become “strangers” to even our closest neighbors. Being a landlord today requires so much more than in the past. Gone are the days of knowing most of the people in our communities and getting referrals from those same people – trusted friends or family – to fill our properties. In the past a person’s actions might be known town-wide, but now people can live and move anonymously within our neighborhoods. How does that affect you as a property owner? And how does that affect your ability to operate as a “successful, lazy landlord,” a concept I teach and live by? I’ll tell you; it affects both dramatically.
A disclaimer before you read too far: I’m not advising you to never rent to any individual with a criminal history. I am advising you to utilize criminal history checks as just another tool in your landlord “toolbox.”
When it comes to understanding criminal behavior, we have to rely on the criminal statistics to give us a true and accurate look at our current situation. Recidivism, the tendency of a convicted criminal to reoffend, and the rates of reoffending are a powerful indicator for you as a landlord as you analyze a potential tenant. The Bureau of Justice recently released the results of a 10-year study of individuals that were released from prison in 2008. This is what they found:
- 66 percent of prisoners released across 24 states in 2008 were arrested within three years.
- 82 percent were arrested within 10 years.
- Of those that were arrested within 10 years, 47 percent were arrested for offenses involving property and another 47 percent for drug-related offenses.
- The average inmate committed nine crimes before they were sentenced.
Based on just this data, what risks are you willing to take? Though this is federal data, state recidivism rates closely mirror them.
A Country on the Move
The moving industry reports that more than 15 million American households move annually, with an average of three people per household: great news for us as housing providers. That equates to 45 million people a year calling somewhere new “home.” More than three million of those moves are considered interstate, meaning they are leaving one state for another. What that means for you as a landlord is that a “current state only” search of any history, criminal or otherwise, for your applicant during tenant screening is likely insufficient. Specific to criminal, 16 percent of those who were arrested within 10 years of release from prison were arrested in a state other than the one they were convicted in. Would you as a landlord be happy with a one in six chance for anything, but especially when searching an applicant’s criminal history?
One reason individuals with a criminal history move is to get away from their communities, especially in small towns. For better or worse, it’s hard to escape the stigma of being the town drunk when the whole town knows your history. Also, individuals with criminal histories often move to states that have less stringent research and reporting laws, seeking asylum where their history can’t even be reported to you as a landlord, leaving you feeling handcuffed in managing your property. And finally, 33 percent of the individuals released from prison could not find active employment within the first three years of their release. These factors combined with the transient nature of our country indicate that including a nationwide check during tenant screening shouldn’t just be an option, it should be a necessity for successful landlords.
Applying Consistent Criteria
What kind of criteria do you have when it come to an applicant’s criminal history? If you don’t have one, I’d encourage you to visit with your attorney to determine what is fair and legal in your state when it comes to criminal background research and use in housing. We have a sample criteria you can request at email@example.com. If you do have criteria, make sure you are applying it fairly and equally across the board for each applicant. A question I get often is “Is it okay to have property-specific criteria?” Not only is it OK, but I would also encourage you to make this a key part of your practice. Your portfolio may contain properties of varying locations, values, and restrictions, and each of these will affect how you manage the property. For example, you may have a property that qualifies as low-income housing. Would the criteria you use for a tenant there differ from the criteria you might have in place for a property in an age-restricted community? Of course it would. What doesn’t differ is your enforcement of whatever criteria you use for each specific property. Consistency is king whether you are considering criminal, credit, or eviction history.
As much as we might like a return to the old days where agreements were sealed with a handshake, our future is much different. Knowing criminal histories, seeing moving patterns, and using consistent criteria make us better landlords and more profitable investors. This is why it is so important to include a nationwide criminal history check on every tenant from whom you receive an application.
About the author
David Pickron is president of Rent Perfect, a private investigator, and a fellow landlord who manages several short- and long-term rentals. Subscribe to his weekly Rent Perfect Podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties.