As more people begin to shy away from buying for fear that home values will continue to decrease and others enter the rental market because they cannot afford a mortgage or have been foreclosed upon, landlords stand to profit from a larger pool of prospective tenants.  As such, landlords who are financially able to increase their holdings will benefit and those who were once looking at empty units may now be fully occupied or able to increase rents.

All of this good news for Alabama landlords should also come with a word of caution.  Landlords should learn from the mortgage industry’s failure when it comes to investigating prospective tenants.  One of the causes of the mortgage industry bust was the failure to properly determine if borrowers were good credit risks.  Too many loans were given to people who simply could not afford the homes they were buying.  The result, as we all know now, was disaster.

The same risks exist for landlords who do not properly investigate their tenants before renting.  The best way to avoid an eviction is to properly screen applicants.  Failure to do so can be costly as unpaid rent and eviction costs mount.

Here are four tips for landlords who wish to take advantage of the housing crisis without taking unnecessary risk:

1. Require all prospective tenants to fill out an application.  The application should give you enough information to investigate rental history, income, credit and criminal background.
2. Call all references given on the application and be wary of people who have no rental history at all or long gaps,  Those gaps could mean that they are being untruthful, have spent time in prison or have been evicted.
3. Run credit checks on all prospective tenants.  There are many websites available that will run credit checks for you and then make a recommendation  about whether you should rent to an applicant or not.  Other sites will allow you to pull the credit reports directly and make your own decision.  The difference between the two is largely in the cost of start up and the amount of information you are willing to provide about yourself. The sites that provide recommendations are open to anyone, but direct access to credit reports requires the landlord to undergo a background check before being given access to credit files.  Running credit checks also means that the landlord must provide the applicant certain disclosures about the reason for a denial based on credit and an opportunity to view their credit report. The advantage to pulling your own credit and criminal history would be that there are some situations where the applicant has a good reason for having bad credit, like a medical crisis.  Which ever option you choose, credit checks are invaluable decision-making tools.
4. Get copies of all prospective tenant’s pay stubs for at least two months.  This allows you to evaluate whether the tenant can, in fact, afford the property.  You should always require the actual documents, because applicants may not always share their true income or their obligations.  This information also will help you determine where the applicant works, information you will be glad you had in the event that you later need to garnish their wages after an eviction.