Tenant Screening

Tenant screening is the process of checking a rental applicant's credit, income, rental history and background before signing a lease. It decides how reliably the rent in a gross rent multiplier actually arrives. A GRM assumes every dollar of scheduled rent is collected, and screening is how landlords try to make that true.

Weak screening shows up later as late payments, turnover and vacancy, all of which reduce collected rent without changing the scheduled rent a GRM is built on. A property with loose screening and a low GRM can collect less than a stricter landlord's property at a higher GRM.

When buying a tenanted property, you inherit the previous owner's screening. Ask for the payment history on each lease. Rent that has been paid on time for years supports the GRM. Rent from a tenant who moved in last month, with no record yet, deserves more caution.

Further reading: Tenant Screening on Wikipedia.