Navigating Uncertainty: Why Tenant Screening is Your New "Investment Portfolio"

The real estate landscape is constantly shifting, and recent economic trends have brought new challenges and opportunities for real estate investors in Pennsylvania.

As the saying goes, "Real estate in 2025 is less about scaling fast and more about building quietly, using leverage wisely, and staying liquid enough to pounce when the math works."

In this environment, your approach to tenant screening can be the cornerstone of a stable and profitable rental business.

Think of your tenant screening process as building a financial portfolio. Just as you diversify investments to mitigate risk, a thorough tenant screening strategy helps you select renters who are most likely to be reliable assets. In today's volatile economy, a renter with a strong payment history and stable employment is worth their weight in gold.

Why is this so important now?

Economic Uncertainty

The current economic climate demands a more cautious approach. Vacancy costs can quickly eat into profits, making consistent rental income crucial.  Consider using automatic lease term renewal clauses (i.e evergreen) in your leases to encourage consistent tenancy.

Minimizing Risk

Comprehensive screening helps you avoid potential issues like tenants with volatile lifestyles, property damage, late payments, and even costly eviction proceedings.

Protecting Your Investment

Your rental property is a significant asset. Careful tenant selection ensures it's treated with respect and care.

Key Elements of a Robust Tenant Screening "Portfolio"

Income Qualification

Get verification of the income for anyone who will be responsible for the lease.  Look for income that is 3x the monthly rental rate. That usually means the tenant(s) will have the financial ability to pay the rent on time during the lease term.

Credit Checks

A credit report provides valuable insights into an applicant's financial responsibility. Look for a history of on-time payments and low debt.  Consider requiring a baseline minimum credit score for your regular rental rate.  If the applicant’s score falls below that rate, consider assessing a monthly “credit risk fee” to the rent of $50-$100 that is added to the rent to pay you for taking the risk of a tenant with a lower credit score.

Background Checks

Criminal history checks can help you identify potential risks and ensure the safety of your property and other tenants. (Be sure to comply with all applicable fair housing laws).  No violent crimes against a person within the past 10 years and no convictions or pending cases of murder, sexual assault, any crimes against a child, human trafficking, and similar offenses.

Employment Verification

Confirming an applicant's employment and income stability is essential.

Rental History

Contacting previous landlords can reveal valuable information about an applicant's past behavior as a tenant. Get three years’ rental history if you’re able.  Look for no evictions or broken leases within the last five years.  Expert’s tip:  do not talk to the applicant’s current landlord.  If the applicant is a problem tenant, that landlord is likely to tell you whatever it takes for them to get rid of their problem tenant.

Where to Get a Tenant's Credit Report

Three credit bureaus have cornered the market on credit reports:

• Equifax (Equifax offers resident/tenant screening services)

• TransUnion (SmartMove is the name of its tenant screening program), and

• Experian (Experian has its own tenant screening services).

As linked above, each of these credit bureaus offers tenant screening services that include credit checks. You can order the reports online and receive them immediately. Fees for the services vary, but usually are no more than $40.

Another popular option is to have a service request a credit and screening report from your tenant. Doing so avoids your having to collect a credit check fee (the service charges the applicant) and potentially sensitive information (such as a Social Security number). Most of the time, you simply register an account online with the service, and it will send the applicant instructions for how to order the report and allow you to receive it. The service notifies you when the report is complete and tells you how to access it. Many of the credit bureaus provide this option, as do other landlord-oriented websites such as Avail and TurboTenant.

Building for the Long Term

In 2025, success in real estate isn't just about rapid expansion. It's about building a solid foundation, making smart financial decisions, and adapting to changing market conditions. By prioritizing thorough tenant screening, you can create a more stable, profitable, and ultimately, more successful rental property business.