Updated September 27, 2022.
Legal Note: This article is not a substitute for legal counsel. If you need direct assistance for your Detroit investments, reach out to Own It Detroit Property Management for a rapid, professional response!
We've talked about the importance of a thorough tenant screening process—but how discerning can Metro Detroit rental property owners really be when it's time to choose a new resident? Being 'selective' is generally considered acceptable for such a highly-valued asset. However, being 'discriminatory' with your selections can quickly land investors in hot water.
Real estate investors in the Detroit area rental market can have renter criteria and put every applicant through a screening process, but they can't get specific about who they will or won't choose to live in their investments in Detroit.
As a growing investor, you may have these questions in mind when seeking to protect yourself from litigation:
What screening criteria are allowed?
What preferences can get me in serious legal (and financial) trouble?
What form of tenant screening practices can shut down my rental property business and kill my cash-on-cash returns?
To build an extensive portfolio and create tremendous cash flow, rental property owners have to follow some important federal, state, and local guidelines when screening and selecting renters.
As a seasoned Detroit metro property management company, we have the insight you need to stay legal and find excellent residents for your Detroit investments!
Your Preference Probably Isn't Legal
Women certainly seem to be the ideal renter. They're probably quiet, they keep things tidy, and they don't break things as often as a house full of male roommates might.
While that might be true (or it could just be a stereotype), Metro Detroit investors can't restrict the renter criteria only to allow female residents. The Fair Housing Act (FHA) prevents any discriminatory actions when screening and selecting renters for residential quality properties. There are no exceptions to the rules, and every property investor must set up best practices to avoid discrimination claims.
That means your criteria can't exclude a potential renter based on:
Race (or color)
Sex (or gender)
National origin (or ethnicity).
For example, if you've been listing your properties as 'Available only to blondes less than six feet tall and without kids,' frankly, we're amazed you haven't ended up in court yet. Using any of these human characteristics can land you in significant legal trouble and destroy any future cash flow in Detroit real estate you may have been seeking.
We'll talk more about the criteria you can consider. Still, it's critical for investors in the Detroit metro area to take personal preference out of the screening process when choosing residents for their Detroit investments.
What Is Legal?
Before you worry that you can't investigate a potential renter at all or apply any restrictions to who you allow in your investment properties, the law does allow plenty of discretion when picking your next resident.
Rental property owners can set appropriate criteria for applicants to qualify as a renter for your rental property. Legal criteria can include:
- Requiring a photo ID
- A minimum credit score
- A sufficient level of income
- No history of evictions or defaults
- Proof of current employment
- Payment of fees or security deposit
- Passing a criminal history check.
Make sure to use the same criteria for every applicant that goes through the tenant screening process. Setting your limits for sufficient income should be a factor of the monthly rent amount and fees or deposits. If an applicant meets these qualifications, they're probably a good fit for your Detroit metro property—even if they aren't female.
While you can't pick and choose a resident based on looks or religious beliefs, you can dig into their background to make sure they meet your legal criteria.
Your Screening Process
How can Detroit investors find the information they need to find out if a potential renter meets their criteria? A thorough screening process is the best way to find your best residents and rule out anyone who isn't a good fit—legally.
Your screening process can include:
- A credit check
- A criminal history report
- Confirming employment and income
- Checking prior rental history
- Talking with references.
How can property owners keep this process legal? Use trusted resources to run reports and follow the privacy requirements from the Fair Credit Reporting Act (FCRA) when handling private, sensitive information and documents during the screening process.
Hiring a Detroit Michigan Property Manager
Have we made the renter screening process more intimidating for you? We hope not, but there's a way to protect yourself and your real estate portfolio from any potential claims of discrimination—every time you need a new renter. Hire a seasoned Detroit metro property management company!
We already know the rules to legally screen and select the best renters for your Detroit investment properties.
We also have secure resources and proven processes to protect your investments from any risk of discrimination or fraudulent claims.
You don't have to worry about who lives in your properties or how they were chosen with the right property manager handling the tenant screening process!
Find the Right Renters With Detroit Metro Property Management
Metro Detroit real estate investors can't pick and choose people they like to live in their rental properties. It's critical to follow a legal (yet thorough) screening process and place the most qualified residents in your rentals.
When you have a large portfolio, you need a collection of reliable residents to build long-term wealth. The best-in-class team of Own It Detroit knows how important it is to choose high-quality renters for real estate investment success when growing your portfolio. However, this isn't the only element of rental real estate you need to know to experience elite returns.
To learn more, download our free, professional resource: How to Grow Your Portfolio With a Property Management Company!