Landlords! Here Is How You Do Criminal Background Checks (The RIGHT Way)

My first two posts on tenant screening dealt with the most important aspects of tenant screening, credit and income verification.

In my third post on tenant screening, I discussed, with quite a bit of controversy, the downfalls of past landlord checks. The fourth and final pillar in tenant screening is the Criminal Background Check.

Why is a Criminal Check Important As An Investor?

I see about 400 tenant background checks per year.

They are not all my tenants, as I screen tenants for a 120 unit homeowner association (HOA).  I decide, based on the HOA rules in place, whether or not people will live in the complex.

The policies I created, with the help of the other owners, have led to an environment where we went from the highest crime rate multifamily complexes in our city, to one of the lower ones.

Not only are the calls to the police down 90% (140 in 2003 compared to 14 in 2014), but the severity of the calls are way down too.  This takes into account all of the first quarter calls, including medical emergencies.  I much rather see a noise complaint or medical call, than an assault or robbery.

Why do you care about a criminal record?

Because if a person has a criminal background, do you think they care about an eviction on their record?  I want people to be deathly afraid of an eviction.  I want them to be someone that follows rules, as I have rules in my lease.

I am all in favor of giving people another chance, but my tenants that share a common wall might not want me to.  They know that when they are on vacation, the other tenants in the building also know it.

A multifamily landlord has to think of the impact of the other tenants, not just this one.  In a single family home, all of the other neighbors could move out, and it doesn’t impact you, as long as you get your tenant’s rent.

Criminals are not necessarily bad people, they just got caught.  Martha Stewart is a multiple felon.  Bernie Madoff is.  Many professional athletes and actors and actresses have criminal backgrounds.  Some landlords are felons themselves, they just have not gotten caught.

If you had a younger girlfriend when you were 18, you might be a sex offender.  If you completed a RE transaction where some things were not disclosed, you could be a criminal.  If you ‘missed’ a bit of revenue on your taxes, you might be a criminal.  If you ever borrowed a car, without permission, you could be a criminal.

But this post is not about whether or not something should be legal, or follow a person forever.  It is about finding criminal activity, and making a decision for your business.

Common Mistakes When Running A Background Check

Most landlords do not have the slightest clue how to do a criminal background check.

Many property managers are at a loss too, unless they use a screening service.  Many Landlords want to ‘give people a chance’, and they get burned.  I have seen a property manager run a Minnesota criminal check on tenants that were moving in from Nebraska.  The tenants had never stepped foot in MN, of course they were clean.

One of the first mistakes that landlords do is run a “National Criminal Background Check”.  After all, how much better can a check be?  It checks all 50 states, plus Washington DC, and you find out all of the dirt on your tenant.

If your tenant is squeaky clean, this is an OK method to run a criminal check, but you have just wasted a bit of money.  The fact is, the national criminal check system is only as accurate as the data it receives.

Some states are two years behind in sending information.  Some states do not provide misdemeanor violations.  Some states put a violation ‘on ice’ for a while, and then dismiss it if there are no further violations.  All of these are important things to know.

The plus side of a National check is that you might find information in a state the applicant never lived in.  Perhaps they were traveling on a drug run, and got stopped along the way for something.

Maybe they did something during an out-of-state protest and got arrested.  Maybe they were at an after-hours party on Spring break and things got out of hand.  Odds are, these might be in the national database, but it might take a year or so before it gets in there.

How To Start a Criminal Background Check

When I get an application, I know that the tenant should at least have said they are not criminals, and do not have a criminal record.

Most often, the tenants are telling the truth.  When you do not have a criminal record, and very few people do, it’s easy to be honest.

Often one of the first things I will do, before I spend $40 on a background check, is Google the person’s name.  Combine the search with the word ‘Arrest’, or ‘mug shot’.

If they are bad individuals, ‘stuff’ will show up.  I might Google the person’s phone number, or look at images in any of the searches.

Do they hang out with questionable characters?

Do they post videos of themselves revving up their motorcycles in front of their rental?

I am just looking for outrageous items that could be a detriment to my rental.  Maybe a “Screw the Landlord” party is posted on Craig’s list, with the tenant’s phone number and previous address.  Maybe they are selling puppies, or snakes, and they don’t have a pet listed on the application.

If you are more creative with your searches, you can find your tenants hobbies, and extra-curricular activities.  You are looking to find ways to connect the limited information that you already know about your tenant, with what you can find.

If they say they write church bulletins, and you find a church bulletin they wrote on-line, it established a bit of truthfulness about your tenant.

I only spend 15 minutes doing this at the most on my tenants, but it is interesting what you find out at times.  Once you have uncovered any of the easy to find items, you can run a state criminal check.

Most states have a Bureau of Criminal Apprehension, and that provides information about arrests and convictions.  It is an OK source for major criminal events, and that is where most criminal background checks stop.

Courts Sites Searches Are Invaluable

If you live in a state like Minnesota, we have a Court site that you can search to find all of the smaller items that anyone has paid a fine, or been to Court for.

Speeding tickets, DWI, Murder, anything that has been through the court system, will be there.  It has both civil and criminal items.  It is a wealth of information.

In MN, going to an actual courthouse to look on their public terminals, will lead to even better information.  You will get street address information, open cases, dismissed cases, non-public cases, and much more detail and court documents for each case.

I know most other states have a public Court site, just Google your state and “Search Court cases”.  If you find the site, practice.  Search for yourself, your friends, your associates, your contractors, your parents, boyfriend, girlfriend, etc.  Get some practice, you will need it. You might find information that will save you a lot of frustration too.

If your handyman was convicted of burglary, do you want him in your tenant’s apartment doing maintenance?

If your boyfriend has been convicted of domestic assault several times, isn’t that something you should know?

Once you have made sure it will be worth the money to submit an application to a background check company, do it.  Do not wait; it could cost you a month’s rent.  If it takes a week to complete the check, and you then decline the tenant, you are a week behind.

You will want the background check company to run a County level criminal check on all counties that the applicant has lived in for the past seven years, as evidenced on the credit report.

Some states only hold information for seven years, so going back further might not be cost effective.  Bad people cannot stay good for long, so odds are, if the person is not great, they will continue to have had issues.

If I am pretty certain the tenant will pass the check, I submit the application to the background check company right away.  I can do my own search later, if I want.  I want a credit score first.

If I see a nice car, they say they have a good job and can speak intelligently about it, and write a check for the $1,000 holding fee without a problem; these are indicators that you probably have a great tenant.  But still verify.

Common Themes

I see many background checks, and here are some unscientific generalities.

• When a tenant has a low credit score, ~619 and lower, they will generally have more criminal issues than a tenant with a ~675+ credit score.
• People with a 700+ credit score rarely have any criminal issues.
• People in professional careers rarely have criminal issues.
• When a tenant has a DWI, they will have several other drivers’ license violations, such as no insurance, driving after revocation or suspension, other DWIs, etc.
• Men have more criminal events than women, regardless of the credit score.
• People without a credit score, and some collection accounts, generally have a several criminal events in their history.
• People with multiple DWIs, will probably be a problem tenant at some point.
• People with lower incomes, generally have more criminal events.
• People with evictions, generally have more criminal events.

Once you know the person’s background, it is time to make a decision.  You should have objective criteria that you can screen everyone with.  I like the idea of no more than one or two misdemeanors in the last five years, and nothing recent.  Assuming a solid credit score, I like the entire background to be clean.

Remember, most convictions go away when a person turns 18, so people under 23 will not have five years of history.

What do you do to find criminal history on prospective tenants? 

What is the worst thing you have found?  Have you ever found something that a tenant tried to hide?

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