Those may sound like strong words, but consider the alternatives. A recent study shows the average loss from a bad-risk tenant is $1,450, which makes tenant screening a good business investment. With property screening procedures, property owners and managers can alleviate many of the problems associated with high turnover, damage, slow payments/collections, skips, moves with no notice, disturbance, evictions, and so on.

A property manager complies with the Fair Credit Reporting Act by obtaining permission from the prospective tenant in the form of a signed disclaimer. Another concern is the increasing cases of "landlord liability." These cases are being won by the victims of the tenant who was not properly screened by the property manager before placing them in the building. One management company was ordered to pay more than $3 million to the family of 3 children abused by a convicted child molester living in the complex. Background screening could have allowed the manager to make a different, well-informed decision about renting to that particular tenant. One case such as that could ruin a small management company forever.

Tenant screening has grown dramatically. Property managers have discovered that such a service can usually provide a complete professional report cheaper than they can do it themselves and in most cases with a 24- to 48-hour turnaround. A typical tenant screening report will include rental history, job history, legal history, check of references, a credit report, and banking information, among other things.

Asking the right questions—having your prospective tenant complete a proper application to rent—and doing professional tenant screening could save you thousands, and possibly millions of dollars. Imagine how well you could sleep at night knowing you have answers to the $3 million question.