By Laurie Mega
Tenant screening is a big part of what you do as a property manager. You want to fill your units quickly to avoid losing money, but you need to find the right tenants to move in.
That’s where tenant screenings come in. Checking the financial, criminal, and rental history of prospective tenants helps ensure you get a tenant who will pay rent on time, who is not likely to break their lease, and who could even stay for the long-term.
But of course, a screening can be time-consuming. And if you’re managing multiple properties, screening alone could take up the better part of your day.
So how do you get the most accurate assessment of every prospective tenant who applies to your units without holding up the rental process? An AI tenant screening solution just might do the trick.
While tenant screening offerings have been around for a while, the use of artificial intelligence (AI) is still fairly new. Companies like RealPage are pioneering the use of AI to make the tenant screening process more streamlined.
What Is AI and Machine Learning?
You’ve probably heard the terms artificial intelligence, AI, and machine learning batted around, especially if you have Alexa or some other smart home device.
The same technology that allows Alexa to respond to your questions and predict your preferences is now used to help property managers screen prospective tenants.
Artificial intelligence, or AI, is the ability of an application, such as Google search, to predict an outcome based on a large amount of data, also called big data. Every time you begin to type in a query into Google, a list of possible queries pops up, right? That’s because the algorithms powering the search engine are trying to predict what you’re searching for based other searches using the same keywords.
Apps like Google also use machine learning to deliver the best results to users. Machine learning is exactly what it sounds like. The app is refining its results based on your previous searches and the results you clicked on.
Tenant screening solutions that use AI and machine learning are doing essentially the same thing.
For instance, the RealPage proprietary rental payment history database contains more than 30 million lease outcome records, the largest and most comprehensive in the industry. Those records are analyzed by their AI tenant screening algorithm to predict tenant behavior.
How is AI Used for Tenant Screening?
You know how the traditional tenant screening works. When a prospective tenant applies to one of your homes or units, you take their information and run a credit check, a rental history, a criminal background check, and you may call their references.
AI tenant screening automates at much of the process by analyzing the information from each tenant to come up with a score, much like a credit score, that property managers can use to determine whether or not they will be a good fit for their properties.
It also gives the opportunity for populations who were previously disqualified a chance to qualify.
Finally, the scoring algorithm analyzes debt-to-income differently. Instead of looking at all debt equally, it takes into account low-interest “good” debt, such as student loans and car payments versus “bad” debt such as that from credit cards.
The Benefits of AI Screening Tools
Because AI tenant screening tools take a much more robust approach to tenant screening from a financial perspective, it reduces the risk of financial loss from unpaid rent and eviction processes. According to RealPage, it can amount to a cost savings of more than $400 million for U.S. property owners.
Aside from the financial benefits, a tenant screening solution with AI can also help level the playing field for tenants. The Fair Housing Act (FHA) prohibits property managers and owners from refusing to rent based on sex, race, sexual orientation, disability, age, gender, religion, color, familial status, or national origin.
Finally, a tenant’s score result is transferable. This has a number of advantages, including the ability to track the lifetime value score of residents currently living in a property. From year to year, their score will change, and you can track that change to assess their viability as a tenant.
The use of AI and machine learning in tenant screening are changing the game for property management. Those who are pioneering the technology, such as RealPage, are making great strides to help property managers choose the best tenants for their properties while opening up the market for an even larger tenant pool.