As a landlord, choosing the right tenant to occupy your rental is not always an easy process. You’re about to let a stranger live on your property for a year or more. Rental applications are the best way to know if your prospective tenants will meet your needs and help you weed out undesirable applicants. Here are a few essential things to pay attention to while screening rental applications.
An ideal tenant should have enough income to cover their rent, even if an unexpected expense arises. If they don’t have suitable income, they may have trouble paying their bills, maintenance, and rental fees. Keep in mind that the industry standard is a ratio of three times the income to rent, although this varies depending on location. Your minimum income requirements can be laid out in your tenant screening criteria.
When screening rental applications, you’ll want to look for someone with a stable employment history. A person who has held the same job for several years and does not have significant gaps in employment helps to prove that they have a steady income.
Not only is this a good sign that the tenant will likely pay rent on time, but there’s also a good chance they will renew their lease since they don’t have a history of changing jobs frequently.
If the applicant is a student with no employment history, you may want to have a co-signer or guarantor, usually a parent or guardian, who can provide security.
If the applicant is self-employed, ask for tax returns from the past two years. If the applicant owns a business, he or she can produce letters from vendors and associates, which you can use as a reference.
You can determine how likely a tenant is to pay their rent promptly using credit scores. By reviewing a prospective tenant’s credit report, you can get an idea of how they have handled payments in the past on loans and credit cards.
Anyone with a credit score over 711 is already above the average credit score of most Americans, according to valuepenguin. Millennials (ages 24 to 39) have an average credit score of 680, while baby boomers (ages 56 to 74) have an average credit score of 736. So, if your applicant has a score of 680 or higher, that’s an excellent credit score for most rentals.
Most landlords are looking for a score somewhere between 600 – 650 since renters don’t usually have the credit history of making mortgage payments to boost their credit score.
An applicant with a clean criminal check is a good indicator that you can trust them with your property and the neighborhood. A background check will gather all available criminal data that is reportable from sources across the country.
You’ll want to be sure to perform a criminal check at both the state and national level that includes Most Wanted Databases and the National Sex Offender Public Registry.
However, if the background check does reveal some offenses, it’s important not to rule out the tenant automatically – in fact, it’s illegal. Take the time to see what the incidents are and how they will impact your decision as a landlord.
Previous rental history is a good indicator of how a renter will be in the future. Eviction records can provide an in-depth view of an applicant’s eviction history, including unlawful detainers, failure to pay rent, and tenant judgments for rent and possession.
TransUnion research shows that evicted residents have nearly three times as many prior evictions and rental-related collection records when compared to non-evicted residents. Since prior evictions predict future evictions, an eviction record should be a warning sign that landlords take seriously when screening rental applications.
Reference checks should verify that the applicant was a good tenant who paid rent on time, left the unit in good condition, and provided accurate information about their employment status. You’ll also want to have an actual conversation with their employer on a company line.
It is essential to look out for red flags while screening rental applications to avoid any difficulties with tenants.