How to Evaluate a Tenant Application

As a landlord, you want tenants who pay the rent on time every month and treat your property well.

That's why the tenant application is extremely important. Not taking this step can cost you a lot of money in the long run in the form of lost rent, eviction costs, and lawsuits.

Pay Attention to Their Credit History

You don’t have to worry about your tenant's credit score when processing their application, but you should pay close attention to their credit history.

Here are some things you don’t want to see:

  • Numerous late payments
  • Unpaid accounts
  • Collection account
  • Judgments from previous landlords
  • Prior evictions

It’s important to understand that most people will pay for housing before they make payments on their credit card if money is tight.

While recent non-payment of debt means financial trouble, late payments on consumer debt doesn’t necessarily mean they will be bad tenants.

Additionally, if you find a tenant with a foreclosure or bankruptcy on their credit report, you need to decide how that affects you and give your tenant an opportunity to explain the circumstances.

Verify Employment

The best credit history in the world won’t help your tenant make rent payments on time if they’re currently unemployed, which is why it makes sense to verify that they have an income source.

It’s customary to ask for at least the last two pay stubs, but you should also call the employer to verify that the tenant still works there.

Perform a Thorough Background Check

As a landlord, it’s important to run a thorough background check to verify your tenants’ ability to pay, protect your property, and ensure your good standing in neighborhoods where you rent.

It’s not discrimination to turn down an application of someone who was convicted of a crime as long as you apply the standard evenly to everyone.

However, you’ll probably want to consider what type of crime it was.

For example, a traffic violation shouldn’t have a bearing on the application, while robbery, assault, or similar crimes may make a potential tenant a threat to other people in the neighborhood.

In the process of investigating your tenant's background, you may also call their current and previous landlords.

The current landlord may just be happy to be rid of the tenant, but a previous landlord is more likely to be honest with you.

Collect the Deposit

If you’re ready to approve a tenant application, it’s time to ask for the deposit.

For tenants with poor credit history or insufficient employment history, you may want to increase the amount of the deposit for your own security.

However, this cannot be done arbitrarily. If you raise the deposit for some but not all tenants in the same circumstances, then you’re unlawfully discriminating.

Finally, you’ll need to be sure not to exceed the maximum security deposit set by your state.

Put the Rules in Writing

In order to comply with current laws and avoid accidentally discriminating against prospective tenants, you should put your screening processes down in writing.

It’s okay to say no to smokers or pet owners (service animals present an exception to this rule), but the rules must apply to every tenant. Additionally, you should remember that certain groups of people are protected.

While it’s okay to deny housing to a registered sex offender, it’s not okay to deny a tenant application because the family has children.

Posted on Dec 01, 2014


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