five red flags You want to have a long and happy relationship with your current tenants, but things don't always work out. If you find that you're running into the same issues again and again with them, the problem may stem from an inability to pinpoint red flags during the application process or during their tenancy. There are plenty of red flags to look out for throughout the time you spend with a tenant, but here are five major ones that you need to keep an eye on.

1. Unstable Employment

The economy is not the best, but there's a difference between someone who has run into hard times occasionally and someone who has major issues with maintaining a steady income. Do more than simply check for a job and for corresponding pay stubs during your tenants' initial screening. Talk to the place of employment and check references if possible to determine whether your tenant is going to hold the position over the long term. Also, note the length of time the tenant has been at their current job and if there is frequent job-hopping in their employment history. Be wary of tenants who have changed jobs frequently in the past six months.

2. Evictions on Background Checks

Past evictions seen on a background check or credit report can be a red flag. Examine each case on an individual basis to determine whether extenuating circumstances, like divorce, led to the eviction. In addition to figuring out whether there's more to the story than simple non-payment, finding out whether the potential tenant paid the landlord for back rent goes a long way to determining the individual's understanding of financial responsibility.

3. Debt to Income Ratio on Credit Report

When you look at the credit report when screening a tenant, pay attention to their revolving debt ratios. This is the measurement of the credit card balance compared to the credit card limits. If the cards are close to or over limit, it's possible that the amount of debt is going to quickly overwhelm the tenant's ability to pay off other financial obligations.

4. Bankruptcy Filing

Another financial matter to watch for on a credit report, or directly from the tenant, is whether they have or are filing for bankruptcy. While a bankruptcy doesn't necessarily mean that they are unable to pay their living expenses (it simply means that they can't currently meet all of their debt obligations), it doesn't bode well for their financial stability or their viability as a stable tenant. Be careful when dealing with a tenant who is going through the bankruptcy process.

5. Pending Eviction

One of the biggest tenant red flags are tenants who are rushing from their old place and trying to sign for a new place immediately. While there are some circumstances where this makes a lot of sense, such as a person ending a relationship and needing his or her own place, in many cases it's a tenant who is trying to stay one step ahead of an eviction at their current location. Always contact the previous landlord to understand the terms in which the person is leaving his or her previous home.

POSTED October 09 2014 10:50 AM

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