You have several criteria to examine when looking at tenant applications.
You learn about the tenant’s’ credit history, employment status, and background when conducting a screening. In some cases, you end up with multiple tenants who meet some or all of your qualifications.
The top deciders for choosing the right tenants depend on your personal preferences, but these criteria are a good place to start.
Income Consistency
You want renters who have no problem paying rent month after month.
Looking at the prospective tenants’ income level tells part of the story, but you want to pay attention to their income consistency.
If there are significant seasonal swings throughout the year, you may run into rent payment issues with tenants. Ideally, tenants are paying 30 percent or less of their monthly income in a rental payment, although this may be higher in markets such as New York or San Francisco.
Rental History
The rental history gives you insight into the type of tenants you’re evaluating and their long-term potential. Look at the length of time spent at each rental and follow up with any references.
If you’re uncertain whether a reference is legitimate, try looking up the contact information of the landlord or property manager through a third-party source.
Talk to the tenants about short-term leases and large gaps in their rental history. These inconsistencies can reveal evictions or other issues.
Choose tenants who have long-term rental histories and excellent recent references from verified landlords and property management companies.
Credit History
A tenant’s credit history gives you a wealth of information on their financial history and rental suitability.
You see public record information on bankruptcies and evictions, collections, credit accounts, and other debt information.
You can combine this history with their reported income to see whether the tenants can easily afford your apartment.
Prospective tenants may have excellent income, but their other bills could eat up a substantial portion of it.
Credit card balances and installment loans are also key factors.
High credit card debt and multiple installment loans eat into the tenant’s’ income.
Collections, late payments, and judgments also indicate financial instability.
Choose tenants with clean credit histories and debt-to-income ratios that can support their rental payments.
Avoid Potential Fair Housing Act Issues
You need consistency in your tenant selection to avoid any problems with the Fair Housing Act.
If you end up with two equally qualified tenants, you can run into problems with a discrimination accusation if you approve an applicant who applied later.
You can accept tenants based on a wide variety of criteria as long as you don’t discriminate against a protected class, but it’s difficult and frustrating to defend against discrimination lawsuits.
Stay consistent with your decisions and go with the first applicant who meets your tenant qualifications. You want an established history of selecting tenants based on your criteria so you can point at this evidence to support your claim of nondiscrimination.
You want a tenant who will take good care of your property, pays the rent on time, and remains in the rental for the long term.
These deciders let you examine tenants who appear equally qualified on the surface but have differences that are revealed through their credit usage, rental history and income history.
