Best Legal Documents for a Beginner Landlord

You invest time and energy into your new rental property, and you want to protect your investment.

Handing over the property keys to your new tenants can be nerve-racking, as you are trusting them to respect and maintain that investment.

To protect yourself and your rental property, you need to acquire several legal documents.

These rental documents will ensure that you are compliant with your state’s landlord-tenant laws; they also give you legal recourse in the event that something goes awry.

1. Rental Application
To begin the renting process, you will need a steady supply of rental applications to document each potential tenant.

This simple form gives you all of the information necessary to perform background and credit checks, and it may also reveal your applicant’s serious or fickle intentions.

Check any employer or previous landlord references, establish that your rental applicant can make the rent each month, and ensure he or she has good rental responsibility.

2. Rental Agreement
Once you have chosen the renter(s) for the property, you need to create a rental agreement or lease agreement.

This is a binding legal contract between the renter and yourself, spelling out the exact details of your agreement, including the length of the lease, the exact location of the rental property, the amount of rent, when the rent is due and payable, and any other stipulations you may have, such as pets or no pets.

Each state has its own laws regarding the exact language to be used and if certain elements cannot be included.

Ensure you conduct thorough research.

3. Eviction Notice
No one wants to think about the worst case scenario.

However, it’s best to be prepared if your tenants are unable to make their monthly rent payments, or if they break the lease in another way, such as subleasing the property.

The only legal way to evict inappropriate tenants is with an eviction notice, which may have a different name depending on your location, such as demand of possession.

Once you notify tenants, you start the clock on the eviction process.

This process differs based on your state and whether the tenant is being evicted due to non-payment or other factors.

4. Notice to Enter
You should check on your property from time to time, to ensure that your renters are taking care and not violating any terms of the rental agreement.

However, you cannot stop by unannounced; the tenant is entitled to his or her privacy.

Therefore, you must give your tenants a notice to enter at least 24 hours in advance of your visit.

This gives your tenant enough notice to make sure that he or she will be home (if necessary) at the time of your visit and is in compliance with your legal responsibility as a landlord.

5. Notice of Non-Renewal
Sometimes you don’t want your tenants to stay for another lease term.

This may happen because you no longer want to rent out the property, or you may choose to move someone else in instead.

To give your renter(s) adequate notice to find a new place to live, you will need a notice of non-renewal.

State requirements vary widely on how much notice you need to give, but generally, the more notice you give, the better.

While there are many more forms that a new landlord may need, these five documents will give you the confidence to move forward in renting out your first property.

Find your locale’s requirements on the exact language needed and the time lines necessary to execute proper documents.

Many of the initial difficulties of renting out a property will be alleviated with the right paperwork.

How to Verify That a Renter Is Trustworthy When They Have No Credit History

If you’re only renting units or homes to tenants with an excellent credit history, you might be waiting a while before you get an acceptable application.

While it’s true that a good credit history normally equals timely payments, that’s not always the case.

There are many potential renters out there who haven’t yet had the opportunity to boost their credit score; they’re simply too young or too financially inexperienced to have any credit history worth mentioning.

Others may have flaws on their credit, but they’ve managed to bounce back from a rough patch and will be ideal renters in the future.

But how can you tell these renters apart from the troublesome ones?

There are a few ways to check a person’s trustworthiness, even without a credit history.

1. Ask for old payment records.
Oftentimes, even if a person has no credit history to speak of, they still have some form of past financial obligations that can vouch for their reliability.

You can ask them to provide these records as proof of their timely payment history.

It’s best, of course, to ask for old rent payment history from past landlords, but that’s not always an option.

In that case, any bill payment records will work.

Even a utility bill record will give you a good indication of a potential tenant’s past.

2. Ask for a large down payment.
If you’re still worried about the tenant paying on time each month, ask them for a larger down payment up front.

Because it’s difficult to rent without a credit history, most tenants will gladly put extra money down to secure a rental.

Many landlords use this money as a security deposit or apply it to the last month’s rent in the lease agreement.

Be sure and check local law regarding a large down payment.

3. Ask for references from past employers.
Regardless of credit history, you should always make sure your tenant has verifiable income.

You should verify employment with his or her current company, and you should also ask for references from past employers.

Legally, the questions you may ask employers may be limited, but you can usually ask if the applicant is eligible for rehire, which will give you a good indication of his or her prior work performance.

You don’t want a renter who is fired repeatedly from different jobs.

4. Ask for character references.
Since employers can’t give out much information about the tenant’s character, ask applicants for additional references to vouch for their dependability.

These shouldn’t be family members, though.

If possible, it’s best if references are honest people whose names you recognize in the community.

If that’s not possible, friends, past or present coworkers, teachers, or other professional acquaintances are always good options.

5. Verify their income.
There are several ways to verify a tenant’s income, and you should pursue at least one of them.

You can ask for past pay stubs or old tax records, such as W-2s or 1099s.

You can also request bank statement records.

Of course, their employer can also verify their income through an employment verification request.

Once you’re satisfied that the prospective tenant is honest and reliable, there’s nothing holding you back from extending a lease agreement offer to them.

As long as you verify their history, income and character, you’ll likely have an excellent renter with little to no problems in the future.

When Should You Deduct from a Security Deposit?

A security deposit is often, but not always, equal to one month of rent. Ideally, it helps the landlord or property manager pay for any repairs or cleaning that the property needs when the tenants move out. When the cleaning is over, the landlord sends their tenants a check for what remains from the deposit.

It sounds simple, right? Unfortunately for novice landlords, it’s hard to know exactly what to charge to a security deposit. Any miscalculating — whether accidentally or on purpose — is a great way to get angry tenants and a bad reputation for yourself.

Why Should You Give Back A Security Deposit at all?
Some landlords make their tenants hunt them down to give back their security deposits. Others don’t refund security deposits at all, effectively levying an extra month’s worth of rent from tenants.

These practices aren’t legal in a lot of jurisdictions, and you may find yourself in small-claims court if you don’t refund a security deposit when necessary; check your local laws to learn the details. Additionally, refusing a deposit refund makes your tenants very upset because, for a lot of tenants, a security deposit is a lot of money. Even if you never hear a bad word from your renters about it, their family and friends will — not to mention the whole Internet. Future tenants become much less likely to rent from you if they hear that they probably won’t get their security deposit back. Being unable to rent your properties out is not worth the money you get from holding onto the security deposit.

Therefore, it’s best to give back your security deposit. If there’s a delay, communicate that to your tenants. If there’s a dispute between you, remain as straightforward and clear as possible while always holding onto all records of your communications about the rental agreement.

Security Deposit Deductions 101

When your tenants move out, you’re likely to find wear and tear on the property: paint peeling, smudges on the walls, scratch marks and so forth. You can also discover actual damages: holes in walls, broken windows or torn carpet. Only heavy damage is generally considered fair game when deducting from a security deposit.

Remember that even a model tenant can have deductions from their deposit. As you walk through, photograph all damages so that you have a record if the tenant disputes your charges. Remember also that not all damage in a landlord’s eyes is damage in a tenant’s eyes. For instance, imagine that your tenant painted a wall a different color. It may look nice, and the tenant may have had the best of intentions. However, if you need to repaint the wall, that’s still property damage — especially if they never communicated it to you. If they did tell you before painting and you said it was fine, then billing them later isn’t fair — even if you changed your mind.

If you need to call in a repairman or a cleaning team after tenants vacate the premises, so that they can do badly needed cleaning, billing the tenant out of the security deposit is fair. If it’s a standard practice at your properties to call in professionals — to repaint all walls in your properties, for example — don’t deduct unless the damage goes above and beyond normal wear and tear. If you yourself are doing the repairs, keep a close eye on your time, and then you can bill tenants for your own work as you would for a professional doing the same job. Security-deposit deductions aren’t just to compensate for the time spent on repairs; they also pay for new materials. It’s also fair to bill out of the security deposit for anything that needs replacing, like doorknobs, hooks or appliances.

As a rule of thumb, any damage you don’t find within a week or so of your tenant’s departure isn’t eligible for a security-deposit deduction. If your new tenant finds damage a month after moving in, billing the old tenant for it isn’t really an option.

These deductions can add up. Keep a carefully itemized record of deductions. Ideally, give that information back to the tenant when you send back what remains of the deposit. Don’t forget to leave them your contact information so that they know how to get in touch with you if they dispute any charges.

 

Dealing with Troublesome Tenants

If you have not had a nightmare tenant yet, consider yourself lucky.

These tenants miss payments, sneak in pets despite the terms of the lease, and generally break key agreements you established with them.

When a tenant breaks the terms of the lease, ideally you will have clear and legally enforceable expectations for what happens next.

That could include warnings, penalties, and even eviction if the issues are serious enough.

However, what do you do when you have troublesome tenants who are making your life difficult, but who always stop just short of breaking the lease?

Try these tips and tricks to improve the situation.

Clarify Expectations
The first thing you should do is reach out to tenants and re-establish expectations.

Have a tenant who is consistently sending their payment a few days late?

They might just assume that you do not care about timely payments because a previous landlord did not mind getting their checks until the middle of the month.

A quick phone call or e-mail could nip that problem in the bud.

If you enter the property to make a repair and notice that the sink is piled with dirty dishes, you may justifiably want to get your tenants to clean up their act.

Think of it from the perspective of the tenants before you reach out.

You might have a group of recent college graduates who do not realize that they are inviting pests into the home by leaving their dishes out.

While it should not be your job to teach basics like home maintenance to an adult, it might be worth your time to have an informal conversation with the tenants.

When you follow up with them about the repair, say that you noticed that the dishes were piled awfully high, and warn them that pests will start to show up if they do not keep the home clean and tidy.

Communication can resolve many small issues, from maintenance to getting tenants to allow you to show the home, before they become major ones.

Review the Lease
If the tenant is not responding to informal outreach, it is time to go back to the lease.

Make sure you are not missing any clauses that you could use as leverage.

Look for general clauses that can potentially cover multiple issues.

Grounding a discussion with your tenants in the lease will let them know you are serious about resolving the issues.

Behave Yourself
When you are in a conflict with a tenant, it can be difficult to maintain professionalism at all times, but it is even more important than ever.

Make sure you are always meeting your obligations, regardless of what your tenant is doing.

Even if you are angry that the rent is late (again) do not hold off on repairs to get back at the troublesome tenant.

If you are always in full compliance with the lease, you will have an easier time if the relationship continues to go south and you have to involve lawyers.

Ask Them to Move
Just because the lease is not up yet, does not mean the tenant has to stay if you want them out.

Reach out and say that you would prefer to amicably break the lease so that the tenants can leave early.

They are under no obligation to do so, so you may have to offer an incentive.

Parting with a few hundred dollars in moving costs might be worth the hassle.

While you may just have to wait them out, with these tips you have a chance to get your troublesome tenants to straighten up.

How To Price Your Prime, New Property To Get The Tenants You Need (and Want!)

If you have a new property ready to be introduced to the rental market, but have little to no idea how you should price your home, condo, or apartment, you are not alone.

Whether this is your first rental property or the latest in your rental empire, determining the desirability pricing of a rental space can be tricky.

You want the property to be affordable enough to be attractive to tenants, but you also want a price tag that will demonstrate the quality of your space.

Last, but not least, you want this price to net you profit from your investment.

Follow these few tips to help you find the right number.

Determining Factors For Apartment Rent Prices
There are many factors to consider when setting the starting price of a rental property.

If you’re not sure where to begin, consider using a comparison tool such as the one found on Rentometer, which will allow you to compare rents in your area.

Learning what other landlords are charging can give you a better idea of what your particular apartment is worth.

You can also look through classified ads online to find properties similar in style and location.

Because tools like Rentometer don’t consider the amenities that make your apartments desirable, you will need to consider those selling points when creating your price.

View, on or off street parking, yard access and number of units in the building can all influence the price.

Also, consider hardwood and tile floors, access to public transportation, included utilities or stylish kitchen appliances.

Rental experts warn that pricing too high can mean a higher turn-around rate on tenants in apartments.

Having a long-term resident with whom you have a great relationship is better than a parade of renters who love the property but can’t afford the rent.

Pricing a Single-Family Home
Unlike multi-unit properties that allow you to combine multiple rents to make a profit, single-family units are harder to price.

Finding a happy medium between affordability and profitability may seem impossible.

According to real estate advisors, property owners should rent a home for no less than 1.1 percent of the value for houses appraised at up to $100,000.

When you move up into the next price bracket of $125,000 it is wise to rent at 1.0 percent of the home’s value.

That means if you’re renting a property valued at $120,000, ask for a minimum of $1,200 per month.

Keep in mind, most single-family rentals do not typically include utilities.

If utilities are not included in the rent of your home, make sure the tenants are responsible for the electricity, water, sewer, heating, and cooling.

Keep Up Your Confidence In Your Property
Depending on the rental market in your area, it may be necessary to adjust the price to meet the demands of prospective tenants.

You may need to lower the original asking rental rate in order to get renters interested.

Don’t get discouraged and “low-ball” for the sake of filling the space.

You’ll find the right tenant who is willing and able to pay for your property, as well the utilities and proper maintenance. All that’s required is patience and a little upkeep.

Top 5 Things New Landlords Should Watch Out For

You’ve finally bought a rental property and are looking forward to your new role as a landlord.

Owning a rental property offers a dependable source of monthly income, but if you want to keep that cash flowing, you should watch out for a few practices that can affect the success of your new endeavor.

1. Getting Too Friendly with Tenants
Although it’s important to maintain a cordial relationship with your tenants, it’s best to find friends elsewhere.

If you become too friendly, your tenants might try to take advantage of the relationship, thinking that they can make late rent payments or ignore your policies.

Think carefully before renting to relatives or current friends.

If you do decide to open rentals to friends or relatives, use the same screening procedure you use for everyone else and emphasize that your role as a landlord will be separate from your role as a friend or family member.

It’s not easy turning down someone you know, but if you know that the person isn’t responsible or reliable, it would be better to rent to someone else.

2. Not Establishing Policies
Whether you’re renting 20 units or just one, it’s important to create written policies before the first moving truck pulls up to the door.

With written policies, there are no gray areas.

Are other tenants complaining that Joe in 2B is practicing his drum solo at 2 a.m.?

Pull out the policy and show him the “No loud music or noise after 10 p.m.” section.

Does Kaitlyn want to paint her walls black? Point out the appropriate section of the policy.

Policies are very useful because they clearly spell out what is and isn’t allowed.

Keep in mind that they must apply equally to everyone.

3. Not Running Background Checks
Most potential tenants seem like perfectly wonderful people when they’re touring a rental apartment or home.

But beyond that friendly exterior may be someone who has trouble paying bills on time.

If you don’t run background and credit checks, you won’t know that your new tenant views the monthly due date as a mere suggestion.

Background and credit checks can help you avoid big headaches with tenants who aren’t what they seem.

It’s much easier to turn down potential tenants than try to evict them three months from now.

4. Failing to Identify Your Market Segment
Is your unit the perfect place for a young family or will it appeal to college students?

Identifying your market segment can help you decide where to advertise it.

If it’s ideal for families, an ad in the local shopper makes sense, while college students will be more likely to respond to an ad in the college newspaper.

Make a list of the positive aspects of the unit to determine how to market it.

A unit with multiple bedrooms, a large kitchen and proximity to schools and playgrounds will probably attract families, while an upscale one-bedroom with luxury finishes in a busy urban area will appeal to young professionals.

Use the positive attributes in your ads, social media posts, and website, if you have one.

Even if you are focusing on a market segment, be sure that you do not appear to discriminate against any protected classes when you are advertising your rental.

5. Not Raising the Rent
Taxes and utilities tend to increase every year and so should the amount you charge for rent.

Although you don’t want to gouge your tenants, you do want to increase the rent every year to cover costs.

Tenants will be much more accepting of small rent increases than one very large increase after five years of stable rent.

Renting is more popular than ever, with 36 percent of American households renting.

The things you do as a new landlord will help ensure that you attract the highest quality renters from the renter pool.

Although you’ll do a lot of on-the-job learning, the process will be well worth it when you enjoy the financial benefits of owning rental property.

 

When is it Time to Hire a Property Manager?

A good property managers can be a valuable asset to any landlord.

Not all landlords want to deal with the everyday issues and problems that arise, and many of them have more units than they can effectively manage.

The factors in the decision to hire a property manager will not be the same for every landlord.

Here are some criteria to help you decide if it is time for you to move in that direction.

Do You Have Numerous Units or Are They Spread Out?
If you have a lot of rental units or separate properties that are far apart, you may benefit from hiring a property manager.

You not only have the time-consuming task of dealing with all of those tenant issues and phone calls, you have to find new tenants when someone moves out.

In a larger complex, this is often an ongoing task.

If you don’t live close to your rental properties, you may need someone to keep an eye on everything.

Someone who can be on-site on a daily basis will be able to monitor the property and take care of needed repairs before they become major problems.

Having a manager who checks in regularly will keep residents happier and reduce turnover.

It can also prevent the problem of rundown units where tenants don’t think the landlord knows what is going on.

You Have Limited Time or Interest
Some landlords have full-time jobs while others want to enjoy their retirement or free time.

If you have other obligations or activities that don’t allow you to focus on your rental properties, you should hire a manager.

They can manage the daily issues and report in when something bigger needs your attention.

Many landlords like having the rental income but don’t necessarily enjoy the management aspect of having rental properties.

If this is the case, it is better to let someone who enjoys that part of rental management do it.

You Can Afford To
If you can afford to hire a manager and still make a nice profit on your rental properties, you might as well do it.

Focus on what else you could be doing with your time to improve your income even more or just enjoy life.

Depending on the size of your properties, you may not even need a full-time manager.

Some landlords hire someone to come to the office one or two days per week and have an outside call center handle phone calls the rest of the time.

Your Business is Growing
If you started out with a dream of owning a few rental properties and it has turned into a full-time business, now might be the time to hire a property manager.

As your rental business continues to grow, you will have many other details to deal with and won’t have time for the property management side.

As the owner/landlord, your job is to concentrate on the big picture.

That might mean purchasing new properties or making upgrades on current locations.

These tasks can be full-time work for you, which means you will need a property manager for the full-time job of managing your properties and keeping residents happy.

Not every landlord needs a property manager.

This decision will be different for every property owner.

However, there are many cases when it is not only feasible but preferable to have someone else deal with the daily details, allowing you to use your energy and time elsewhere.

 

What’s Better than Passive Income?

It’s a dream for many—achieve a steady stream of money that works for you while you do something else, like travel, work a different job, or stay home with the kids, but tax implications are everywhere and quickly become complex.

There are many things you need to consider when evaluating the right mix between passive and active income.

Passive Stays with Passive
In the eyes of the IRS, passive losses can only come out of passive income, so if you see major losses from rental properties and you net only a small amount of income from those properties, you will feel the negative effects.

We’ll talk about exceptions—there are many—but in general, it’s good to know how the government sees this income at the very highest level.

For most non-professionals or those with small incomes, it’s going to be a challenge to find a way to have income from one stream (passive) offset or benefit you based on income from a different stream (active.)

Evaluating Active Income Mix
No one can tell you the right mix between active and passive income because it’s something only you can determine for yourself.

That aside, there are still factors you need to consider:

  • Appetite for risk. Passive income isn’t inherently riskier, but it’s far more subject to ups and downs than a steady paycheck.
  • Family needs. If you can’t live 100 percent on your passive income, you must balance between the two and pay close attention to the tax implications.

If you are claiming to get a majority of your income from passive means in the rental property business, you are probably well on your way to becoming a true real estate professional.

You will want to thoroughly research all the pros and cons of becoming one in the eyes of tax law.

Passive versus Your Active AGI
Another thing to consider in determining the risk balance of passive versus active income is knowing that you can deduct up to $25,000 worth of passive losses and have it be offset by any ordinary income in a tax year.

But here’s the hook: Once you start looking at the higher income brackets, it starts to phase out—and phase out quickly.

For example, the benefit starts scaling down for married taxpayers starting at $100,000 worth of adjusted gross income (AGI) and is eliminated after $150,000 of AGI.

Should You Become a Professional?
If your property portfolio gets so complex that you are getting dinged at tax time, you might consider becoming a real estate professional.

By doing so, the tax code will treat you differently, and in some cases, better.

Again, as with any tax question, talk to someone who knows what they are doing and weigh the pros and cons carefully.

Rules around passive versus active income can be confusing.

Know Your Exceptions
There are also exceptions to the passive loss/passive income rule when it comes to real estate.

One example of this is if you deal in short-term rentals like a vacation property—having tenants for 7 days or fewer at a time—or if the property is rented for 30 days or fewer and you have a substantial investment in personal services surrounding that property.

There are more exceptions to consider when it comes to passive loss/passive income, so consult someone who is familiar with this area of real estate tax law.

 

Why Some Landlords Choose to Create an LLC or Other Entities

When you first become a landlord, you may not have considered the type of business entity you need for your property management company.

For some landlords, they simply fell into the rental market because they couldn’t sell their house, wanted to move, and needed the rental income.

Others simply aren’t familiar with the benefits that comes from the right business entity, such as liability protection and tax exemptions.

Sole Proprietor
This is a default business entity that you have when you file business taxes but you haven’t established yourself as a LLC or another business structure.

The only thing you need to establish this business structure is to file a DBA with your state.

Landlords who are first starting out and don’t know about the business entities available may file taxes as a sole proprietor prior to restructuring.

The primary reason a sole proprietor is so bad for a landlord is a lack of a corporate veil.

Instead of having protection from business liability, the sole proprietorship does not separate your personal and business assets.

A lack of a corporate veil is bad if something goes wrong at your rental properties and you get sued or incur a liability larger than your insurance company is willing to cover.

Additionally, you do not get any tax benefits or additional ways to reduce your business tax liability, so you generally pay the highest tax rates as a sole proprietor.

When you’re renting out your real estate, you want to position yourself for the best tax advantage, so this business structure is not ideal for landlords.

Limited Partnership
A limited partnership, or LP, is typically used for someone who invests in rental properties but is not an active partner in managing the business.

You act as a passive investor, so this is typically not a business structure used for landlords who are active in your business.

While you do get liability protection so your personal assets are kept separate from your business liabilities, you do not get the same tax benefits as other structures.

While some business tax benefits are realized, you miss out on depreciation because an LP is not supposed to be actively involved in business operations.

Limited Liability Company
A limited liability company, or LLC, is the structure many landlords turn to as their business entity.

While you have to file slightly more paperwork to establish an LLC compared to a sole proprietorship, you get a lot out of the work without an overly complicated business structure.

The LLC gives you limited liability with the protection of the corporate veil, as well as the ability to claim depreciation when filing business taxes.

You can lower your overall tax liability with these advantages, as well as the ability to be taxed as a sole proprietor, S-corp or C-corp.

A C-corp tax structure can be particularly advantageous for a landlord, as you don’t get taxed at commercial tax rates but pass through the income to your personal return.

Since you’re paying yourself a salary and covering payroll taxes, you avoid a 15 percent dividends tax and the 14 percent self-employment tax, resulting in a lower overall rate.

An LLC is also remarkably flexible, giving you a strong foundation to build your property management business on.

The operating agreement allows you to establish the business structure in the way that works best for you, and you also don’t need to sit through annual meetings with everyone involved in the business unless you want to.

All of these advantages add up to making the LLC the best business structure for your property management activities.

S- and C-Corporations
S- and C-corporations are not commonly used by many landlords, as an LLC is a less rigid business structure that can configure itself in a way to be taxed as an S-corp or a C-corp.

The primary problems with these business entities are the required paperwork and activities associated with running the business.

The filing fees required for establishing and maintaining a corporation are also expensive.

You have to adhere to required corporate duties, such as conducting an annual meeting, and other responsibilities.

The tax requirements for S-corps and C-corps are also quite complex compared to other entities, so unless you have a good reason to want to incorporate, it’s better to pass up these options.

What Causes Personal Liability?
Even with a business entity in place, it’s important to follow the laws and regulations revolving around keeping your corporate veil intact.

One of the most common mistakes for landlords, especially when you’re starting out, is to mix business and personal funds.

It’s essential to keep business income separate from your personal accounts, or else you could run the risk of personal liability.

It’s also important to properly follow any requirements in your operating agreement or the rules of a S- or C-corp so you are legally in compliance.

A business entity offers you the benefits of personal liability protection as well as many tax advantages.

While several options are available, an LLC gives you the most flexibility and least hassle out of all available business entities for landlords.

 

Can You Deny Prospective Tenants Based on Their Jobs?

Landlords can reject applications for all kinds of reasons.

At the same time, they are not allowed to discriminate based on certain criteria.

These two statements leave a lot of gray area for landlords when it comes time to review the applications of prospective tenants.

Requiring an Applicant to Have a Job
A landlord can require tenants to have jobs and to disclose their employment information.

You are allowed to ensure that the people you rent to can afford to make the monthly rent payments and pay for utilities.

In addition, you can require a minimum income to ensure that your tenants have sufficient funds for renting the apartment.

While a landlord can set the rules, the general rule of thumb is that the rent payment should be no more than one-third of the tenant’s monthly income.

While this isn’t technically the same as turning down an applicant because of their job, it does impact the kind of jobs a tenant can have.

For instance, a landlord who charges $1,000 a month in rent for an apartment wouldn’t accept a person making only $900 per month unless he or she would have a roommate.

This is just common business sense, and won’t get you in trouble.

Another issue that goes back to affordability is job stability.

If the job is seasonal or the person switches jobs often, you may not feel that they are a good risk as a tenant, and you would be within your rights to turn him or her down.

Other Reasons Not to Rent to a Tenant Because of a Job
Other than a lack of sufficient income, you may have other reasons you don’t want to rent to someone because of his or her job.

For example, you may not want the unit to be unoccupied because someone travels for work a lot.

Maybe he or she works odd hours and would disrupt the rest of your tenants when returning home.

Whatever reason you have for not wanting to rent to a tenant because of his or her job must be applied to all applicants. In basic terms, landlords have the right to refuse to rent to anyone as long as they don’t discriminate against someone because of a protected class.

A job doesn’t technically fall into that category, but you have to be careful in case it can be linked to one of those protected criteria.

If you were to turn down an applicant because of his or her job and it had anything to do with their age, color, race, religion, or other protected criteria, the applicant could claim discrimination.

A simple example would be to reject the application of a preacher, priest, or rabbi.

The key to protecting yourself and your property when screening applicants is to set your requirements in writing.

Follow those standards when interviewing all applicants, so that you may be fair in your reasons for rejecting applications. It is also a good idea to show your stated minimum requirements to an attorney who specializes in this area to ensure that you are not breaking any state or federal laws.

Landlords have the right to feel good about the people they rent to.

And they shouldn’t have to worry about their tenants being able to afford the rent.

At the same time, they want to make sure they aren’t breaking any laws and practicing illegal discrimination in rejecting an applicant based on his or her job.