Would you rather lose the rental income for another month or take on a bad tenant? Bad tenants can cost you much more than a month’s rent in the long run. Make sure you do your due diligence on the front end (at application time) before accepting an applicant. Here are five very good ways to make sure you fully understand your next potential tenant.
Sufficient income
Does the proposed tenant make enough money to pay the rent and utilities? Landlords typically require annual income to be at least 40 times the monthly rent. For example, if you have a young couple looking at a $3,000 per month apartment, you should require a combined income of $3,000 × 40, which equals $120,000. To determine how much rent tenants can afford, simply divide the combined annual incomes by 40. It’s important to make sure your tenants are financially capable (in your eyes) of paying the rent and utilities. Do the math, and if the budget appears too tight, move on to the next applicant.
Qualifying credit
What is the tenants’ credit score or rating? Do they have any accounts in collection? Have they ever been evicted from a prior residence? Either you or the tenant should be pulling credit for each applicant that applies for your empty unit. If you are going to pull a credit report, make sure the application you supply the tenant clearly provides you with authorization to do so.
Reasons for moving
Why are they moving? Where are they coming from? What don’t they like about their current residence? Have they notified their current landlord of their intent to vacate? These are four great questions to ask a prospective tenant when you receive their application. If you want to take this search a step further you can Google Earth their current residence or even take a drive by (if you’re local). Gathering an image of the tenants’ current residence may help you get an idea of whether their new home (your apartment) will fit the bill.
Employment verification
Call the prospect’s current employer’s HR department. Do they work there? How long have they worked there? Is employment expected to continue for this individual? Make sure the application you’re using to collect tenant information provides authorization for you to make this inquiry. The HR staff may need to verify some information about the employee, so have the application in hand when making the call.
Google search
Do a quick Google search for the applicant’s name and see what pops up. Does America’s Most Wanted pop up as the first website or is a photo of the prospective tenant donating time to a local charity? In the first case you’ll certainly want to contact local authorities about your possible discovery. In the second scenario you will hopefully have a better feeling about the tenant you were going to accept. Note: Any negative information you find on Google should be taken through some type of verification process. You cannot deny an application based solely on something you found online.
