Becoming a landlord is a lot of work. You want to make money from rent, but you don’t want to risk hurting your property value by accepting an irresponsible tenant.
When approving new renters, there’s going to be a few key factors you’ll want to look into. Make sure your application is thorough, and the information you gather is accurate by checking these four things before approving a new tenant.
#1: Call Their Previous Landlord
One of the easiest ways to determine if a tenant will be a good fit is by asking for their previous landlord’s contact information. Most applicants, unless this is their first time renting, have previous experiences with other rental properties that will provide an adequate look into their habits and level of responsibility as a tenant.
Contacting a previous landlord can ensure that:
- The tenant pays their rent on time
- The tenant is who they say they are
- The tenant obeys property rules and won’t leave the space needing repairs
Income and credit scores are important factors in determining an applicant’s eligibility, but getting real life information from a previous landlord will help you fully understand who you’re renting to.
#2: Run a Background Check
This may sound a bit excessive to some, but it may save you from a lot of potential trouble in the long run.
Background checks ensure you aren’t getting yourself into trouble by renting to the wrong person. While it’s not impossible to rent to a tenant with a previous record, you’ll want to make sure they haven’t been convicted of something that could put you in jeopardy as a landlord.
Things like breaking contracts, destroying property, and violent crimes can all be found by running a landlord background check online. Keep yourself, your property, and your other tenants safe by vetting any new applicants thoroughly prior to accepting them.
#3: Verify Their Income
The last thing you want is a tenant who can’t pay rent. Ensure each applicant has a steady stream of income by asking for their employer’s information and their annual salary.
This step can be done easily. Simply ask for this information on the initial tenant application. Once they’ve filled this out, you can verify their answers by calling their employer. If the applicant only has part-time employment, or they’re a student, consider requiring a guarantor on their application.
This will ensure the rent will always be paid, by either party.
#4: Check Their Credit Score
This step may be a bit trickier than the others because some people don’t have a line of credit. However, it’s still an important factor to keep in mind. While no credit score may mean the tenant simply hasn’t accrued any debt, a bad credit score is a clear indicator that they’re not fiscally responsible.
A credit score isn’t a complete deal breaker, but keep these numbers in mind when considering approving a new tenant:
- 300-550 – This is an extremely low credit score. An applicant with a score this low probably owes money to several different creditors. Be wary that this tenant could have collection agencies coming for them, or garnished wages, and may not have the money to pay rent each month.
- 550-650 – A credit score in this range is better, but still considered bad by lenders’ standards. If a tenant has a score hovering around these numbers, there’s a good chance they aren’t entirely responsible with their finances. Consider asking for a guarantor to co-sign with them (only if you’re considering approving the application).
- 650-700 – This is a fair credit score. While it’s not ideal, a tenant with a score in this range may have a credit card or two that has a high revolving utilization on it. An applicant that falls within this range will most likely be responsible enough for approval, but be sure to examine other factors during the application process, as well.
- 700-850 – A credit score in this range is exceptional. An applicant with a 700+ credit score is most likely going to be a responsible tenant you can easily approve. This is particularly good for tenants looking to live alone, because you’ll be able to count on them for the entire rent payment.
Be Thorough, But Fair
A lot of factors go into a rental application. While every tenant is going to have a different story, it’s important you do a thorough inspection of their financial history before approving.
While some tenants may not have the biggest income or the highest credit score, the most important thing to look for is a sense of responsibility. You want to rent out your home or apartment, so it’s important not to be too harsh during this process.
No tenant is perfect, but make sure you find someone that’s going to pay the rent, be respectful of the space, and create a relationship with you based on trust and mutual respect.