As a landlord, you are essentially giving a stranger the keys to your property. Taking the time to select the right tenant for your property is an important way to protect your investment. Here are some ways to differentiate the good tenants from the ones who could cause you problems down the line.
Your desire to find the right tenant for your property does not make you exempt from adhering to the Federal Fair Housing Act. You must always adhere to this Act to avoid charges of discrimination. In short, you cannot discriminate based on:
- Race or color
- National origin
- Familial status (families with children)
In addition, many states have their own Fair Housing Rules that you must comply with, so make sure you know and adhere to your local laws as well.
2. The Right Tenant Has Good Credit
You want to look for a tenant who is financially responsible. If they are responsible with paying their bills, they will most likely pay their rent on time and be responsible with your apartment.
A. Verify Their Income
-Ideally, their monthly income should be at least three times the monthly rent.
- Ask for copies of their pay stubs
- Call their employer directly to confirm their employment, length of employment, their attendance record and monthly earnings.
B. Run a Credit Check
- See if they have a history of paying their bills on time.
- Check their income/debt ratio.
-Even if their income is three times the monthly rent, you have to factor in how much debt they have.
-For example, the rent is $1000 per month. Tenant A is making $3000 a month, but has $2000 in debt payments every month. They most likely would not be able to afford to rent the apartment. Tenant B makes $2500 a month, but has no debt. They could be an excellent candidate to pay the rent even though their income is not three times the monthly rent.
- Look for prior evictions, civil judgments against or bankruptcies.
3. Perform a Criminal Background Check
Criminal information is a matter of public record, and can be viewed at various court houses. This check will turn up both serious and minor offenses. You will need the tenant’s name and date of birth. Keep in mind that those with a criminal record will often try to falsify this information when looking to rent an apartment so make sure to check a valid ID to verify that they are who they say they are.
A thorough criminal check should include:
3 points of caution:
- Certain states, such as California, prohibit landlords from discriminating against renters with certain criminal convictions. As a landlord, you may have an easier time justifying your rejection of a prospective tenant with a drug or violent crime conviction than you would rejecting a tenant with 50 speeding tickets.
- There is no nationwide database of criminal records, so it may be hard to uncover the tenant’s full story.
- Doing a criminal check yourself can be very time consuming. It may be best to hire a reputable tenant screening company to perform this check for you. It can often be combined with the credit check, for a fee of course.
4. Check Out Their Rental History
You should talk to at least two of their previous landlords. This is because, if the applicant was a problem tenant, the current landlord may not be so forthcoming with the truth as they may just want to get the tenant off of their hands.Questions you should ask:
- Did they pay their rent on time?
- What was the reason for the move? Were they evicted for non-payment of rent or for breaking the landlord’s rules?
- Did they give 30 days notice prior to moving?
- How did they keep their apartment? Were they clean?
- Did they cause any damage to the apartment other than normal wear and tear?
- Were they respectful of their neighbors?
- Did they complain often?
Of course, if the applicant is a first time renter, a student or a recent graduate, they may not have a rental history. In this case, you can require a co-signer for the lease.
5. The Right Tenant Has a Consistent Lifestyle
On their application form, look at their prior addresses and employment history. Do they move or switch jobs often? If they move often, this pattern is likely to continue and they will not be a long term tenant. If they have not shown consistent employment, they may not be able to afford the apartment in three months and you will be left starting your tenant search from scratch or dealing with an eviction.
6. Look for a Maximum of Two People Per Bedroom
Although HUD does not have specific regulations regarding the number of occupants per bedroom, a rule of a maximum of two people per bedroom is considered reasonable under the Fair Housing Act with the following exceptions:
- State and local law-
- If a state or locale has specific housing codes, then the landlord must adhere to them.
- Size and configuration of dwelling -
- A 500 square foot bedroom can hold more occupants than a 250 square foot room.
- A unit with a living room and den could hold more occupants than one without.
- Age and number of children-
- Refusing to rent to two adults with an infant for a one bedroom could be considered discriminatory, whereas refusing to rent to two adults with a teenager for a one bedroom would be considered reasonable.
- You can give a maximum number of people per apartment, but you cannot give a maximum number of children per apartment.
- Limitations of the septic/sewer system-
- If capacity of the system limits the number of occupants the dwelling can tolerate.
The more people per apartment, the more noise and the greater the wear and tear on your investment.
Considering all of these factors will help you choose the right tenant for your property and hopefully save you time and money by avoiding costly evictions, non-payment and damage to your property.