You must have objectives in mind as a landlord when looking for the ideal tenants for your rental property. How can you determine if your tenant screening standards are too stringent, though? Overly tight tenant criteria can make it difficult for you to fill openings or perhaps cause you to ignore qualified candidates.
Your screening criteria may be too harsh if, for example, you have a rigid minimum credit score requirement, a rigid rent-to-income ratio range, a rigid criminal record policy, or a tight no-pets rule.
To make sure you rapidly fill vacancies with top tenants, read this post to examine your tenant screening standards.
You are not merely a landlord.
You are a master juggler who balances a million important choices while treading a thin line between two opposing financial interests. You may not have a pet tiger or a sparkly leotard, but if you want to succeed, you must maintain a perfect balance.
Finding that balance requires regular juggling of options, whether it’s determining the precise rate to charge, the optimal length of your rental agreement, or, most importantly, who to accept as a renter.
Your goal is to secure the ideal tenant who will stay in your rental property for a number of years. However, picking the incorrect renter can result in a host of issues. Damage to your rental property, lease violations, and unpaid rent are all things that can severely hurt an independent landlord’s financial line.
It makes sense that you might be anxious about finding your next tenant. It’s not just you. When it comes to finding a new tenant, “payment troubles” are the top concern for about 84% of landlords. And it makes sense because failure to pay rent can result in a number of major issues, such as falling behind on your own debts and, in the worst instance, having to go through an expensive eviction process.
Having to evict someone can cost up to $10,000 or more. Evictions cost money, may take at least three to four weeks to complete, and be tremendously time-and attention-consuming. Independent landlords often have little time and resources.
It makes perfect sense for landlords to want to implement tight rental screening requirements in order to have the best chances of finding a responsible renter in light of all these potential issues and legitimate concerns.
Being overly restricted could be dangerous.
A prolonged vacancy could result from having exceedingly rigorous renter requirements. You might mistakenly exclude some excellent candidates. A thorough screening service can provide you with the financial and behavioral insights you need to make a confident rental decision—regardless of how your applicant appears on paper. Given that vacancies can cost landlords up to $1,750 per month, it is important to understand the criteria for choosing a great tenant, review your own standards, and use this service.
A thorough tenant screening service will provide you with useful insights that can help direct your tenant selection if you’re looking for the ideal balance. We’ll look at some of the factors that landlords take into account below.
To assess whether your screening policy is too strict or too loose, take into account the following:
Minimum Credit Score
Minimum Credit Score
For good reason, a lot of landlords incorporate a tenant credit check in their tenant screening procedures. An excellent predictor of whether or not your potential tenant will pay the rent on time is credit history. A high credit score might indicate sound money management, but a low score might raise questions due to a history of missed payments and growing debt.
Grades for VantageScore Credit Scores
The grades and bands are useful. But keep in mind that a credit score is just that—a score—and that it does not represent the entire credit profile that can be seen in a comprehensive credit report. There is no clear-cut “poor” credit score for renting, which is the issue with focusing solely on credit scores. The length and performance of a borrower’s history affect creditworthiness among other things.
Renters who are older than they are are more likely to have better credit ratings. They have had time to develop a solid payment history, as evidenced by a large number of opened accounts. If they ever experienced financial difficulty, it’s likely that they were able to recover by repaying their obligations and improving their score. Millennial and Generation Z tenants have more recent credit histories than tenants with a long history of borrowing. Therefore, any blemishes on their credit report may have a disproportionately bad impact.
Landlords might think about developing a range of acceptable scores that match the target demographic for their rental unit rather than a strict minimum credit score. If the applicant’s score is too low for them to be held accountable on their own, you might also allow for a cosigner in order to avoid having an extremely severe screening process. Due to the fact that college students have likely not had enough time to establish their creditworthiness, this method may be successful when renting to them.
The Ratio of Rent to Income
The rent-to-income ratio is the guiding principle for determining how much an applicant’s income should be in relation to the rent you charge. To safely cover rental costs, including the security deposit and any move-in fees, and maintain a quality of living, the industry recommends that your applicant’s gross monthly income be at least three times the cost of the rent. However, a number of other criteria, particularly location, have the potential to undermine this stringent screening strategy.
As seen in the map above, the location of your rental property has a significant impact on how much you should charge and the corresponding income verification you should expect from your tenants. For example, if you’re a landlord in Wichita, where the median renter income is $31,500, your verified income requirement will likely be lower than in San Francisco, where renters average a salary of $92,100. You should also take into consideration which utility tenants are responsible for paying or what will be included in the rent.
At the end of the day, your rental property should be offered at fair market value, and you should demand proof of income that demonstrates the applicant’s capacity to pay rent in addition to their other debts. You may quickly learn which candidates need further income verification and which you can choose to approve right away.
A Criminal History
Given that landlords must use caution when rejecting an applicant based on a prior criminal past, you might want to reevaluate your tight tenant requirements involving criminal histories.
A constitutionally protected group may be discriminated against if potential tenants with criminal records are turned away based on a blanket policy. Other possibilities include non-violent offenses, traffic infractions, or convictions that happened a long time ago that could not have much of an effect on an applicant’s probable behavior as a tenant.
Before dismissing an application, landlords should take into account the severity, nature, and timing of previous convictions when establishing renter criteria. You should think about conducting a tenant background check utilizing a complete service, in addition to inquiring about criminal charges or convictions on a rental application. This will help you discover any information your renter is withholding from you.
Landlords frequently have to decide how to handle their pet policies. A “No Pet” policy could seem like a good idea to minimize pet damage, but it may be very restrictive and drastically restrict your options when it comes to tenant screening.
About 60% of pet owners have trouble locating rental homes that will welcome their canine companions. This is due to the fact that many landlords are afraid of the extra property damage that an animal can cause, or they are unable to get insurance coverage unless there is a clause in the lease that forbids pets from dwelling on the property. Having pet-friendly tenants can greatly improve your pool of candidates, especially if there are few applicants.
If you have a pet policy, think about whether the property will benefit from it as well. Do you have a backyard? Is it a single-family or multiple-family home? Charge a greater security deposit, a pet fee, or higher rent to cover prospective expenditures in order to further reduce the possibility of having to pay out of pocket for damage caused by your dog Fluffy.
Verifying a tenant’s rental history and past behavior is one of the best methods to be sure they won’t abuse a policy that allows pets. You may learn whether a pet was well-behaved, whether the property was well-kept, and whether the neighbors were respected by asking the right questions during a landlord reference check.
Utilize Balanced Selection Criteria Along With Thorough Tenant Screening
It is best practice to design and implement your tenant screening criteria. However, having overly strict qualifications may prevent you from hiring some otherwise excellent candidates. If it’s hard to find a tenant that satisfies all of your standards, reexamine your screening criteria and consider whether they are beneficial to or detrimental to your company.
Even the tightest standards won’t reveal everything about a candidate, so set them as you think suitable. You need a balanced screening program that includes a thorough background check if you want to truly secure your assets and yourself.
Any potential tenant red flags should be identified in advance to avoid any major financial losses later on. We can assist landlords in making more educated choices. Additionally, you can immediately build trust because you have a more complete understanding of your applicant, which enables you to make an immediate, more educated lease decision.
Renter and landlord trust may be established, thanks to solutions that give crucial information quickly and a quick and easy method for renters to exchange their personal information safe.
There are many choices to be made when you’re a landlord, but it doesn’t have to be a circus.
Let Landlord Management help with the balancing act while you get moving right away.