A Vacant Unit is Better than the Wrong Tenant
I see this all of the time. Tenant’s not paying their landlords and the landlords having to jump through the hoops of evicting them. Normally, when I get into the conversation with people I find they needed to fill their vacant unit so they lowered their rental standards or they eliminated a credit check all together.
I say this all of the time and people continue to ignore me. I would rather have a unit sitting vacant than to move in an under qualified tenant. Who you move in is one of the most important components of being successful in this business. COVID19 is really showing this. Currently MC Companies is collecting 96% of our rent. Why is this? It is because we were selective in who we moved in. All of our tenants have good credit and no felonies. Most of them are determined to keep their credit in good standing and are working with us on the rent.
Sure there will always be risk, but you can mitigate the risk, and a lot of people don’t because they just want to get their units filled. Below are the six ways you should qualify your tenants before allowing them to rent from you.
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HEALTHY CREDIT HISTORY
Most landlords’ number one concern about new tenants is non-payment of rent. Many landlords use a rent payment to cover the rental property mortgage. If the tenant doesn’t pay rent on time or at all, this could leave the landlord paying the bill out of their pocket.
If an applicant has no significant warning signs such as apartment related collections, judgments on their credit report, or they have a high credit score, it generally shows they have a history of making payments on time and are likely to continue to do so in the future.
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CLEAN BACKGROUND CHECK
As a landlord, you should always have the safety of your neighborhood, yourself, and your rental property in mind. In this regard, it’s best to know whether a prospective tenant has any relevant criminal offenses on their record. An applicant with a clean criminal check could be a good indicator that you can trust them with your property and the neighborhood. You’ll want to be sure to perform a criminal check at both the state and national level that includes Most Wanted Databases and the National Sex Offender Public Registry.
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CLEAN EVICTION HISTORY
Needless to say, a tenant who has been evicted is not a tenant you want to rent to. Although a blank eviction check is a good indicator that the applicant has a positive rental history, you’ll still want to conduct a landlord reference check to make sure the prospective tenant’s behavior at prior residences was up to par because sometimes it takes evictions a few months to post onto a credit report.
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STABLE EMPLOYMENT HISTORY
To help increase the chances of being paid on time, you’ll want to look for stable employment history. A person who has held the same job for several years and does not have significant gaps in employment could demonstrate that they have a steady job and income. Not only is this a good sign that the tenant will likely pay rent on time, but there’s also a good chance they will renew their lease since they don’t have a history of changing jobs frequently.
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SUFFICIENT INCOME
While a credit report is an excellent measure of a prospective renter’s financial credit history, it is crucial to verify employment and income for assurance that the prospective tenant has means to pay the rent. A ratio of three times the income to rent is the industry standard, which typically shows that if any unforeseen expenses come up for the applicant, they are more likely to have enough money to pay their rent.
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POSITIVE LANDLORD REFERENCE CHECKS
A positive landlord reference goes hand-in-hand with your tenant screening reports. Reference checks should verify that the applicant was a good tenant who paid rent on time and left the unit in good condition.