Doing some shopping for a new tenant?
Being a landlord, it's as much of a search for the right renter, as it is for the renter looking for the perfect place to live.
It can be a luring thought to accept the first applicant for your rental but don't get caught up in the thrill of ending your tenant hunt.
The detriment of having a bad tenant far outweighs the fulfillment of signing a lease.
A renter isn't simply just a renter. They're the person who is contractually obligated to pay you on schedule every month, they're the person who is supposed to take care of your property as if it were their own and their supposed to uphold all the fine print of the deal - same as you.
Bearing that in mind, the person(s) you select to rent your property is a BIG deal with potential big implications.
As a landlord there are times where you can reject a tenant because they've given some kind of indication that they won't be a good fit for you and your property. How exactly do you know what the criteria is for turning down a tenant applicant? We've listed those details below.
Please keep in mind that it's illegal to turn down an applicant on the basis of a protected class (more details, below).
As a landlord, below are some of the red flags that can be reasons to deny a tenant application:
1. Poor credit (or none at all) - Credit is basically a track record of your spending and payment history. For a person looking to trust someone financially, it's a great indicator of what behavior you will likely get from a person. If the applicant doesn't have any credit history, that would also require a gamble on your part because you have no idea if/how they will uphold their responsibility as a renter.
2. High levels of debt - This shows that this person may be spending money faster than they're earning it. Although not all debt is bad debt, an excess amount of debt is usually a red flag. (Check out; The Difference Between Good Debt and Bad Debt)
3. Insufficient income - You can't expect people to pay the bills if their income doesn't reach/exceed their spending. A good rule of thumb is that rent should be no more than 25% - 35% of a renter's monthly take-home income. (Source)
4. Displeasing landlord, employer & personal references - If you find an applicant to have negative references from prior landlords, employers and/or personal references, you have the right to deny the applicant. You can simply say "thank you for your interest but we've chosen to go a different direction."
5. Prior evictions (or large gaps in rental history) - Granted there are some landlords who evict on unfair terms, seeing a prior eviction on a tenant's rental history should naturally be a big red flag and is worth digging into, so get more details. Large gaps in history are also reason for concern. They may have a simple explanation but be cautious because it may be a renter attempting to cover up a prior unfavorable renting experience.
6. Not enough work history - The longer someone's work history, the more reliable they are for paying rent.
7. They smoke - Be careful of how you word this. If you don't want smokers to take residence in your property, it's better to say no smoking allowed rather than no smokers allowed. Portray it as more of a rule to be followed verses discrimination against a group of people, smokers.
8. Excess of occupants - There are limits as to how many people can occupy a given space. If there are indications from conversations and background check information that lead you to believe there will be more people living in the space than appropriate (or more than they're letting on) it may be a good idea to decline that applicant.
9. Fail a drug test - This is in regards to current drug users only. Addicts who are receiving treatment and are no longer using drugs are considered handicapped by the Federal Government and cannot be discriminated against.
10. Pets - You are under no obligation to rent to people with pets.
11. Evidence of illegal activity - If you have or know of evidence of illegal activity from a prospective renter, it is acceptable to decline their application.
12. Criminal history that indicates a threat to the property (committed within the last few years) - You are liable for any crime that takes place on your property which means you should do your due diligence to make sure you aren't renting to people who are likely to engage in illegal activity. That's important to keep in mind when you're considering an applicant with a criminal background.
13. Rental history indicates they jump from lease to lease - This means the renter most likely isn't planning on staying in your rental property once the lease is up for renewal. This leaves you obligated to put the work in to finding a new tenant next year when their lease is up for renewal - again.
14. Missed payments on prior rentals - There are occasions where missed payments don't necessarily indicate that the renter is going to skip payments. We're all human and sometimes people struggle. The important thing is to look for patterns and see if it was a rough patch or it was carelessness. There's a big difference.
15. Receiving a false Social Security Number - The falsification of any information on an application is good grounds for not accepting a tenant. This is also a good point to mention that if you (a landlord) ask a tenant for their SSN, you are legally obligated to ask all prospective tenants for that information. (This goes for all information, not just SSNs). If you ask one, you must ask them all).
"Fair Housing Laws require that you treat all tenants equally, so you should require an application, credit report and background check from everyone. No exceptions." - Rentalutions.com
16. If someone says they work from home - This is a personal call. The reason that some tenants are turned down for working from home is because they will likely use a larger portion of utilities because they're home all day. If you don't cover any utilities (or only cover minimal utilities, this may not apply to you).
We would like to conclude this list by making note that you are not necessarily required to tell an applicant why they're being rejected, just simply that they are.
You can say something along the lines of, "thank you for your interest but we're going to take a different direction." If an applicant that's been denied inquires further, you do not have to explain why.
It's also important to note that the following criteria are NOT acceptable reasons to reject a tenant: gender, age, race, ethnicity, religion or any other reason based on a protected class.
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