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By Evelyn Long
Despite all of the positives that can come with renting out properties, one of the downsides is sorting through all of the applications for potential applicants. It’s arguably one of the most important roles of a landlord or property manager. Ensuring your properties are inhabited by responsible and reliable tenants is key to a successful rental property on all fronts.
Renting properties to the right tenant makes everyone’s life easier. If you know what (and what not) to look for in potential tenants, you can avoid some nightmare tenant situations and avoid the various costs that can accompany those circumstances.
1. Bad Credit Score
One of the first indicators of a good potential tenant is a glowing credit score. That being said, a not-so-glowing credit score is probably also a good indicator of a riskier tenant. Depending on the credit report you use to review your tenants, you may determine whether different score ranges are acceptable or not. You also might want to take other factors, like location, into account.
Even with those other factors accounted for, it’s a good idea not to accept a tenant with a credit score below 620. Sufficient income and decent rental history do not necessarily outweigh the negative traits a poor credit score can indicate. Low credit scores can tip you off to risky habits like irresponsible spending and failure to pay bills on time. These are definitely things you’ll want to avoid in a tenant prospect.
2. Questionable Rental History
When reviewing a potential tenant’s rental history, there are a few markers that could serve as good or bad signs. Keep an eye out for some of these red flags to avoid in rental history.
Previous landlord references can be a great indication of a reliable tenant. However, if a reference seems too good to be true, it just might be. Not only could a current landlord be trying to rid themselves of a bad tenant, but anyone could have a friend pose as a former landlord and offer an excellent reference.
If a current landlord has nothing but nice things to say, but previous landlords have some complaints, it’s probably best to trust your instincts and avoid this tenant.
While there are many reasons for not having a long rental history, it still may be a red flag if your potential tenant has no history to look into.
This is probably a pretty obvious red flag, but prior evictions are always something to take into account, if not a reason for immediate denial. Whether landlord references are positive, negative, or nonexistent, a previous eviction should be an immediate red flag that a tenant may not be the most reliable person to rent to.
3. Criminal History
It’s always important to run a background check on all potential tenants of a rental property. Like other possible red flags, a criminal history doesn’t always mean a tenant will give you unwanted trouble. There are some convictions that should raise more alarm than others, such as domestic violence or theft.
When renting property, you want your tenants to be respectful, responsible, and reliable. Certain criminal convictions and other violations can be indicators that an applicant may not fit those criteria. Tenants who are comfortable ignoring rules and laws are likely not going to be the best tenants to approve.
It’s important to know the laws behind discrimination when using criminal history as an indicator for potential applicants. While you may question an applicant’s potential based on their criminal history, HUD guidelines prevent discrimination against applicants based on their record to avoid violating the Fair Housing Act. The best practice is to evaluate on a case-by-case basis and determine whether a potential tenant is a good fit.
4. Unstable Income
For renters, it’s highly likely that their rent payment is their biggest bill to pay every month. An inability to provide proof of stable income is a red flag when screening or interviewing potential tenants.
There may be some tenants with less-traditional income sources who can still provide proof that those sources are sustainable for the long term. You’ll want to make sure you review the proper documents from your applicant to determine whether their income will be sufficient for paying monthly rent.
Discrepancies in income over time may indicate that a potential tenant changes jobs often, which could be a red flag on its own. With most of these red flags, it’s important to use your best judgment when reviewing an applicant’s income history.
5. Needs to Move in Quickly
There are many reasons why a potential tenant may need to move quickly into a new place. If someone is starting a new job in town and is moving to the area, it’s totally understandable that they may have a quick turnaround for moving in.
However, if a tenant isn’t upfront with their reason for moving so quickly or the reason they give you sets off some alarms, you may not want to accept that applicant to rent your property.
These potential tenants may have been kicked out or evicted from their previous rental and need a place to move into fast. They may also have been staying with friends or relatives that want them out. Or, perhaps they did not give their current landlord proper notice for moving out and will be leaving them high and dry.
Know What to Look Out For
All of these red flags can be potential reasons for declining applicants who are looking to rent your properties. In addition to knowing what red flags to look out for, it’s also important to keep in mind legal protections for potential tenants and what you can’t deny an applicant for.
Use your best judgment, and if an applicant gives you pause, you may want to keep looking. It can be tempting to fill a vacancy as quickly as possible, but you want to make sure you protect yourself and your property first.
Author
Evelyn Long is the editor-in-chief of Renovated. Her real estate work has been published by the National Association of REALTORS®, Rental Housing Journal, and other online publications.
