In the challenging landscape of a tenant-favorable rental market, landlords face the daunting task of sifting through applicants to find tenants who will not only take care of their rental properties but also pay rent reliably. While it may seem like a Herculean feat, there are specific criteria that can help landlords make informed decisions when selecting tenants.
In a tight rental market, it’s often relatively easy to select high-quality tenants because the pool of applicants is more competitive. However, in a tenant-favorable market, you must scrutinize applicants more closely to identify those who are likely to be responsible renters.
Contrary to popular belief, a credit score is not the sole indicator of a quality tenant. It’s important to look beyond this number and focus on other financial criteria. The most critical factor is a clean rental history, meaning no prior broken leases or evictions. Additionally, a spotless home ownership history, free from foreclosures or deeds in lieu of foreclosure, is vital.
Following closely in importance is a positive core utility bill payment history, demonstrating the tenant’s ability to meet financial obligations. Distantly trailing these factors is the absence of car repossessions, which is less crucial but still noteworthy.
Note that a less-than-perfect credit score, particularly due to credit card debt, should not be an automatic disqualifier. Many otherwise responsible tenants may have past struggles with credit card payments, so this factor should be considered with caution.
When assessing income quality, it’s crucial to evaluate not only the income amount but also its source. Income stability and reliability are key indicators of a tenant’s ability to consistently pay rent on time.
Ideally, tenants with W-2 income from professions in high demand within the local rental market, such as registered nurses, make excellent candidates. On the flip side, tenants with 1099 income in a sole proprietorship context, working in industries prone to economic fluctuations, like real estate agents, pose a higher risk.
While the common guideline is that a tenant’s income should be at least three times the rent, it’s essential to prioritize the source of income over the sheer amount. A stable, secure income source can sometimes compensate for a lower income-to-rent ratio.
When it comes to assessing an applicant’s criminal history, landlords should maintain strict standards to ensure the safety and well-being of their property and neighbors.
Non-negotiable criteria should include an absolute rejection of tenants with violent criminal histories, those involved in drug distribution, tangible thefts like burglary, and sexual offenses.
However, other offenses like minor drug possessions or non-violent crimes committed in the distant past may be more forgivable and less of a liability for landlords.
In a tenant-favorable rental market, selecting a good tenant requires a meticulous approach. By focusing on rental and home ownership history, income source and stability, and criminal background checks, landlords can make informed decisions that protect their investments and ensure peace of mind. Remember, when in doubt, consulting with legal counsel or a property management professional can provide invaluable guidance in navigating this challenging landscape.