Any Property Manager can tell you how critical tenant screening is to successful property management. The wrong tenants in a property can create enormous losses that could take a landlord years to recover. A good Property Management company cannot afford to take on risky tenants, and neither can a landlord. However, with proper diligence and knowing what signs to watch out for, the pendulum swings way over to the landlord’s side, making it possible for real estate to become a very successful investment.
Below, then, is our comprehensive list of sixteen warning signs when screening tenant applicants. Each of the following carries different weight in the screening process. Be aware that while some can be automatic deal killers, others must be considered only in conjunction with the other red flags.
1. Bad credit. By far and away, the single predictor of tenants who will pay their rent on time is their credit report and credit score. A bad credit score is a deal breaker in itself. Bad credit score? STOP. Don't rent to these people! In general we look for a minimum credit score of 640. It's a passing score but it should also be supported by the absence of any of the other items on this list.
2. Low income. You don't have to be a mathematician to understand that if tenants are not making enough in their monthly paycheck, they will not be able to pay the rent. In general, look for a minimum income that is at least 2.5x to 3x the monthly rent.
3. Criminal history. A criminal conviction can be a huge red flag. Get more information and evaluate carefully.
4. Many convictions. If applicants have many convictions for anything other than traffic violations over a short period of time, it is a possible indication that they cannot obey rules. Do not look for them to obey your lease. This includes any disturbances, DUIs, driving without a license or insurance, or even worse. Do not count speeding tickets or expired tabs in this category. Open and/or pending cases shouldn't be counted as convictions until they have been completed in their entirety.
4. A prior eviction. Such applicants might as well be wearing a sign that says, “I don’t care about ripping you off.” These are people who defaulted on their lease but would not make good on it by moving out voluntarily. Evictions kill profits, and you can’t afford to take the risk.
5. Bad landlord references. First of all, if this is your main indicator for determining eligibility of applicants, you are making a big mistake. Far too many landlords ask tenants to leave, only to give them a great reference. Further, tenants can ask friends to pretend they are a landlord and say great things about them. Still, sometimes you can get important information. Was the entire deposit returned? If not, why? Not getting most of the deposit back is a huge red flag. Late payments are also a problem. Terminating a lease early is a problem. Not giving proper notice is an issue. Move on to someone who understands how to be a renter.
6. Aggressive or large breeds of dogs. Did you know Pit bulls are illegal in Prince George's County? Odds are, your insurance company may not even allow some aggressive breeds.
7. Asking to pay the deposit after move-in. If tenant applicants don’t have the full deposit at move in, do not rent to them. You will likely never get the full deposit and you will have a very risky situation. When collecting the deposit, be sure to request the deposit is paid only via certified funds.
8. Looking to move in less than a week. If tenant applicants need a place right away, it may not be a godsend for your vacant rental. Instead, it could be another red flag. Why do they need a place so soon? Did they just get a cure/quit notice? Did they realize they couldn’t pay their rent and needed to move out? Are they going to stiff their current landlord and move out without notice? Yes, there are legitimate reasons for tenants that need to move in less than a week, so be sure to investigate thoroughly.
9. Living with relatives or in a motel. When people are living with relatives or in a motel, it could be a red flag. Did they just need a fast place to stay because of a cure/quit and did not have time to look? This is a common theme among people who are getting evicted. They move in with relatives and try to save money. After a few months, they attempt to move out. Although there are special cases, solid tenants usually have their own place and it is usually not with friends and relatives.
10. Owing money to the State. Do the applicants have unpaid traffic tickets or fines? Do you think that they will pay your past due rent if they risk being arrested for having an unpaid fine?
11. A tax lien. If the IRS can't collect on your applicants, how do you suppose you will?
12. Incomplete application. People who won’t fill out the complete rental application should be turned away. It’s a sign of false identity, a bad history, or just plain apathy. Be sure to qualify the applicants after all information is submitted.
13. Needy, demanding. If your very first interactions leaves you wanting to pull out your hair, just imagine what it will be like when they have a legal right to the property. Save yourself the headaches.
14. Planning to move mid-lease. If their rental application shows they are looking for a place well in advance of their current lease termination, they may repeat the pattern. Find out more before you get into trouble.
15. Not likely to follow your rules. If you smell cigarette smoke on applicants who are renting a non-smoking unit, or they are covered in cat hair but swear they don’t own a pet, you have a problem. Casual liars make bad tenants.
16. Changing jobs too often. Prefer applicants with careers, not jobs. Look for applicants who are employed at places that have paid vacations, sick days, health insurance and paid holidays. Otherwise you may find rent late due to Christmas or other reasons. If they change jobs that often, you may soon be without rent when they are between jobs. Look for at least 12-months at the same job or career. It is a lot tougher to track down a judgment and get a garnishment with a job hopper.
Before screening applicants, first set an application criteria for the many categories and stick to it (i.e. credit score above 640 or income no less than 3x rent amount). Be sure to screen each applicant the same for their qualifications to either approve or deny. Do you need any help, just give us a call.