What to look for on Renters application?

Question

I am starting to receive applications on my first rental property (all digital applications). I need some advise on what exactly I should be looking for to qualify each tenant please.

Income: What multiples of the rent should their income be? Also is 3 months of rent upfront standard? (first/last month rent + 1 month rent security deposit)

Employment: What is the average job tenure to look for? I see some applicants here with less than 12 months.

Credit: What's a good minimum credit score to qualify? also what other important metrics to look for on the credit report?

Past rent: What is the average past rent stay to look for? for example I have applications from college students who's average stay at their last housing is less than 6 months. Does this matter?

Co-applicants: How do you treat multiple 'unrelated' applicants?

Quarterly rent: Have you experienced this before? I have an applicant who wants such arrangement.

All answers and advise are greatly appreciated. Thank you.

Marcia Maynard · Answer

Did you establish clear rental criteria BEFORE you started to advertise and accept applications? That is key. Your rental criteria must comply with the laws for your jurisdiction, including non-discrimination laws.

Ask the same questions of each applicant. Review the applications against your established rental criteria.

Good rental criteria will cover Residence/Rental History, Income/Employment History, Financial/Credit History, and Legal/Criminal History. You will want to tailor your criteria to the type of property and market that you are in.

Here's an example of our rental criteria (which works in Washington State). We give each applicant a copy of this PRIOR to taking their application, so they can self eliminate if they don't meet our criteria. This saves time and money for both parties.

---------

RENTAL CRITERIA

GENERAL REQUIREMENTS

1.Each adult (18 years or older) must complete an application to rent and background check authorization form.

2.Each applicant must provide a valid government issued picture ID at time of application.

3.Each applicant must qualify individually or together with a co-applicant as a household.

4.An application fee of$40 per application must be paid prior to processing the application.

5.Occupancy is based on the number of bedrooms per unit.Maximum occupancy is two persons per bedroom.

6.No Pets - no pets allowed on the premises.

7.No Smoking - no smoking allowed on the premises.We will not rent to smokers.

8.No Drugs - no illegal drugs are allowed on the premises.We will not rent to illegal drug users.

9.No Firearms - firearms are not allowed openly on the premises.If a firearm is owned, it must be safely stored.

10.We conduct full background checks. We are willing to work with applicants who have made mistakes in the past or have a negative history.We may require additional security deposits to do so.

11.Inaccurate, false or misleading statements made verbally or on the application will result in denial.

12.If approved to rent, applicant must be able to pay first month rent, move-in processing fee, and security deposit at time of move-in.

RESIDENCE/RENTAL HISTORY

1.We will examine the most recent seven years of residence history.

2.Home ownership will be verified through the tax assessors office and/or credit report.

3.Rental history will be verified through the property owner and/or rental agent.

4.Rental history reflecting any unpaid past due rent, damages or fees will result in denial.

5.Rental history showing excessive property damage, excessive noise, or unruly behavior will result in denial.

6.Three or more notices for failure to pay rent and/or to comply with the terms of the rental agreement, within a 12 month period, will result in denial.

7.A person with an eviction or unlawful detainer on their record may be approved if full restitution has been made. We would require an additional security deposit as well to mitigate our risk. One eviction only. Multiple evictions will result in denial.

8.Long term rental history or home ownership is favorable.Residence history that shows an excessive number of moves within the last seven years will require additional security deposit.

9.If residency was out of state within the last five years, an additional fee may be necessary to conduct an out of state background check.

INCOME/EMPLOYMENT HISTORY

1.We will examine the most recent two years of income history.We will not consider unverifiable income.

2.We require sufficient and stable sources of income, equal to at least 3x the monthly rent.We will consider income that is 2.5x the monthly rent with additional security deposit.

3.To verify income, we may request documentation such as pay stubs, benefit award letters, bank statements, retirement accounts, and tax returns.

4.Long term employment history in the same job or profession is favorable.

5.Short term, temporary or seasonal employment may qualify with additional security deposit.

6.Self-employed individuals must be able to verify their income through tax returns or bank statements.

7.Retired and unemployed individuals must be able to demonstrate they have sufficient resources to pay living expenses.

FINANCIAL/CREDIT HISTORY

1.No outstanding debt to previous rental property owners.

2.No outstanding debt to utility companies.

3.No outstanding debt in excess of $1000 that is not in a payment plan.

4.No excessive monthly financial obligations - more than 20% of income.

5.Lack of credit history or marginal credit history may result in additional security deposit.

6.Derogatory credit (past due accounts, collections, charge off accounts, tax liens, judgements in excess of $1000 and/or bankruptcy) may result in additional security deposit or denial.

LEGAL/CRIMINAL HISTORY

1.Criminal offenses of a violent nature against either person or property will result in denial.

2.Applicants with a non-violent criminal misdemeanor that occurred more than two years ago or a non-violent criminal felony that occurred more than five years ago may be considered if restitution for their crime was made in full and all time was served.Also, we may require an additional security deposit and demonstration of good employment history, credit history, and rental history since the time of the crime.Multiple offenses may result in denial regardless of what the employment, credit and rental history shows.

Kelly N. · Answer

Income: We require 3x the monthly rent in combined income.  Students can use their parents as a personal guarantor.  In my state we can insist on one month's rent plus security deposit (1.5xrent max) ahead of time.

Employment:  Employment duration is variable- I'm ok with a new job as long as the previous one was steady and somewhat long term.

Credit: We have a minimum credit score of 600, but also are ok with someone who has NO credit due to lack of use.

Past rent: I like to see people that stay put for 12 months (or close to it) in their previous places.  I like to see that they were paying a similar amount, or slightly more, than what the rent will be at my place.

Co Applicants are screened separately, but we use joint income.  If it is an unmarried couple and they haven't lived together before, I am a little hesitant, but it typically has worked out in the end.

Rent in advance:  We have taken payments for a year's rent, or 6 months' worth, ahead of time.  Be mindful that if they leave early you may have to refund them, and it isn't really your money until the rent would have been collected.  We bought a place from a buy who had taken a lump sum for the year's lease, he was pretty bummed when he had to cough up the remaining 6 months worth of rent at closing time...  I have a couple of tenants that will request their rent invoices a month or two in advance, kind of annoying since the accounting becomes a little more difficult, but I'd rather that than not getting rent on time!

Michael Noto · Answer

@Mike Ojo

Income: The standard for this seems to be 3x the rent amount. Check your state laws for the max amount you can charge in terms of security. I know where i am in Connecticut the security deposit amounts you can require vary based upon the tenants age.

Employment: No matter what they claim on the application verify with paystubs and a call to the employer. The longer the employment period the better, but do not shut yourself off to people who may be relocating because of a job change.

Credit: This all depends on the area the rental is in, but in general you want minimally in the 600 range. Hopefully higher than that though and if the rental is in a good area, much higher.

Co applicants: Everyone applies who is over the age of 18. Before lease signing explain to them they are all on the hook equally if things go south

Quarterly rent: I have never had someone specifically request this, but I have had people pay a couple months in one payment before. Make the rent due monthly and then if they want to prepay a little bit in advance and apply it to future months then so be it.

Brian Adzadi · Answer

@Mike Ojo

With the little experience I have as a landlord. The major factor that would determine what to ask and utilize to determine if this person is worth renting to is the class of the neighborhood. If you have a property in a C-D class neighborhood, you will attract C-D class level of tenants. This is not to say those level of tenants are all exactly the same but tend to share about the characteristics. Those characteristics are as follows:

1. Their credit score tend to be low. In the 600 or below level. So requiring a credit score on this population will be moot.

2. They tend to have tag-along friends or family who stay longer than you expect. To mitigate this, you either ask for all individuals 19 or over to be on the lease or anyone who stays for over 1 month in the property to be added on to the lease.

3. Although their credit score is low, some have decent jobs which should cover the rent. Their income should be 2.5x to 3x the rent charge EACH. I say each because if one lose a job or becomes sick, the other can temporarily pick up the slack.

4. C-D class tenants tend to not have that great of a savings to cover firs/last and security deposit. Security deposit and first months rent should suffice.

5. If you are dealing with full grown adults or a family and they show a history of short-term stays like a year less and then move. That's a red flag. College students, however, you can forgive because its pretty much expected, they are only living there for school.

If however, your property is in a A-B class neighborhood, everything you previously mentioned can be asked for without much trouble because A-B class tenants tend to be professionals who on average are responsible and should be able to fulfill your requirements and requests without a problem.

What to look for on Renters application?

Most Popular Reply