Is my screening policy too strict?

Question

Just bought our first rental property. It's a single family house and the prevailing rent would be around 1,300 to 1,400.

I ask the tenant to submitt 3 months bank statments, 3 months pay stubs, employer information, landlord information for the past three years.  I also told them I am going to run credit/criminal checks on all applicant 18+ yo.

Am I asking too much for screening?

Account Closed · Answer

Do you feel you are asking too much?  If not, then you aren't!

For my property in McKinney, Texas, I requested the following for each applicant:
Most recent 4 pay stubs
Credit/Criminal BG check
Previous 2 landlord contacts
Reason for leaving the past 2 locations
Personal interview with all adult applicants together

At the end of the day, you are providing them with the keys to your property, and you are taking on a risk.  I would request whatever information that you personally feel is necessary for you to have warm and fuzzies with your new tenants.

Johann Jells · Answer

Interesting thread, I haven't been routinely asking for stubs, though I do call the employer. Last rental though, one of the tenants worked for Walmart, and it was impossible to get through to them, they subcontracted out employee inquiries and that sub required a paid subscription!  I accepted the stub at face value.

Fact is, on that rental, I broke the rules badly. The couple had sub 500 FICO!  And I had only met the wife, the husband hadn't moved to the area yet. But I met their nice 30 yr old son who already lived in the neighborhood, and the narrative of their financial problems due to health emergency was compelling, as was her starting a well documented new office job in Manhattan that would be enough income even without her husband's.  This would be their 1st rental after decades of ownership, and renting out their current home for this move.  I went with my gut that that these would be good tenants despite their bad credit. This is the kind of gamble you take in a gentrifying area when you want to pull up the neighborhood.

Account Closed · Answer

Hello. I think your policy is too strict. You don't need the 3 months of bank statements or the 3 months of pay stubs. Truth is, most people live paycheck to paycheck and getting bank statements isn't going to tell you anything different.
Really all you need is the last pay stub. You can see their YTD on it. I only ask for bank statements if they are self employed. The credit/criminal checks, employer and landlord checks are fine.

Be sure to get ID copies on all adults.

Ben R. · Answer

Back in the eighties a banker friend of mine said he had a married couple for clients that were doctors making six figures each and were two paychecks away from zero...

Mike Franco · Answer

I would ask for bank statements if I didn't feel comfortable after seeing paycheck minus expenses listed on credit report.

My current tenants actually provided their bank statements, and they had a little over 10k saved. They drive gas guzzlers and commute a long distance, they still have car payments, and they're still paying down some kind of mortgage or short sale. In the end, they just have enough to cover rent and expenses with almost nothing left over.

It's true many people who even earn 3x rent live paycheck to paycheck, but you need to know how bad it is.

Ben R. · Answer

Often there is more story in what is NOT in the application than in it...

Elizabeth Colegrove · Answer

Yinan Q.

Personally I do one months pay stub, landlord checks (although I don't put alot of stock in it) and most importantly 2.5-3 times rent to income and credit check (often). We "usually" rent to military so I get LES statements and orders. Personally I put alot of stock in a great lease and my "gut".

Thoughts: We own higher income rentals with our rent between $1200-$1700. I personally have found that people rent for a "reason". Especially higher end houses. This is a great time to buy so people who don't buy have a reason. Most 0% mortgages are less than rent by a significant amount.

Find out what that reason is and see if it is okay with you (ie moving soon, bad credit, foreclosure, short sale, previous burn, professional tenant.....). This reason might be found in the pay stubs, bank account.... More often it is done by talking to the potential tenants.

Some time the "best" tenants don't necessarily look great on paper. They might have trouble coming up with a huge deposit (1st months, security deposit, pet....). They also usually have an issue in their background they are trying to overcome a foreclosure 4 years ago....

After renting out my/my parents houses for the past year I put less emphasis on paperwork and more on my gut and motives as long as they have passed the 2.5-3 times rent.

I follow ALL far housing rules than I follow my gut.

Aly W. · Answer

Michelle LAnd as @Michelle l said, make sure the people match their IDs and that you take pictures of the IDs.

For self employed tenants, I need their tax return.

Yinan Q. · Answer

Thanks all for your suggestions and comments.

I will drop the bank statmentment requirement unless for self-employed renters. I will also drop the pay stub requires as income can be verified through employmer anyway.

Jon K. · Answer

I've never had a landlord ask me for 3 months pay stubs or bank statements.

Usually landlords would verify my employment and previous 2 rental references. Then, check my credit. All that info comes from my 1/2 page rental application that they had me fill out.

Is my screening policy too strict?

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