But good point, this is another document I can request so I verify no discrepancies from what I’ve tracked.  

Establish your buy box and really get to know the territory in the specific area you are looking at and then trust, but VERIFY

What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.?

Would love to hear from a tax professional to verify this. 

Verifying last 2 years of rental history very important!

As noted above, you need to be mindful of and verify local ordinances when renting by the room.

What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.?

Is this local ordinance verified by the city and if so, what are the ways around it, like possible SB1033 and condo out the units or something else? 

Instead of relying on anecdotal evidence with your horror story, perhaps do some honest analysis instead.The vast majority of the time a tenant like this will catch up, if the shortfall was caused by a verifiable and temporary issue.

If your state losses are several hundred dollars or more - then pressure your CPA to verify whether these losses are worth filing current state tax returns.