What is the Best Criteria for Screening Tenants? Raleigh Property Management Education
System - Friday, September 15, 2017
In prior videos, you’ve heard me talk about the importance of having policies and procedures in writing for your rental property. Never has that been more true than when we’re talking about tenant screening criteria. Today, we’re sharing the best criteria for screening tenants.
Credit and Tradeline Reports
Credit is something everyone looks at when evaluating an application. Bad credit is a good reason to reject an application, but good credit doesn’t automatically mean you’re getting a great tenant. Look at a tradeline report, which is a summary of what the applicant is servicing in terms of student debt, medical debt, car payments, credit cards, etc. When you apply a ratio test, you’ll be able to better understand if that person has enough income to pay rent, service the debt, and have money left over for living expenses.
If the scenario for credit plays out okay, your next step is to verify income. That really isn’t as easy as it sounds, particularly if the applicant is self-employed. In that case, the person will report total business income on the application, even though all that income isn’t available to the applicant. So, you’ll want to make sure you secure an individual tax return, not the business tax return. That gives you an idea of the adjusted gross income, or the money available for the applicant to use. If a regular w-2 employee is applying, look at a few pay stubs so you can see the year-to-date income and the monthly income. If you receive an application from someone moving into the area, get a letter of employment from the new employer which indicates the start date and pay rate. You can ask for an individual tax return here as well.
Screen All Adult Applicants
Make sure all adult applicants apply for the property, even if your primary applicant is arguing that only one person in the house will be responsible for the rent. There is a lot more I can tell you about this particular point, so please don’t hesitate to contact us at Paramount Realty Solutions. We’d love to tell you more about Raleigh property management and tenant screening.