Screening, Qualifying and Turning Down Potential Tenants

2 min read
Kevin Perk

Kevin Perk is a full-time buy and hold and fix and flip real estate investor with over 15 years of experience. He and his wife Terron operate Kevron Properties, LLC, a boutique real estate investing company in Memphis, Tenn.

Experience
Kevin was a past president and is a current board member of the Memphis Investors Group. He’s also a blogger and writer who has authored hundreds of real estate investing articles on BiggerPockets and his own blog, SmarterLandlording.com, some of which have been featured on The Motley Fool and MONEY: Personal Finance News & Advice.

Kevin is also host of the SmarterLandlording podcast.

Originally from the Washington D.C. area, Kevin moved to Memphis to attend graduate school at The University of Memphis. After receiving his master’s degree in City and Regional Planning, Kevin climbed the planning career ladder to eventually become planning director of a county in the Memphis metro area. He “retired” from planning in 2003 to pursue real estate investing full-time.

Since “retiring,” Kevin’s main real estate investment strategy has been to buy and hold, otherwise known as landlording. Generally working in historic Midtown Memphis, Kevin is also known to fix and flip grand, historic homes when the right opportunity presents itself. He and his wife Terron (who is the principal broker at Perk Realty) have participated in dozens of real estate transactions in the Memphis metro area.

Kevin has the heart of a teacher and believes in helping others through education. An instructor of college-level geography for over 25 years, Kevin also regularly participates in seminars and panel discussions at such forums as the Memphis Investor’s Group and the Single-Family Rental Summit.

In addition, Kevin has been interviewed in publications such as the Memphis Commercial Appeal, the Memphis Daily News, and the Foreclosure News Report.

Education
Kevin earned a master’s in City and Regional Planning from The University of Memphis.

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Screening and qualifying applicants for your rental properties are two of the most important things a landlord can do.

Many of the problems that landlords complain about, such as nonpayment of rent, excessive damage to a property, etc, can often be remedied by not letting potentially bad tenants in your property in the first place. Your screening and qualifying process should involve checks on a potential tenant’s income, job history, credit history, criminal history, etc.

When a potential tenant has applied to rent one of your rental units, you have a legal obligation not to be discriminatory in your qualifying of that application. Usually if the applicant is accepted as a tenant, there is no problem, but what about the applicants that get turned down? These applicants are your potential problems and are the ones that have to be handled a bit more carefully.

Let’s look at the process every landlord should have in place to protect themselves when reviewing and qualifying tenant applications.

Develop Rental Qualifying Criteria

The first step in qualifying tenant applicants is to develop a set of tenant qualifying criteria.

Related: Are You Still Struggling to find Great Tenants? Struggle No More!

These criteria can include items such as minimum credit score, minimum income, eviction history, criminal history, smoking, pets, etc. Your local market conditions and preferences will determine what your criteria should be. Be aware however that your criteria cannot include anything related to the seven federally protected classes which are race, gender, familial status, age, color, national origin and religion.

Whatever tenant screening criteria you select, write them down and place them in a file. You may need them later on if you ever get accused of being discriminatory in your application and qualifying procedures.

Evaluate Every Applicant Using Your Qualifying Criteria

Does the applicant meet your minimum credit score?

Do they have enough income to afford the rent? Have they ever been evicted or filed bankruptcy? Do they have a criminal past? Do they have a pet? Were they rude to you?

Develop a checklist to rank applicants against your criteria. Use that same checklist for every applicant and keep them on file.

What To Do With Those You Deny

If you choose to deny an applicant, it is best if you communicate with them why they were denied.

This communication can be verbal at first, but you should follow up with something written. For example, if they were denied due to poor credit history, write them a letter explaining such and directing them to the appropriate credit reporting agencies.

Send this letter to the address listed on the application you received and keep a copy in your records. You might be amazed at how many of these letters are returned as undeliverable (Yes, people lie on applications). If a denial letter is returned to you for some reason, keep that as a record as well.

Related: Tenant Screening: The Ultimate Guide

Conclusion

In sum screening, qualifying tenants and then denying a person housing can be a tricky business, especially if someone feels they were discriminated against.

To protect yourself, use the simple procedures outlined above. Use the same procedure with every applicant and document, document, document everything. That one piece of paper in your file could mean the difference between a clear record and a $20,000 fine.