Tenant Qualifications: What to Allow and What Not to Allow

Tenant Qualifications: What to Allow and What Not to Allow

3 min read
Engelo Rumora

Engelo Rumora is a real estate investor, your favorite Australian, and the Real Estate Dingo.

Experience
Engelo quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties (at which point he stopped counting).

Engelo runs the most reputable turnkey real estate investment company in the country: Ohio Cashflow (ranked multiple times on the Inc. 5000). He is currently in the process of launching a real estate brokerage, “List’n Sell Realty,” that will disrupt the entire industry.

He is also known for giving houses away to people in need and his crazy videos on YouTube.

His mission in life is to be remembered as someone that gave it his all and gave it all away.

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Let’s talk about tenant qualifications. What criteria should applicants be required to meet in order to be approved? Is there any room for leniency? What are some deal breakers?

First of all, for any self-managing rental property owners, I strongly suggest that you hire a property manager. (Why? That’s a topic for another day.)

And to everyone who currently utilizes a property management service, I want to share something with you that is pretty important. As much as you expect rules and policies from your management company, I encourage flexibility and adaptability when it comes to tenant screening.

At my company, we consider tenants on a situational basis. I think this strategy injects a personal touch into managing properties and evaluating prospective renters.

That being said, here are some tips that even self-managing property owners could implement when pre-qualifying a tenant.

What to Consider When Screening Tenants

What Are the Most Important Things to Look for When Screening Potential Tenants?

  1. Income Verification: Make sure that the tenant is making at least three times the amount of the monthly rent. That way, he or she will (theoretically) still have sufficient funds to cover their monthly payment even if circumstances interrupt their monthly budget (i.e., unexpected expenses, loss of employment, etc.).
    Ask for proof of income, call their employer to make sure they are indeed employed, and double-check that they are getting paid what it says on their pay stub. I’ve had tenants lie before, fraudulently providing inaccurate numbers. So, it’s important that you pick up the phone and make that call.
  2. Eviction History: In my opinion, you probably don’t want to be putting anyone in your property that has an eviction on their record. However, sometimes I’m willing to bend on this and dig in deeper to understand the circumstances of the eviction—especially if the potential tenant tells us that it was a mistake. Maybe they actually gave the landlord notice, or maybe they vacated the property but the landlord went ahead and proceeded with the eviction anyway.
    Believe it or not, there are many instances where a prospective tenant has been unjustly evicted even though they gave enough notice to that specific landlord. Therefore, I’m often willing to listen to the story and approve tenants that have been unjustifiably evicted.
  3. Criminal Background: Check to see if the applicant has any criminal activity on their record, particularly something that took place in recent years. And major criminal activity that occurred at any point in their lifetime is usually a deal breaker.

Related: Tenant Screening: The Ultimate Guide

What Factors Are Less Important?

  1. Credit Score: This is something I really don’t take into consideration as much. I’ve found a less than optimal credit score isn’t the end of the world—as long as the person’s income verification checks out.
    My reasoning is somewhat personal. I’ve run various successful companies that have earned huge amounts of revenue, but my credit score isn’t the greatest. Why? I didn’t begin building it up when I was 18; I didn’t have credit for a long time. The algorithm that determines credit scores (and the whole credit system, for that matter) is a bit weird to me.
    Of course, when someone has a great credit score, that’s wonderful. But it’s not something I necessarily focus on.
  2. Criminal Background: Yes, I already touched on this. But similar to one’s eviction history, I think it’s important to consider applicants’ records on a case-by-case basis. I want to understand their story better. I’ve approved folks that had a dent in their criminal history, especially if it was 10, 15, or 20 years old.
    Of course, looking past someone’s record is heavily dependent on their specific legal troubles. I’ll read court documents, if they’re available, to fully try to understand what was going on and why it happened. We all make mistakes—some people are never even caught for theirs. So, I’m definitely willing to work with people.

To be sure, it’s ok if you have a property manager that’s cut and dry when it comes to tenant screening criteria. Some have procedures and policies in place where if an applicant doesn’t meet these parameters, they’re out. It’s similar to traditional lenders.

I, on the other hand, like being more flexible and adapting to the circumstances. Also, sometimes money talks.

Here’s a scenario: say, someone wants to rent your property, but they have a 17-year-old DUI on their record. They’re willing to pay a year’s worth of rent in advance. What would you do?

You have to weigh your options. As a landlord or property management company, you have the authority to approve or disapprove based on your own policy. Just make sure to investigate thoroughly and avoid making any rash decisions.

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What are things that you are willing to bend on when it comes to tenant qualifications? What are no-gos or red flags?

I’d love to hear from property managers and both beginner and experienced landlords. Please, comment below!

What criteria should applicants be required to meet in order to be approved? Is there any room for leniency? What are some deal breakers? I recommend screening tenants on a case-by-case basis. Here's why.