{"id":88135,"date":"2018-10-17T05:00:01","date_gmt":"2018-10-17T11:00:01","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=88135"},"modified":"2021-03-16T12:24:34","modified_gmt":"2021-03-16T18:24:34","slug":"underwrite-rental-applications","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/underwrite-rental-applications","title":{"rendered":"How I Underwrite Rental Applications to Mitigate High-Risk Tenants"},"content":{"rendered":"

My partner<\/a> and I have acquired and leased hundreds of rental units. As co-owner at my organization, I still have the final say on approving rental applicants. As much as I want to delegate the task, I am aware it is of pretty high value. Having a great tenant in your property is crucial. A troubled one who\u00a0is constantly late on payments and complaining about dings on the refrigerator can be a headache. A troubled tenant can eat up your cash flow if they\u2019re not paying and you have to evict and replace them.<\/span><\/p>\n

Leasing Agent<\/h2>\n

I have an in-house leasing agent who handles collecting the paperwork and necessary documentation from rental applicants. The needed documents include the most recent three pay stubs\u00a0or current lease and bank statements (if self employed). Once all this is submitted, the agent starts the underwriting process. Be sure to obtain all the necessary documentation\u00a0from the prospect. It is important that you have a clear picture of the prospect’s history to verify they are qualified to pay rent your properly. If they are not willing to provide all the information, then move on. \u00a0<\/span><\/p>\n

\"free-mentor\"<\/p>\n

Related:<\/strong> 7 Types of Tenants I\u2019ll Never Rent to<\/a><\/em><\/p>\n

Our Criteria<\/h2>\n

Criteria for screening tenants<\/a>\u00a0can vary depending on what class of property you\u2019re in. For example, with a C class property, you may allow 600 credit score tenants, and with an A class require a minimum score of 700. I am mostly dealing with the working class. These professionals tend to have just an OK\u00a0credit score. That is the reason why they are paying $700 to $800 in rent. I run their credit through the software Propertyware<\/a>\u00a0to make sure there are no outstanding balances from utility companies or judgements from landlords. <\/span><\/p>\n

My tenants must produce gross 3x the monthly rent. This is by far the most important factor in approving a tenant. If they don\u2019t have that, they must have a co-signor who does. Additional criteria include having no prior evictions within seven years of the date they\u2019re applying for the home, having at least one year on the job (or proof of prior job stability), and having no felonies within the past five years.<\/span><\/p>\n

Stick to It<\/h2>\n

It is always best to remain objective when underwriting rental applicants. If they do not make enough income or have been at their job only two months, then you simply have to move on. You want to stick to your criteria because you want to treat every applicant the same.\u00a0<\/span><\/p>\n

\"credit-report-loan\"<\/p>\n

Related:<\/strong> The 11 Most Common Questions Asked by Tenants\u2014Answered<\/a><\/em><\/p>\n

Final Approval<\/h2>\n

I am an optimistic person, but I\u2019ve seen some interesting stuff in my days of underwriting tenants. I was almost <\/span>fooled by tenants<\/span><\/a> having a friend pose as their landlord and submitting fraudulent pay stubs. When I get the file from the leasing agent, I look for red flags that may have been missed, such as fraudulent pay stubs. Then I start taking a look at income, landlord references, income, etc.<\/span><\/p>\n

To date, I have not had to evict a single tenant I placed, and I plan to keep it that way.\u00a0<\/span><\/p>\n

We’re republishing this article to help out our newer readers.<\/em><\/p>\n

\"\"<\/a><\/p>\n

What is your underwriting criteria? Has it changed over the years?<\/em><\/p>\n

Leave your comments below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

I have not had to evict a single tenant I placed, and I plan to keep it that way. Therefore, when I underwrite applications, I use a specific process.<\/p>\n","protected":false},"author":12140,"featured_media":95626,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5183],"tags":[6022,4338,2898,6232],"class_list":["post-88135","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-landlording","tag-screening-renters","tag-screening-tenants","tag-tenant-screening","tag-underwriting-applicants"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/88135","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/12140"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=88135"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/88135\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/95626"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=88135"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=88135"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=88135"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}