How to turn down prospective tenants?

18 Replies

Hello, I am about to close on a 4-unit property in a working class neighborhood.  Three of the units are vacant, so this will be my first time marketing units and finding tenants to fill them. 

I have done research on how to screen tenants and what to look out for, but I don't know how to turn someone down if I just don't "get a good feeling."  I am happy to rent to anyone as long as they are respectful and pay their rent on time, but I have heard so many stories about nightmare tenants I really want to avoid this.  

I do plan on running credit and background checks, but I just don't want to have to do this for every prospective tenant as this is expensive and time consuming. I'd prefer to only do this after checking references and overall having a good feeling about the tenant(s). 

That being said, if someone inquires and I meet with them and decide it doesn't seem like it will be a good fit, how should I proceed? Do I not even give an application? Do I give them one and then send a reason for rejection?  Any advice or experience with this?

Thank you!

Hi @Shane Matzen  , welcome to BP!

I've found that if I don't get good vibes from someone it's usually because of something that is subsequently uncovered during the screening process.  The most important thing is to determine your criteria upfront, including your automatic disqualifiers, so that you are not accused of violating the Fair Housing Act.  And document, document, document your selection process.

Since we don't charge an application fee, we process applications in order received, one at a time, after denying incomplete applications and those that disclose automatic disqualifiers.  It saves time and money, and we're very upfront with all applicants about the process (and we put it in writing).

Shane,

First, congrats on your first 4-plex, this is a big step.  I would brush up on your state's landlord-tenant act to get the lay of the legal landscape, this should help determining reasons for why you can turn someone down.  Secondly, set your criteria for tenants including rental history, credit score, income (usually 3x rent) etc.  You should be able to charge an application fee for each perspective tenant to offset the cost of the credit & background check.  Typically, if we approve a tenant we credit the application fee off the first month's rent.  Also, ask for references like previous land lords, give them a call, they can be very insightful.

I have had perspective tenants that I had good feelings about, but when talking with their current landlord their story didn't check out.  I had one who was attempting to stiff their landlord by not paying and walking out on the lease they just signed to move into one of my properties.  Fortunately, we had someone else come through before they could come up with their deposit & first month's rent so we didn't have to turn them down.

How ever you decide to run your system, establish your standards and stick with them.  

Best of Luck,

Jesse Waters

Are you planning to charge tenants an application fee? A good screening service won't be that time consuming so if the cost is bothering you, its quite normal to charge an application fee. This should weed out the more serious prospective tenants from the tire kickers.

Have a clear screening policy of what you will and won't accept. Write it all down. And then check each and every tenant against each and every criteria. In this way you are fair and consistent in your treatment of prospective tenants. Go through each of the criteria to let them know what you will be checking for, if they balk at the prospect of you calling their employer or checking the criminal history, etc, they're probably not going to pay the application fee.

I understand you're really asking about the gut feeling aspect but generally, if you have comprehensive criteria for tenant screening, chances are the tenant who doesn't meet your "gut" test won't meet at least one of your criteria. 

Thank you @Jesse Waters  !  I am actually meeting with my real estate attorney to draw up lease agreements, so I'll also be sure to ask him about landlord-tenant regulations.  I really like your suggestion of crediting the application fee if accepted. 

 I definitely would like to charge an application fee, I just don't know if other landlords in my area are doing this and if this will drastically limit my pool of tenants, something I will have to look into.  

It sounds like calling the previous landlord definitely worked out for you.  Any suggestions on how I could verify that the reference is in fact a previous landlord?  I've heard that some tenants will list a friend posing as a landlord.  

If they list a prior landlord check the tax records to make sure they person your calling actually owns or manages the property.  If they give the right name, you might ask the previous landlord how long they have owned the property (just in conversation), if they say something totally different from when the tax records indicate you might wan to really dig into that application.

I recently got a 'great tenant' response from the 'previous landlord",  problem is they weren't the previous landlord,  they were being evicted by current landlord for constant late payments,, its only happened once, but it was enough to make me very careful to make sure the 'dots all light up' between someone's story and the application.

Thanks @Wendy Noble  !  I do agree that an application fee will help with screening, I just have to see if this is common for my area; It's starting to sound more common than I previously thought.  If they do balk at some of your criteria, how do you typically proceed?  Do you insist that this is your criteria or just make a mental note to document this later and not call them back?

Thank you @Andy Collins  , that's a great tip!  I'll be sure to this.  What's the best way to check on tax records?  Are there any online databases or websites that you use for this or do you just go to the county clerk's office or website?

in Texas each county has an appraisal district, they have websites that you can look up the information on any property,,it's not something that happens often, it was my first time to experience it, but it does happen

@Shane Matzen  

I have a property management company that does this for me. But the idea is that you are clear and up front with them and they decide whether or not to go ahead with the application. For example:

Landlord: Let's go through some of the criteria I have for renting a property to you. I want to let you know what I'm going to check for and how I will check it through the application process. First, you will be required to earn at least three times the rent. To verify this, I will request 3 most recent paystubs. Your paystubs should confirm that you have earned at least (insert $ figure based on the rent) in each of the last three months. Will your paystub show an income of at least this amount? 

Landlord: I require a credit score of at XXX or higher. Have you checked your credit score recently? Will you be able to meet this criteria?

Landlord: Another criteria is that you have been in your current employment for at least 12 months? If I call you employer will they be able to confirm this?

etc, etc.

Landlord: So based on your responses it sounds like you would be a great applicant to rent this apartment. Here is an application form that you will need to fill out, please be sure to include all the requested documentation (e.g. paystubs) that are requested. The last page is the list of criteria that we have just discussed in case you want to go over that again. The application fee is $X. This amount is non-refundable if your application is not successful but we will credit you this amount on your first rent statement if you are are. Do you have any questions for me? Do you plan to go ahead and apply to rent this apartment?

OR

Landlord: Based on our conversation it sounds like you don't meet all of my criteria and your application will not be successful. Good luck in your search. (At this point you could mention if you would be willing to accept a co-signer on the lease - the co-signer will need to submit to the full application process and meet all the criteria as if they were living in your unit)

In the latter case, I would do a quick note to file of your conversation with the prospective tenant and the responses they gave that did not meet your criteria. In case it ever came up that they claimed you discriminated against them, you will have something to refresh your memory.

Thanks again @Wendy Noble  , your comments are extremely helpful.  I haven't thought about potentially asking for a co-signer, I will keep that in mind as an option.

@Shane Matzen   We provide notification to everyone that turns in an application.  If we deny them for something and didn't run a credit/background check, we tell them so. For example, incomplete applications are denied without further consideration. So are prior evictions. I'd recommend providing notification to all applicants, and specifically telling them why they were denied. It's all part of the documentation process that is more for your protection than anything.  I believe the notification is a requirement if you deny based on a credit pull anyway.

@Shane Matzen  

The tenant screening service I use provides a denial letter that you can print or save and then send to the applicant.  The easiest way to avoid a lot of this hassle is to have clear prescreening criteria on the front end.  If they understand clearly that 3x monthly income, no evictions, credit and criminal (whatever you choose), and required funds upfront with a lease signing to get the keys are the minimum qualifications.... They won't apply if they don't have a chance.  

They won't apply if they don't have a chance.  

Right. The key is to have a process and criteria in place, and fully disclose it.  The below average applicants will weed themselves out.

Originally posted by @Bryan Neal:

@Shane Matzen  

.... They won't apply if they don't have a chance.  

Not always true, there are those prospective tenants who will pretend to be qualified hoping that the landlord will not check them out - because after all, the landlord might think "they won't apply if they don't have a chance", to use your exact words :)

In our area, if we didn't charge an application fee we'd have hundreds of applications from unqualified applicants.

Discuss the requirements first so people have the opportunity to screen themselves out; if I was a tenant I wouldn't want to pay an application fee and later find out that I didn't meet the criteria.

Make sure you have a written criteria and apply it to all applicants.

There will be applicaants who don't meet your criteria because they assume you won't check anything, don't know their credit score, don't know there income (it happens), etc.

When you reject, be as nice about it as possible so they don't get upset and decide to sue for discrimination.

It sounds like calling the previous landlord definitely worked out for you. Any suggestions on how I could verify that the reference is in fact a previous landlord? I've heard that some tenants will list a friend posing as a landlord.

I just read a suggestion on this the other day that I thought was a great idea.  Call the landlord and ask him if he has any vacancies.  If he hesitates or has no clue what your talking about then you have your answer. If he says no not at this time, then you can identify yourself and pass this strategy on.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here