Tenant Screening Guidelines
Realtor · Racine, WI · Member since 2019 · 30 posts · 9 votes
Tenant Screening Guidelines
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Jonathan Taylor SmithBusiness Member
Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes@Jason Runkel - I have essentially those same criteria for tenant screening; however, you can get someone who meets all of those requirements and more, is a great person and will make a perfect tenant - but who has a < 600 credit score due to medical bills or student loans. So instead of setting some arbitrary minimum credit score, I instead look for and deny based upon non-medical / non-student loan related collections, liens or judgement. I also charge 1.5x rent for the security deposit, and decrease it to 1x rent for better qualified, or increase it to 2x rent for those with certain credit or qualification challenges.
Then upon 2nd year renewal, I MAY (at my sole discretion) refund the additional 0.5 security deposit if there have been no late payments or other issues and all inspections have been passed during the prior year. But if I had set a credit score limit, then I would have missed out on some of my best tenants who have been with me for years and never caused a single issue or had a late payment. How long they've been on their job or lived in their prior home + rental and personal references tell me FAR MORE than a credit score.
Blue Chariot Realty & Management4.915 Reviews
17 Replies
- 6yJonathan Taylor SmithBusiness MemberRental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
@Jason Runkel - I have essentially those same criteria for tenant screening; however, you can get someone who meets all of those requirements and more, is a great person and will make a perfect tenant - but who has a < 600 credit score due to medical bills or student loans. So instead of setting some arbitrary minimum credit score, I instead look for and deny based upon non-medical / non-student loan related collections, liens or judgement. I also charge 1.5x rent for the security deposit, and decrease it to 1x rent for better qualified, or increase it to 2x rent for those with certain credit or qualification challenges.
Then upon 2nd year renewal, I MAY (at my sole discretion) refund the additional 0.5 security deposit if there have been no late payments or other issues and all inspections have been passed during the prior year. But if I had set a credit score limit, then I would have missed out on some of my best tenants who have been with me for years and never caused a single issue or had a late payment. How long they've been on their job or lived in their prior home + rental and personal references tell me FAR MORE than a credit score.
Blue Chariot Realty & Management4.915 Reviews - Rental Property Investor · Member since 2019 · 31 posts · 36 votes6y
Hi Jason,
Your criteria are right on the mark and I also agree with Jonathan regarding requirements for applicants' credit scores. We typically require at least 600 or more, otherwise, an explanation letter is required for any collections and we often make exceptions for medical bills and student loans.
You may have challenges with attracting "neat, clean, prompt and courteous" tenants... good luck with that one! The more units you obtain in your portfolio, the fewer tenants will meet these criteria. Of course, housekeeping issues are a pain and problem for many of us property owners.
Here in California, we reduced our monthly income requirement to 2X's the rent. However, we're in California were rents are very expensive, so it works here. With California's new rent control laws, we have to get savvy on rent increase incentives moving forward. I'm thinking of offering a 3% increase with a one-year lease renewal or 5% month to month.
We also give our prospects our criteria in writing when touring units. Our handout was created as a renters checklist to reduce intimidation regarding submitting all required documents for the screening process. It's a handy tool prospects can use to shop for their new homes.
Happy renting!
Detra
- 6yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
I would add no smoking, 600 minimum credit score, DTI of 45% or less and positive result from 3rd party screening. I try to be specific on my criteria. I use a point system with 10 criteria categories. This allows me to compare against other applicants.
- San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes6y
Originally posted by @Jason Runkel:
Hey Everyone,
My partner and I are working on our tenant screening guidelines for the property management portion of our business, renting properties in generally C+ and above neighborhoods. Some things we have included that we have seen common include:
- Makes 3 times the amount of monthly rent payment
- Has 3 or more good years of rental references
- Has no prior evictions
- Has not made excessive late payments
- Have not filed bankruptcy or been foreclosed on in the last 5 years
- Has a good credit score (any one have any specific number they don't typically go below)
- Does not have any drug, violence, theft, fraud, capital or sex offender convections
- Has no breeches of leases
- Has no history of damage to property
- Must be neat, clean, prompt and courteous
Any one have any others they would add to the list? If so which and why?
Thanks in advance!
I'd change the no excessive late payments to no more than one late payment - otherwise, it's too subjective.
You can add lots of other things like - smelling like smoke, rude behavior, unruly kids, bickering adults, adults yelling at kids, showing up with rude friends, filthy vehicle, having someone other than applicant who is doing all the talking, showing up late, sounding drunk when they leave a voicemail, not filling out application completely, asking for lots of changes like new carpet or paint (they'll be difficult to deal with), tenants who never ask where the laundry is or look to see how big the closets are or ask about parking (they are desperate to take anything), not bringing documents when they said they would -- the longer the legal list you have, the better. I emailed my criteria to myself to establish the date it was created.
Just remember that there are just a few things you can't discriminate for. Anything else is fair game. It's your job to discriminate against anything else that might make them a bad tenant. As long as you treat everyone the same, you're okay.
- Realtor · Racine, WI · Member since 2019 · 30 posts · 9 votes6y
@Jonathan Taylor Smith - That sounds like an awesome strategy and a good way to not miss out on some potential good tenants! I appreciate it!
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes6y
Hi Jason--we have rentals in B & C neighborhoods. We advertise that a 620 minimum score is "preferred but not required." We're ok with any issues related to medical or student debt because both systems are designed to screw people over. We also state that prior landlord references are, again, "preferred but not required." We don't want to discount someone coming out of a divorce or choosing to downsize who may have owned their previous dwelling. I've also had previous landlords refuse to give me information, which isn't the applicant's fault.
- Realtor · Racine, WI · Member since 2019 · 30 posts · 9 votes6y
@Kenneth Garrett Awesome thank you so much for your help! If you don't mind me asking could you go into more detail on your point system? What categories do you use and how do you work your system?
- 6yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
I use the scoring system to approve or disapprove an applicant. This avoids arbitrarily selecting a tenant.
The point is up to 110 points. A score of 88 or higher a yes for that applicant.
A score of 77-87 is a conditional approval and requires two months security deposit.
Categories are: Credit Score, Income, DTI, Employment, Cat or Dog, Smoking, Previous Evictions, Landlord Reference, 3rd Party Screening.
- Realtor · Racine, WI · Member since 2019 · 30 posts · 9 votes6y
@Kenneth Garrett That makes a lot of sense. So how do you score and weight the categories to ultimately reach the score? I appreciate your help!
- Rental Property Investor · NJ · Member since 2019 · 442 posts · 40 votes6y
Originally posted by @Jonathan Taylor Smith:
@Jason Runkel - I have essentially those same criteria for tenant screening; however, you can get someone who meets all of those requirements and more, is a great person and will make a perfect tenant - but who has a < 600 credit score due to medical bills or student loans. So instead of setting some arbitrary minimum credit score, I instead look for and deny based upon non-medical / non-student loan related collections, liens or judgement. I also charge 1.5x rent for the security deposit, and decrease it to 1x rent for better qualified, or increase it to 2x rent for those with certain credit or qualification challenges.
Then upon 2nd year renewal, I MAY (at my sole discretion) refund the additional 0.5 security deposit if there have been no late payments or other issues and all inspections have been passed during the prior year. But if I had set a credit score limit, then I would have missed out on some of my best tenants who have been with me for years and never caused a single issue or had a late payment. How long they've been on their job or lived in their prior home + rental and personal references tell me FAR MORE than a credit score.
well said,
BUT about the 2 month security deposit you needto make sure with local laws, for example, in new jersey the maximum security deposit permitted by law is 1.5 timesthe rint
- Rental Property Investor · NJ · Member since 2019 · 442 posts · 40 votes6y
Originally posted by @Nicole Heasley Beitenman:
Hi Jason--we have rentals in B & C neighborhoods. We advertise that a 620 minimum score is "preferred but not required." We're ok with any issues related to medical or student debt because both systems are designed to screw people over. We also state that prior landlord references are, again, "preferred but not required." We don't want to discount someone coming out of a divorce or choosing to downsize who may have owned their previous dwelling. I've also had previous landlords refuse to give me information, which isn't the applicant's fault.
medical bills i agree there is no way most people can pay them.
BUT STUDENT LOANS they are you usually small payments that you can make monthly, and if someone pays that late, they probably are late and careless on everything if it is a bit too hard for them at the moment. and there goes your rent on the monthS that they have more expenses, went on vacation .
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes6y
My list allows for some discretion if one component is lacking, and almost all of your undesirables will lack in more than one area so they will disqualify:
Applicant must be employed or have verification of income. We require monthly gross household income to be at least three times the monthly rental rate. Self-employment or income other than wages from employment such as tips, commissions, school subsidies, or allowances from parents may require verification. An applicant that is not currently employed must provide proof of funds (current bank statement), which will equal a full year of the lease agreement and may require a guarantor and/or additional security deposit.
Credit history for a two-year period prior to this application will be evaluated. Lack of credit history may require an additional security deposit. Negative credit history including bankruptcies or repossessions is unacceptable.
Applicant is preferred to have a minimum of one-year verifiable rental history. Verifiable rental history for a period of at least 12 months, in which all the lease terms have been satisfactorily fulfilled, is preferred. Negative rental history, eviction, or outstanding monies owed to a previous landlord are unacceptable. If applicant owned a home, applicant may need to furnish mortgage information upon request. If applicant has no prior verifiable rental history due to living at home, an additional security deposit may be required. If an uninterrupted chain of documentable residence cannot be established for the previous 24 months, this is unacceptable.
A criminal background check will be done on all applicants and any occupant 18 years of age or older. Misdemeanors or felony convictions against persons or property within the past five years are not acceptable.
Applicant’s character. Evidence suggesting a courteous person who is generally clean and well kept in appearance, and demonstrates truthfulness, reliability and follow through on and during the application process.
At landlord’s discretion, compensating factors such as an additional security deposit or co-signer (guarantor) may be required for qualification if Applicant fails to meet any one of the above requirements. In the event of multiple applicants, tenancy will be granted to the most qualified, based on the above criteria.
- 6yJonathan Taylor SmithBusiness MemberRental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
@Sami Gren - Yea, here in NC 2x rent is maximum allowable security deposit. But there is a "homelessness prevention program" in Durham that has paid the security deposit on behalf of a couple tenants. Sometimes a local church may also contribute.
Blue Chariot Realty & Management4.915 Reviews - Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes6y
Originally posted by @Sami Gren:
Originally posted by @Nicole Heasley Beitenman:
Hi Jason--we have rentals in B & C neighborhoods. We advertise that a 620 minimum score is "preferred but not required." We're ok with any issues related to medical or student debt because both systems are designed to screw people over. We also state that prior landlord references are, again, "preferred but not required." We don't want to discount someone coming out of a divorce or choosing to downsize who may have owned their previous dwelling. I've also had previous landlords refuse to give me information, which isn't the applicant's fault.
medical bills i agree there is no way most people can pay them.
BUT STUDENT LOANS they are you usually small payments that you can make monthly, and if someone pays that late, they probably are late and careless on everything if it is a bit too hard for them at the moment. and there goes your rent on the monthS that they have more expenses, went on vacation .
There are folks out there with student loans greater than a mortgage. If student loans were usually small payments, you wouldn't have folks delaying marriage, children, and home ownership because of them.
- Rental Property Investor · NJ · Member since 2019 · 442 posts · 40 votes6y
Originally posted by @Nicole Heasley Beitenman:
Originally posted by @Sami Gren:
Originally posted by @Nicole Heasley Beitenman:
Hi Jason--we have rentals in B & C neighborhoods. We advertise that a 620 minimum score is "preferred but not required." We're ok with any issues related to medical or student debt because both systems are designed to screw people over. We also state that prior landlord references are, again, "preferred but not required." We don't want to discount someone coming out of a divorce or choosing to downsize who may have owned their previous dwelling. I've also had previous landlords refuse to give me information, which isn't the applicant's fault.
medical bills i agree there is no way most people can pay them.
BUT STUDENT LOANS they are you usually small payments that you can make monthly, and if someone pays that late, they probably are late and careless on everything if it is a bit too hard for them at the moment. and there goes your rent on the monthS that they have more expenses, went on vacation .
There are folks out there with student loans greater than a mortgage. If student loans were usually small payments, you wouldn't have folks delaying marriage, children, and home ownership because of them.
Your point is on target, but that's where I'm struggling, because Ask the applicants themselves how much their monthly payment is asks you'll see.
It could be that there are all types of payment plans, but I only heard ones that are really really low, and that's what I can't uderstand.
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