Should I Consider this Tenant?

Question

Hi all,

My question is pretty simple. I have spoken to someone via FB about my rental and they answered my pre screening questions well. They seem like a good fit. The only thing I’m hesitant with is their monthly income being 2.7x the monthly rent (plus 5-10% annual bonus which brings it closer) been following the 3x the monthly income qualification. Although, are there exceptions to this?

Thank you in advance!

Robert Kemp · Answer

I appreciate your input. FB marketplace seems to be getting the most responses.

I understand what you’re saying. So I’ll have to explain these qualifications ahead of time to avoid discrimination?

Robert Kemp · Answer

Thank you for the feedback! I have been consistent with my qualifications and use RentRedi to streamline it all. I didn’t know about turbotenant though. That’s definitely good to know since RentRedi does charge for listings.

Tim Baldwin · Answer

Consider more than just rental income, such as, prior tenant history, civil and criminal background, employment history, number of occupants for the size of the home, desired move-in/move-out date, etc. When all factors  are considered in totality, the applicant's 2.7 income factor may be a "safe" risk, but if the other factors indicate a problem with this applicant's qualifications, he may prove to be riskier than you should permit.

Tyler Cook · Answer

@Robert Kemp Brandon Turner's book, "The Book on Rental Property Investing" includes downloadable guides that spell out the qualifications that applicants must meet to be eligible. You may want to use these as a starting point but @Bill Brandt's point about consistency is an important one to avoid a lawsuit. I would also encourage you to source leads through a software like TurboTenant which will streamline the process, in conjunction with the handouts found in Brandon's book, and likely provide a better applicant pool as your listing is automatically published to multiple rental listing sites. It is also completely free which I was surprised by, given the value.

Bill B. · Answer

BUT….

You need to treat EVERYONE the same or you are guilty of discrimination. If you turned down anyone else before or after this person because they don’t make 3x you could be found guilty.

Your standard can be 2.7x or it can be 3x. It can not be both. And these standards are OBVIOUSLY written down and followed religiously.

You may want to hire a PM to handle at least the tenant attraction and screening if not everything. They may collect enough extra ent to pay for themselves and give you a better selection of tenants. I don’t think your first qualified tenant should have come from FB marketplace. But maybe your market is different?

Jason Wray · Answer

Robert,

Its a good rule in theory but its not a fail safe.  If banks used that rule not many people would have a mortgage.   2.7X is still a safe number.