Managing Tenants Part Three: Written Criteria for Tenant Selection

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Success as a landlord depends on screening tenants-weeding out the Naughty and renting to the Nice. Awareness of (and compliance with the Fair Housing Act is not only necessary, but essential to success for any [tag]rental[/tag] business. Adopting a set of written criteria for tenant selection is one of the best (and easiest) ways to stay on the goodie-good side of the Fair Housing Act.

In its simplest incarnation, written criteria can be nothing more than a simple set of guidelines which clearly define who can rent your properties. For example:

Applicants:

• Must have verifiable monthly income of at least 3 times the rent
• Need credit score over 600
• Provide copy of photo ID
• Must have no prior evictions

Keeping things simple works, but more detailed criteria can help chose between several qualified applicants.

Let’s Makes Things as Difficult as Possible…

Here’s a sample set of written criteria using a point system. Criteria are weighted according to the importance the landlord places on each item- a system that allows more freedom for personal preference. (In the example below, it’s fairly obvious the landlord gets highly peeved by lateness and no-shows when showing his properties.)

Once again, feel free to cut, paste and personalize to suit your circumstances. A quick internet search will yield a surplus of additional ideas and clauses to suit a multitude of situations and localities. (Apologies in advance for formatting errors which fail to translate well from MSWord to Blogsville.)

Interview: House showing:

1. On time for appointment: 5 points
   1. Running late, called to inform: 3 points
   2. Late: 0-10 minutes 2 points
   3. 11-20 minutes 0 points
   4. 20+ minutes- landlord leaves, applicant rejected
2. Respectful and courteous: (subjective, score -5 to 5)
   1. To landlord:
   2. To each other:
   3. *Cursing, swearing, pushing, shoving, and violent behavior, demeaning speech or treatment of landlord or landlord’s agent or to one another: Applicant rejected
3. Neat/Clean appearance of all parties: 5 points

Application:

1. Attached copies of ID to application: (Driver’s license and social security card)
   1. Yes: 5 points
   2. No: 0 points
2. Filled out application entirely leaving no blanks:
   1. Yes: 5 points
   2. No: -5 points, grounds for rejection
3. Brought application fee? ($25)
   1. Yes: 5 points
   2. No: application shelved until funds received
4. Application complete without errors or omissions:
   1. Yes: 0 points- expected
   2. No: application rejected
5. Able to provide
   1. verification of previous address: Driver’s license or utility bill: 5 points
   2. Proof of income, employment: Pay stub: 5 points
   3. If self employed, a tax return or bank statement: 5 points
6. Able to pay first months rent:
   1. Yes: 0 points
   2. No: application rejected
7. Able to pay full amount of security deposit: 5 points
   1. Half of security deposit? 0 points
8. Monthly income= 3X rent amount ie: ($1350 x 3 = 4050/month or $48,600 / year).
   1. Higher 3X-4X: 5 points
   2. 3X: 0 points
   3. 2X or below: Application rejected, co-signer considered
9. Stable income or employment
   1. For of 3+ years: 5 points
   2. 1-3 years: 3 points
   3. 0-1 year: 0 points
10. Credit history:
    1. Score over 700: 10 points
    2. Score 650-700: 5 points
    3. Score 600-650: 2 points
    4. Below 600: 0 points
    5. Bankruptcy: -10 points
    6. Collections: -5 points
11. At current address for a minimum of:
    1. 1 year: 3 points
    2. 1+ years: 5 points
    3. Less than 1 year: -5 points
12. No pets: 5 points

Pets accepted on a case by case basis. No large or heavy breeds of dogs-no dogs over 20 pounds. No snakes, reptiles or birds larger than a canary.

1. Non-smoker: 10 points
2. Number of residents does not exceed occupancy limits: (2 per bedroom+1)

Background Check/Screening

Name must not appear in Sex Offenders Registry.

Criminal history may not contain drug offenses within 7 years except for one conviction for possession of a controlled substance.

Criminal history may not contain felony convictions within 7 years for violent crimes or property crimes.

Those with criminal history’s dating 7+ years will be considered on a case by case basis.

1. Verified previous landlord? 5 points
2. Verified 2 previous landlords? 10 points
3. Gave proper notice to previous landlord? 5 points
4. Verified rent amount to previous landlord? 0 points
5. No problems with previous landlord? 0 points
   1. Problems: Possible rejection
6. Prior evictions: Application rejected
7. Previous deposit fully returned: (None held for damages) 5 points
8. No significant violations of previous rental agreement: 5 points
9. Complaints filed with police dept for disturbances: Application rejected

Score: ______

Applicant: Accepted _____ Rejected____

Meanwhile, Back at the Ranch…

Many small-fry landlords never grow up to become big-shot landlords, because they never learn to do business like a grown-up. Professionalism is mandatory. Think like a pro, act like a pro, be a pro. It’s vital to set up systems and procedures and behave like the successful business person you want to become-not the one-home owner you may be at the moment.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.