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Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
What Make A Good Renter?
Is a good renter someone with great credit, or large deposit or maybe high income? The approach landlords take in qualifying their renter could be changing because of the housing crisis and the large number of foreclosures.
The main objective of renting your home should be to have a qualified renter that will pay rent on time and take care of the home to some degree. Large deposits can maximize renters responsibilities to the care of your home, but what can be done to help minimize renters late pay or simple non payment and evictions.
The qualifying approach I encourage landlords to take is one similar to underwriting a loan. The question that everyone should ask themselves before renting their home. Can my renter make the payment on a consistant basis and how? This question is always answered by employment. There are a number of way to increase the odds of finding a good renter just by looking at their employment.
Time on the job – The length time at the current employer is the first thing you should look at. If a potential renter has been employed for a number years this helps build a case that consistant income can help provide for timely rental payments.
Proof of income – Not only knowing where your renter works, but knowing exactly how much he makes is very important. It is not out of the question to ask for the last two paystubs and last years W2’s. While this may seen extreme, you have answered two critical questions. Does your renter really work and how much do they make.
Debt to Income Ratio – While pulling credit can give you an idea of credit score and repayment history, how are you going to judge individuals that have gone through foreclosures and bankruptcies. Sometimes a bad borrower is a bad borrower and you need to decline them for your rental, but in today’s market place you will find more good renters with bad credit than ever before. My suggestion is to look at credit, income and employment and determined a debt to income ratio . This will illustrate whether they have sufficient income to cover their rent and debts.
This process is very similar to qualifying for a home mortgage. It is up to the landlord to develop their own guidelines as to what is acceptable to their market place. This is a very simple process to help increase the odds of a good renter – check employment, have proof of income, and determined debt ratio.