My previous two articles discussed the importance of tenant screening and how to avoid a federal discrimination suit. In this article I want to discuss some of the criteria that you can and should be using to screen your potential tenants.
As mentioned in my previous articles, you must treat all applicants equally. Further, you cannot discriminate against the seven federally protected classes. But you have to have some method of choosing the best tenant for your property. You have to discriminate, or choose, in some form or fashion. So what should a smart landlord be looking for?
Here are my Top 7 Criteria for Selecting Tenants
- Can they prove who they say they are with proper ID, SSN#, etc?
- Do they have a job and/or enough income so they afford the rent and utilities?
- Do they have job stability, a good work history and good job references?
- How is their credit? Do they pay their bills? Do they pay on time? Have they ever filed for bankruptcy?
- Can they provide good references from previous landlords? Have they ever been evicted?
- Do they have a criminal background?
- How many people will be living in the property? HUD has guidelines about how many people to allow per room, usually it is 2 people per bedroom.
The above are criteria that you should at a minimum be looking at as you screen your tenants. You want to know if they can they pay the rent, will they pay the rent and will they cause any trouble.
Of course there are other criteria that you may want to consider as well. Many of these are based upon experience or preference. Remember also that the tenant screening process begins at the first point of contact with the prospective tenant.
- Were they rude or abrupt, or were they respectful and well mannered?
- Were they clean and well put together or was their car full of trash and junk?
- Do they have any pets? Pets are not a protected class (assistance pets for the disabled are the exception).
- Do they smoke? Smokers are not a protected class, you can discriminate against them and some landlords do because of the added expense of cleaning up their properties when a smoker moves out.
- Do they own a motorcycle? Guess where that motorcycle may end up in the winter? Likely in your dining room dripping oil on the floor.
- Some landlords will not rent to lawyers. Lawyers are not a protected class. Lawyers are known for suing people, even their landlord. Just tell one you will not rent to them because they are a lawyer and see what they say next.
- No job category is a protected class. I know of landlords who do not rent to police or preachers for example. It may seem harsh, but they do not want to try and evict a cop and would hate to evict a preacher.
The point is that almost anything except for the seven federally protected classes is pretty much fair game for you to use in screening your tenants. And that is what is so great about real estate investing; there are thousands of ways to do it and no “right way.” What works for you may not work for someone else.
Like I said before, at a minimum you want to ensure that the prospective tenant can afford the property, will pay on time, will not cause trouble and will not destroy the place. Whatever standards you choose to use to determine this, write them down and apply then consistently during the application process.
I will talk more about the application process next time.
Photo: Aric McKeown