How Good is Your Tenant Selection Criteria?
The temptation to get someone into your vacant property quickly is one every landlord deals with. Reducing non-revenue producing periods is high on the list of priorities for anyone serious about making a success of their investment property. However, with the rental market growing at its current rate, there are plenty of potential tenants to fill the vacancy. The short-term gain of getting rent quickly from a new tenant might be appealing, but being too hasty might create a costly nightmare scenario in the long-term. Setting tenant selection criteria that looks at all facets of a potential tenant is the best way to keep you out of a nightmare situation.
Scenario: Which tenant do you choose from the following?
A. Married couple, husband works a steady job and earns three times the rent. Credit score 750.
B. Couple, both working earning three times the rent. Credit score 725.
C. Roommates, both have a verifiable income of four times the rent, and willing to pay 1 year in advance. Credit score 680.
Did you choose A? If so, you are incorrect.
Once a background check was performed it was found the wife has a criminal record and many felonies.
What about couple B? If so, you are incorrect.
They both work temporary job assignments. Their 2nd to last landlord also said they would NEVER EVER rent to them again because of the damage to the rental property.
Did you choose C? If so, you are correct!
Why is C the winner here? Well, their rental references are impeccable. They have been in business together for 10 years but had to file personal bankruptcy 3 years ago and find it much easier to pay in advance.
Don’t underestimate the importance of previous landlord references as they can be a great way to weed out potential nightmare tenants.
You should be concerned if tenants omit information that prevents you from contacting previous landlords or resist the suggestion of providing details and/or references. Even if you don’t have any problems getting a reference, there is a potential snag you should consider – some landlords might deliberately give a glowing reference to a terrible tenant in an effort to get them out of their property. While relatively rare, it does happen.
To avoid this unpleasant pitfall, Real Property Management offices utilize proprietary tenant selection criteria which encompasses full background checks, credit and criminal history checks, employment verification, and past landlord and personal references to ensure you get the best quality and qualified resident in your property. After all, when it comes to your property investment, you can never be too careful.
The short-term gain of getting rent from your new tenant might be appealing, but a nightmare scenario will make you pay in the long-term. So just remember – you don’t have to take the first person who walks in the door.