Leasing a property involves more than completing checklists to prepare for renters. While many resources focus on practical preparations, they often overlook the emotional challenges of entrusting one's home to strangers and the complexities of finding suitable tenants.
Despite the desire for a positive rapport with prospective tenants, decisions must often be made based on objective criteria rather than personal impressions. Even a promising initial encounter doesn't guarantee a reliable candidate.
To effectively secure a quality tenant, it's important to rely on systematic approaches grounded in factual analysis and market trends.
1) Be Objective and Make Business-Based Decisions
Homeowners must base the tenant selection process on their application and renting, paying, and maintaining rental property history. Nothing more, nothing less. Fair Housing Laws protect renters from discrimination, and denying applicants for anything other than data is unlawful.
That said, if you have a strong group of potential renters, according to NOLO, “You are legally free to choose among prospective tenants as long as your decisions are based on legitimate business criteria.”
Just be sure not to discriminate within the applicant pool for personal reasons.
2) Know the Fair Housing Laws
Know what the Fair Housing Laws are and abide by them. They protect renters from discrimination and specify every reason you cannot use to deny an applicant.
You can't reject a potential tenant due to race, ethnicity, or any personal reason you feel is justified. While this is a general summarization of the housing laws, it benefits landlords greatly to read them more thoroughly at HUD.GOV.
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3) Verify Employment and Income
Determine the minimum monthly income your tenant must receive to qualify, then check your applicant’s earnings.
Not sure how much money they need to make each month? A common guideline requires a potential tenant's income to be at least three times the monthly rent. Following this method, if you list your rental property for $1,000/month, the tenant should ideally have a monthly income of at least $3,000. This ratio helps confirm they can manage the rent comfortably while also handling other living expenses, reducing potential risk for you as the landlord. But don't overlook factors like credit history and employment stability in conjunction with income.
You can request a payment stub from their work or a Leave and Earning Statement (LES) for military applicants. Pay grades and Basic Housing Allowance (BAH) rates are available online. However, ask for a copy of a military member's orders to verify their BAH is active for the area.
4) Conduct Tenant Screening
Professional tenant screening will include credit and criminal history, payment history, and records of evictions. If your applicant has a history of involvement in illegal activities, it’s advisable to consider other candidates.
Even in the absence of additional applicants, it’s better to maintain strict screening and incur the costs associated with an unoccupied property than to face the potential consequences of leasing to an irresponsible tenant.
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5) Check Rental References
It's advisable to contact references provided on the rental application. While you may have a have a positive impression of the potential tenant, you can't be certain without digging a little.
Check with previous landlords and discuss their experience with the applicant:
- Did they pay rent on time each month?
- Did they take care of the property?
- What conflicts did they encounter with said applicant?
- Were they good communicators?
You can also use this information to decline a prospective tenant if it's confirmed through references that they failed to pay rent regularly or caused damage to the property, rather than relying on mere intuition.
6) Look for Stability
Consider tenants with a stable rental history and long-term employment, which indicates reliability. And since the goal is to find a responsible tenant who doesn't put your property at risk, whether by causing physical damage or failing to pay, reliability is key.
Keep in mind, however, that active-duty military regularly receive orders to relocate.
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7) Interview Candidates
Meet with applicants to gauge whether they’re a good fit for your property. This step can be done in person, or virtually, if you're a long-distance landlord.
Pay attention to how applicants communicate, and be sure to answer questions they have after reviewing your house rules and lease terms. The goal is to foster an open and honest environment where both parties feel comfortable moving forward with the commitment.
These steps can help you make informed and unemotional decisions regarding your rental property, offering peace of mind that you've selected a quality tenant.
See our free guide below for even more information about becoming a landlord.
