Amateur Landlord: Picking the Right Tenant

August 19, 2010
4 Comments

by Bryce Baschuk

For property owners looking to rent out a portion of their home, it is important to know that tenant screening is an essential part of the landlord process.

As a landlord you want to ensure three things about your prospective tenant:

That the individual can pay their rent regularly and on time.
That their income and employment are stable.
That they have a positive track record of responsible renting.

“Don’t rely on gut feeling alone,” Rick Gersten, founder of UrbanIgloo.com, a residential rental brokerage firm, told UrbanTurf. “When it comes to verifying tenants, you should rely on substantive information.”

The first and most fundamental way to collect substantive information on prospective tenants is to have them complete a tenant application form. An example of a tenant application form can be found here. Gersten suggests that amateur landlords use a combination of three documents when verifying a tenant: a credit application form, a landlord verification form and an employment verification form.

“As a landlord you want to make sure that your tenant has been accountable to their landlords and their employers in the past,” Gersten explained. “You also want to make sure that the information they provide is legitimate and correct.”

Some landlords use screening services provided by private companies, while others will investigate the information personally. Either way, landlords should conduct a background check, call past landlords and current employers and run a credit check. Using an objective national credit reporting agency can help landlords determine if their prospective tenant has had any history of late payments. The three main credit score monitoring bureaus are Equifax, Experian and TransUnion.

While there are no strict guidelines for landlords to determine a credit score benchmark, most current American FICO scores are in the 750-799 range, according to a July statement issued by Fair Isaac Corporation. “I haven’t seen any landlords accept anything under 650, said Gersten. “That doesn’t mean landlords won’t accept scores under 650, I just haven’t seen anyone do it.” If you deny a tenant’s application based on information gleaned from reviewing their credit score, you must let the tenant know why you chose to reject them.

Finally, it is illegal to refuse to rent to a tenant for discriminatory reasons. According to the District of Columbia’s Office of the Tenant Advocate it is illegal to refuse tenants for any of the following reasons: race, color, national origin, sex, age, source of income, religion, marital status, sexual orientation, family responsibilities, parental status, personal appearance, physical handicap, political affiliations, place of residence or business, or student status. It is also illegal to refuse to rent to someone because they would pay the rent using a Section 8 voucher.

“The bottom line is you treat everyone equally,” said Gersten.

This article originally published at http://dc.urbanturf.com/articles/blog/amateur_landlord_picking_the_right_tenant/2391

4 Comments

anonymous said at 9:55 am on Thursday August 19, 2010:
Good info. Something I’ve wondered about, though: is it legal to discriminate based on how many people will live in the apartment, or charge more based on the number of occupants? (Within the safe limits). I’ve actually seen ads like this, where say, for a 1br they won’t rent to 2 people or for a 4br house they won’t rent to more than 3 people.

SW said at 11:13 am on Thursday August 19, 2010:
Why wouldn’t you rent to more than three people for a 4BR? That’s just ridiculous.

RentLaw.com said at 1:51 pm on Thursday August 19, 2010:
For smaller landlords, it may be hard for them to run a credit check. There are certain laws that apply regarding privacy. RentLaw.com offers a tenant screening service with their partners. see rentlaw.mysmartmove.com
As far as number of people - landlords have to be careful not to discriminate based on family status. Some towns do have restrictions based on the national building code. One person to a bedroom of 70 sq ft (minimum size). Two people is 120 sq feet.

Face it, many tenants overcrowd. They have to. Money is tight.

Mo said at 12:37 pm on Monday August 23, 2010:
Also, does anyone know if it’s illegal to discriminate based on security clearances? If someone had a top-secret clearance issued by the government, it would already indicate decent credit and no serious criminal past. If you have a TS clearance, you’re also very unlikely to get laid off anytime soon.