Below are some tips for landlords who are trying to find a good tenant for their rental unit.
What you can and cannot ask applicants
You must treat all applicants equally and fairly. This applies to every landlord. You are held to the same standard whether you are a property manager for a large, multi-unit building or you are a renting out the second floor of your grandparent's two-flat.
You cannot discriminate based on any of the following things:
- National origin
- Whether the tenant has children
- Marital status
- Military discharge
- Housing status
- Sexual orientation (only in Cook County)
- Source of income (including government housing help, like Section 8) (only in Cook County)
You also must make reasonable accommodations for a tenant's mental or physical handicap.
This doesn't mean you should be afraid to say no to a potential renter. You can deny people for non-discriminatory reasons. For example, you can refuse to rent to people who smoke, own pets, have a criminal record, or a history of being evicted.
The only way to learn this information is to have the potential renter fill out a detailed application, and look into their credit, rental, and criminal history. This can take a lot of time and money, but it is worth it to do before you start a lease. You will save yourself money and headaches in the end.
You can use this sample rental application.
Make sure that any application you use includes a consent to run a check on the person's credit, criminal, and rental history. It should also provide that the applicant pay a non-refundable fee for those inquiries. An applicant who won't agree to pay the fee either doesn't want you to know his history or doesn't have the money for it. Either one is a bad sign.
Apply the same standards to each applicant. The best way to do that is to decide beforehand what kind of tenant you will accept. Here are some questions to consider:
- Is a smoker okay?
- How many people do you want to occupy the premises?
- Will you allow pets?
- What kind of past criminal history are you willing to accept?
- Will you take someone who has filed bankruptcy in the last 10 years?
What information you need to know, how to get it, and what to do with it
You can get some important information from the application, but that is only a starting point. You can get much more important information through credit, criminal, and rental history checks.
Even if you are a part-time landlord, you need to take the time to verify everything. This is not the time to rely on your gut. If you're going through the trouble to ask for information, you should spend the time it takes to verify it before entering into a lease with the tenant.
Several agencies perform credit, criminal, and rental history checks for a small fee, usually between $20 and $30. Most offer all 3 in a package, but you can usually order single checks too. Some services may require that you pay a one time registration fee. All require that the applicant sign a consent form for the background checks.
Although this looks like the simplest piece of information on the application, pay attention to it. It is very important to have the applicant's correct name to get an accurate background check. You will also need it to find the tenant later if you have to collect money.
Be sure you get the applicant's full, legal name, including the middle name, that it is spelled correctly, and that the applicant lists any other name he is also known by or has ever used. Be sure to match the listed name with the one on the applicant's driver's license or other government-issued identification.
Social security number
This is the second most crucial piece of information. Agencies can only investigate the information you provide them, so be sure you're getting a legitimate social security number. Cross check the number the tenant provides against some government-issued identification or a current pay stub.
Everybody wants and needs a tenant who can pay rent, and pay it on time. A good way to ensure that your tenant will be able to pay the rent is to insist that the rent be no more than a certain percentage of the tenant's income. For example, you might want to insist that the tenant's monthly income is at least three times the monthly rent.
Verify the tenant's income by asking for recent pay stubs, W-2 forms and employer information. This policy may make it more difficult to find a tenant up front, but in the end, you'll probably have better luck collecting rent. Remember, however, that you may not discriminate based on the applicant's source of income.
You should not only look at the amount of income, but at the applicant's employment history as a whole. Here are some questions to consider:
- Do you see a stable job history?
- How long does the tenant stay with one employer?
- What were the reasons for leaving?
- Are there large time gaps between jobs?
You can ask the applicant to explain gaps or other in things in their employment history that stick out. You can also call the previous employers to verify employment dates and job titles.
Prospective tenants who won't pay debts, probably won't pay you. Credit reports provide information about late payment histories, outstanding judgments, wage garnishments, bankruptcies, and foreclosures.
Three major credit bureaus gather and report credit histories: TransUnion, Equifax, and Experian.
You can get credit reports from each, or you can use one of the tenant screening agencies, which will also check criminal and rental history. Make sure that a screening agency gets information from all three credit bureaus.
An applicant's credit score will help you determine how well they have paid their bills in the past. While a credit report is full of all kinds of information about a person, a credit score represents how their credit measures up against others'.
The scores range from about 300 to 850. The higher an applicant's score, the smaller the risk you are taking in accepting him as a tenant. You will have to decide for yourself what a good or a bad credit score is based on this information.
For example, you may be reluctant to take a tenant with a score between 300 and 620. Applicants with numbers in this range represent the lowest scoring percentage of the population. Low scores show a substantial problem with managing money in the past.
Although your application can ask about criminal convictions and pending charges, you shouldn't trust the applicant's responses without verification. A criminal background check is well worth the money. Criminal checks are usually done on a state-by-state basis, so you will likely have to pay extra if your tenant is moving from a different state.
It is important to look at the number and types of arrests an applicant may have, not just the convictions. Think about what the applicant's record says about the kind of tenant he will be. What do their arrests or convictions say about their likelihood to pay rent without causing any disturbances?
Be on the lookout for previous convictions for threatening neighbors, damaging rental property, or selling or manufacturing drugs. Those criminals are most likely not good tenants.
Most landlords are willing to talk to other landlords, especially if they've been mistreated by a tenant before. If you talk to them, they will probably tell you any problems they've encountered with your applicant, such as unauthorized occupants, late payments, poor housekeeping, damage to property, evictions, or other problems. It is legal to deny a person's application based on a bad rental history.
Beware of applicants who have only rented from family. Some applicants will cover a poor rental track record by naming only family or friends as previous landlords. This requires a judgment call on your part. If the criminal, credit, and employment checks come back OK, the tenant may have actually only lived with family, and may prove to be a perfectly good tenant. Just be cautious.