The dream of any landlord is to have multiple well-qualified applications vying for their rental listing. However, if that becomes a reality, how do you decide? While this can seem like a good problem to have, it puts landlords in a difficult spot. Additionally, any decision made must comply with Fair Housing Laws. So, if you are not already aware, the Fair Housing Act makes it illegal to discriminate or refuse residency based on a tenant’s race, color, national origin, religion, sex, family status, or disability. Furthermore, depending on location, other protected classes may be included. Feeling overwhelmed? Let us walk you through how to choose a tenant for your rental property below.
What Do Property Managers Look for in a Tenant?
Before landlords ever list their property for rent, they must establish written guidelines for how to choose the best tenant. Creating a set of application qualifications helps set a baseline for all prospective tenants. However, the key here is consistency. So, ensure that each applicant is made aware of the qualifications and that they remain the same for each applicant. Check out a few examples of standard screening criteria that can landlords choose between multiple tenants below.
Rental Application Screening Qualifications
- Minimum Credit Score – While the numerical score is not everything, use a credit report to see the applicant’s overall financial health. Any applicant with excessive debt, overdue accounts, or poor repayment history is not the best fit for your rental property.
- Rental and Eviction History – History is often the best predictor of future behavior. Therefore, landlords should steer clear of applicants with a poor rental history that includes lease breaks, early terminations, or evictions.
- Minimum Monthly Income – Verifying income is typically the simplest form of screening in the application process. That said, an applicant’s financial documents should show a minimum gross income of three times the monthly rent. Thus, ensuring they can afford the rent along with other obligations.
- Landlord and Professional References – Documents do tell a story, but not as much as person-to-person contact. So, request contact information for previous or current landlords, an employer, or other professional references. Then, take the time to contact them and ask open-ended questions to gain as much insight as you can.
- Criminal Background – Criminal background checks could be a slippery slope depending on local and state regulations. For instance, some states do not allow landlords to discriminate against applicants convicted of certain crimes. That said, a record of violent crimes or drug convictions are an exception where landlords can deny an applicant. However, tread lightly and never ask an applicant if they were ever arrested. This is not the same as a criminal conviction and cannot contribute to a landlord’s decision.
Of course, property owners will want to customize this list based on individual rental unit needs and landlord preferences. You can learn more about what to include on your list here. Once you have your list, make sure each tenant meets the standard guidelines set forth. Landlords may be able to eliminate some applicants based on this list alone, which helps narrow down the pool of qualified tenants.
Why Do Landlords Need Written Screening Guidelines?
Using a written list of criteria to make decisions is important. Furthermore, this helps property owners and managers avoid accusations of unfairness or discrimination lawsuits. That said, ensure your list of criteria is compliant with the Fair Housing Act before putting it into practice.
Also, make sure the qualifications and how they are presented remain consistent throughout each applicant interaction and application. If landlords make an exception for one tenant but not for another, they could easily find themselves accused of discrimination. To learn exactly what you can and cannot legally do under the Fair Housing Act, check out this page.
Tips for How to Choose the Best Tenant for Your Rental Property
After showing the unit and receiving multiple applications, you realize, more than one person is amply qualified. So, what to do now? After all, the tenant a landlord chooses is directly tied to their success over the course of the lease term. Ideally, property managers search for someone who will pay rent on time, report maintenance concerns promptly, and care for the property as if it were their own.
So, when it comes to narrowing the field of applicants, a landlord has two main options to choose from. The idea here is to remain fair and follow good business practices. Continue reading as we examine these methods a little further.
Method #1 for How to Choose the Best Tenant – First Come, First Served
Arguably the simplest way to handle how to choose the best tenant when all applicants are truly equally qualified is to go with a first-come, first-served approach. In other words, choose amongst the qualified applicants based on when the application was submitted. Although this method is fairly straightforward, it does mean that the most qualified applicant may not be the eventual renter.
Therefore, if this is a concern, consider the next method of further evaluating each option more carefully. Remember, whatever method you choose, it must remain consistent.
Method #2 for How to Choose the Best Tenant – Sort Based on Application Strength
When multiple applications meet all of the standard qualifications, it does present a quandary. So, if first-come, first-served does not make you comfortable, delving deeper into each applicant is the only way to come to a decision. That said, landlords may end up choosing the applicant with higher income, better rental history, or the soonest move in date. Regardless, ensure that you document the reasons why one applicant is deemed more qualified than another, just in case disputes arise.
Therefore, when deciding how to choose the best tenant for your rental, reexamine the following criteria and carefully weigh the differences between applications. That information could prove to be the deciding factor.
Review Reference Checks
Above we established that the written list of screening criteria should include a specific number of required references. However, are you calling and interviewing those references every time a tenant applies to live in your property? If not, you should start doing so right away!
Interviewing tenant references help landlords gain insight into how that tenant will behave, regardless of how qualified they seem on paper. So, here are a few good questions you should ask every potential tenant’s references:
- Were there any late rent payments? – If late rent payments were a regular issue in the past, they will probably be a regular issue in the future too.
- Did the tenant receive any noise complaints? – The last thing you want is a noisy, disruptive tenant who trashes your property and annoys the neighbors.
- Was the property well-maintained by the tenant? – If severe damage occurred in the past, watch out – the tenant will likely treat your property poorly too.
Additional Tenant Reference Check Questions to Consider –
- How long was their tenancy?
- Why did the tenant leave?
- Would you rent to this tenant again? Why/why not?
- What could this person do to be a better tenant?
- Do they smoke or have pets?
- Can you confirm this person’s employment at your company?
- How long have you known them?
- What are the average hours the applicant works?
- How do they spend their spare time?
- How would you describe their overall character?
Money Is Not Everything
Maybe you are considering two tenants but feel faced with a financial dilemma. The first tenant can move in this week but only barely meets your minimum qualifications and has paid rent late a time or two. Meanwhile, the second tenant is extremely qualified with a stellar rental history but will need to wait a month before moving in. So, how does a landlord know how to choose the best tenant?
If possible, choose the second one. Yes – property owners might miss out on some quick cash by not renting out the property immediately, but the better tenant is worth the wait. Furthermore, landlords will feel confident knowing they have the best chance of rent being paid on time, making your job as a landlord much less stressful.
Our expert advice advocates prioritizing long-term benefits to your rental business over quick cash. In the long run, you will thank yourself when you have high-quality tenants in your properties who make your job easy and enjoyable.
How to Handle the Rental Applications You Do Not Choose
Once landlords decide on an applicant, it is time to protect themselves. Therefore, it is vital to document why one applicant was chosen over another. Thus, helping to prevent the threat of discrimination lawsuits. So, when deciding how to choose the best tenant and following through on that decision, follow the guidelines below –
- Consistency Matters – Make sure you pick one selection method to use consistently when faced with multiple qualified tenants.
- Document Everything – That way, your documentation is consistent, and it does not look like the landlord made any unfair exceptions for specific tenants.
- Send Notices – Send a letter to the tenants who applied for but did not get the rental property. If they failed to get the property due to their credit score, you must let them know because of the Fair Credit Reporting Act. Additionally, if they were denied for other reasons, explain those reasons in your letter and clearly state the criteria used to make your decision.
- Know the Law – The best way for landlords to protect themselves against lawsuits is to know and follow the law. Fair Housing Law is essential, but there are also state and local laws that govern the landlord-tenant relationship every property owner needs to know.
If you have doubts about how to choose the best tenant or whether your screening processes are legally compliant, consider consulting a local attorney. Additionally, landlords can research local landlord-tenant laws and requirement s on their own. However, this might take some time and effort on your part, but it will be well worth avoiding a lawsuit or tenant conflict.
Are you feeling overwhelmed just reading this post and would rather avoid the tenant screening process altogether? Consider partnering with Bay Property Management Group! We help landlords in Montgomery County and the surrounding areas eliminate unwanted responsibilities and get the best possible return on their rental property investments. Contact us today to learn more!