4 Ways To Avoid High-Risk Tenants
The last thing a landlord wants to deal with is a risky tenant. For one, tenant turnover is extremely costly. The average cost of finding a new tenant is estimated at $2,500 for a single unit. Even worse is the prospect of evictions, legal proceedings and other expensive and time consuming frustrations. It’s a scenario that no landlord ever wants to face.
If you’re looking to avoid these costly hassles, it’s important to screen out the high-risk applicants from the qualified ones. Read on to learn 4 ways to avoid high-risk tenants and protect your property—and yourself.
Set Income and Credit Requirements
The first thing to do when drafting a rental listing is to establish your tenant requirements. Spend some time thinking about a comfortable range for you in terms of a tenant’s yearly income. Generally, landlords look for an income between 3 and 4 times the rent of their properties, though if you live in an area with a high cost of living, you may need to adjust that number accordingly.
To avoid high-risk tenants you should set boundaries in place from the beginning to ensure that both parties understand what is expected from them. For example, you could explain that you will be willing to report bad tenants to the credit bureau as it protects you as a landlord but also provides the opportunity for good tenants to boost their credit.
Similarly, decide a minimum threshold in regards to credit score. Above 700 is considered to be good credit, but you may want to raise the threshold to only rent to those with excellent credit history. Remember to keep your minimum reasonable; we’d certainly all like a renter with a credit score of 800, but a number that high can be unrealistic.
Perform an Official Check
Once you’ve established your minimum income and credit requirements, it’s time to make sure that applicants meet them. Unfortunately, it isn’t as simple as a verbal confirmation, It’s important to do your research by pulling a tenant credit report and verifying income. You can do so by requesting either pay stubs or the prior year’s tax forms.
Meet Tenants in Person
Often, you can tell a lot about a person by simply meeting face-to-face with them. Approach an in-person viewing as you would a job interview. Does the prospective tenant show up on time? Do they appear kempt and put together? Are they pleasant to interact with? Does anything seem “off” about them? Pay close attention to body language, tone, and more.
No matter what you do, never rent to an applicant without meeting them first. If the tenant doesn’t currently live in the city your rental is in, schedule a video interview at a minimum. If you don't care about it beforehand, you'll have to go through the process of eviction. As a result, the need for eviction notice will increase. In that case, as per this site, https://www.ezlandlordforms.com/documents/eviction-notice-templates/, you'll have to search for notices accordingly.
Request References
Now, it’s time to talk to some real life people. In the application, ask your prospective tenant for both employer and landlord references. Give each a call and ask the following questions.
For their employer:
● Can you confirm that this person works for you?
● What is their yearly salary?
● Are they a full time or contract employee?
● Would you consider them a responsible employee?
● Have you had any major disciplinary issues?
● Would you hire them again?
For their landlord:
● Can you confirm that this person is a tenant?
● What is the address of their rental property?
● How long have they lived there?
● How much rent do they pay?
● Do they have any pets?
● Have you had any issues with them as a tenant?
● Would you rent to them again?
If you find any red flags in their reference checks, it’s best to practice extreme caution and look for a new tenant. Protecting yourself and your property is your number one priority.
Perform a Background Check
It’s important to weed out tenants with concerning history. To do so, pull a background check on your prospective tenant. Look at things like locations lived, criminal history, and more. If they’ve bounced around a lot, they may be a flighty tenant and not a good choice for you.
If they have criminal history, they can be an extremely high risk not only for your property, but for your other tenants. Frequent police activity can make other tenants feel unsafe in their homes and give them reason to leave. Give them the opportunity to explain themselves, but be extremely wary. Extensive criminal history should be avoided altogether.
High-risk tenants can mean bad news for your rental property. By following these steps, you’ll be able to avoid less-than-desirable tenants and save yourself a lot of hassle.