Author Topic: What is your tenant criteria?  (Read 4188 times)

gazzamatic

  • 5 O'Clock Shadow
  • *
  • Posts: 17
What is your tenant criteria?
« on: June 02, 2016, 10:34:58 AM »

I'm about to start showing my first rental property to potential tenants, but I haven't locked down the tenant criteria I should be using.  I know I should have done this before advertising, but too late now.

I've read that generally the criteria should be Income, Credit score, Criminal history, and Rental history, but I'm not sure where to set the levels.  So I'm wondering how others set these levels?

Income: 3 x rent seems pretty common.  Is this usually gross income or net income?  Do you usually require pay stubs to verify this, and how many?
Credit score: 650 includes 2/3 of the US population, is this a good minimum?  Are there other things which you usually look for on the credit report?
Criminal history: Are people just looking for eviction notices here or do you screen out those with other issues, like prior drug convictions?
Rental history:  My plan is to request references from 2 prior landlords over the last 3 years.  Is this a reasonable approach?

What else should I be considering here?

Do you only run the background check after you've verified income and rental history, or do you run it regardless?

Thanks for your insight!

-Gary

onlykelsey

  • Handlebar Stache
  • *****
  • Posts: 2172
Re: What is your tenant criteria?
« Reply #1 on: June 02, 2016, 10:39:44 AM »

I'm about to start showing my first rental property to potential tenants, but I haven't locked down the tenant criteria I should be using.  I know I should have done this before advertising, but too late now.

I've read that generally the criteria should be Income, Credit score, Criminal history, and Rental history, but I'm not sure where to set the levels.  So I'm wondering how others set these levels?

Income: 3 x rent seems pretty common.  Is this usually gross income or net income?  Do you usually require pay stubs to verify this, and how many?
Credit score: 650 includes 2/3 of the US population, is this a good minimum?  Are there other things which you usually look for on the credit report?
Criminal history: Are people just looking for eviction notices here or do you screen out those with other issues, like prior drug convictions?
Rental history:  My plan is to request references from 2 prior landlords over the last 3 years.  Is this a reasonable approach?

What else should I be considering here?

Do you only run the background check after you've verified income and rental history, or do you run it regardless?

Thanks for your insight!

-Gary


I've only ever rented out the second bedroom in my apartment (and to acquaintances), but I don't think I've ever been asked for references from two prior landlords.  I honestly don't think I'd be able to get them (not because I'm a bad tenant but because in one instance I took the guy to court and got a 8K judgment against him, and the older landlords I doubt remember me or would respond to my requests).  What would you do if a tenant weren't able to contact two previous landlords?  I've served as a reference to previous tenants, but sometimes it takes two weeks to connect with the new landlord/there's a language barrier/etc.

gazzamatic

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Re: What is your tenant criteria?
« Reply #2 on: June 02, 2016, 10:51:22 AM »

I meant that I would request contact information for 2 previous landlords.  Being as objective as possible, if all other things are equal, then I would select a different applicant.  If all other things are not equal, then I'll have to consider the individual circumstances I suppose.

therethere

  • Pencil Stache
  • ****
  • Posts: 757
Re: What is your tenant criteria?
« Reply #3 on: June 02, 2016, 11:12:34 AM »
With the landlord reference criteria  I would fail even though DH and I are professionals who have always paid on time and never left a mess. Mainly because the past two have been deadbeat landlord's where we've had to create a major stink to get things fixed or tried to charge us money for damages that didn't happen. Actually I'd probably say 3 of 5 of our last landlords have been this way.

I would think you would need to take this with a grain of salt. Someone who rented at a large apartment complex, I'm sure they'd only report on any late payments and not know much else about the tenant. Meanwhile individual landlords would likely have much more colorful reviews (for good or for bad). I'd sincerely hope someone would not reject me as a tenant just because my landlord didn't report back. I had to provide my previous landlord as a reference for my current place. I had to give a disclaimer about how she would not have positive things to say since she did not uphold her responsibilities as a landlord and we got in many back and forth disagreements. Luckily, I don't think they even bothered to call her.

onlykelsey

  • Handlebar Stache
  • *****
  • Posts: 2172
Re: What is your tenant criteria?
« Reply #4 on: June 02, 2016, 11:18:59 AM »
With the landlord reference criteria  I would fail even though DH and I are professionals who have always paid on time and never left a mess. Mainly because the past two have been deadbeat landlord's where we've had to create a major stink to get things fixed or tried to charge us money for damages that didn't happen. Actually I'd probably say 3 of 5 of our last landlords have been this way.

I would think you would need to take this with a grain of salt. Someone who rented at a large apartment complex, I'm sure they'd only report on any late payments and not know much else about the tenant. Meanwhile individual landlords would likely have much more colorful reviews (for good or for bad). I'd sincerely hope someone would not reject me as a tenant just because my landlord didn't report back. I had to provide my previous landlord as a reference for my current place. I had to give a disclaimer about how she would not have positive things to say since she did not uphold her responsibilities as a landlord and we got in many back and forth disagreements. Luckily, I don't think they even bothered to call her.

Agreed, therethere.  My last tenant's new landlord asked for the last three references for landlords, and I was the only one who responded.  She was a fine tenant, wasn't her fault that her other two landlords were deadbeats.  I also wonder how valuable previous landlord's input will be if you're running a small place.  For me, I'm not super perturbed if a tenant gets a paycheck a few days late and is a week late on rent, because I just throw my rental money at my HELOC.  For other landlords, that'd be a deal breaker.  I loved that my last tenant was super neat because we share space, but probably her new landlord DGAF unless she's attracting bugs.

I don't mean to gang up on you, OP, I think you're asking good questions.  If I start renting out my bedroom again, I'll have to make similar decisions.  I've thought a lot about the credit score thing.  If you order the full report (not just the summary score), you could consider giving more weight to more recent behavior than older, especially with younger tenants.  If they were late once last year, I'm more worried about that being late five times six and seven years ago, for example.


mskyle

  • Pencil Stache
  • ****
  • Posts: 693
Re: What is your tenant criteria?
« Reply #5 on: June 02, 2016, 11:20:00 AM »
Two prior landlords over the past three years might screen out people who like to stay in the same place for a long time (which seems like desirable tenant behavior to me)... I've rented in my current place for three years and before that I rented a room in a friend's condo. A few apartments ago I lived in the same place for six years. I have friends who've rented the same place for 10+ years, and my upstairs neighbor has rented here for 20 years. It's also a tough standard for young people who are just coming out of the dorms or their parents' houses, or people who owned until recently.

So at least have some kind of alternative in mind as opposed to two recent landlords.

I also think where you can draw the line depends on your market. If you're renting lower-quality properties in a place with a different rent-vs-own tipping point, 650 might be completely outside of the realm of possibility. Sure, 650 accounts for 2/3 of the U.S. population, but it only really matters how 650 compares to the average for people who would be interested in renting your property. That place I stayed in for six years wanted a 600 or above, and that was in a pretty desirable young professional-ish kind of area (or course that was also 10 years ago).

tonysemail

  • Pencil Stache
  • ****
  • Posts: 725
  • Location: San Jose, CA
Re: What is your tenant criteria?
« Reply #6 on: June 02, 2016, 11:58:28 AM »
for credit score, it varies by market segment.
I used a limit of 720 for a modestly upgraded duplex and 750 for an almost new SFH.

Beaker

  • Bristles
  • ***
  • Posts: 336
Re: What is your tenant criteria?
« Reply #7 on: June 02, 2016, 12:15:07 PM »
Here's what I use:

Quote
1) Stable employment for 1 year
2) Income >= 3x monthly rent OR demonstrated at least 6 months cash on hand + prepay last month's rent
3) Good rental references from last two landlords (min 2 years)
4) Credit score >= 600
5) No evictions, bankruptcies or broken leases on record
6) No felonies or other negative criminal activity

Thus far my experience with rental references is that I only get good references. The bad ones just never call back. I don't necessarily hold it against people if their prior landlords can't be bothered to deal with me, but it's definitely a point in favor when I do get a good reference. Also, keep in mind some people have extenuating circumstances, eg, owned their house for the last 10 years and are now moving to a new city.

The alternative to income in #1 is from experience. One of my best tenants had no job, but tons of cash in the bank - I got 3 months statements for that. I did require a cosigner as well in that case.

The 600 credit score is somewhat arbitrary, but I haven't had many applicants that are borderline. Usually they're either really good, or a complete horror show. I do read the full report, but it always agrees with the score (go figure). Do remember that most people have a few late payments here and there for silly reasons. (I actually missed a credit card payment last month because I forgot about auto-billing on a rarely used card. The late fee was more than the actual charge. I've already facepunched myself over that one.)

I have been using MySmartMove for all the background/credit checking, but they've made some changes recently that I don't like so I may be switching.

tonysemail

  • Pencil Stache
  • ****
  • Posts: 725
  • Location: San Jose, CA
Re: What is your tenant criteria?
« Reply #8 on: June 02, 2016, 01:00:27 PM »
I have been using MySmartMove for all the background/credit checking, but they've made some changes recently that I don't like so I may be switching.

boo.  that doesn't sound promising.  What did they change which you don't like?

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 41
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: What is your tenant criteria?
« Reply #9 on: June 02, 2016, 01:01:05 PM »
"My PM approved them"

beltim

  • Magnum Stache
  • ******
  • Posts: 2848
Re: What is your tenant criteria?
« Reply #10 on: June 02, 2016, 01:24:06 PM »
Here's what I use:
1) Stable employment for 1 year

Income: 3 x rent seems pretty common.  Is this usually gross income or net income?  Do you usually require pay stubs to verify this, and how many?

Often times it depends on the market you're targeting (as others have said), but keep in mind a large portion of the rental market consists of long-distance moves specifically for a job.  Criteria such as these may exclude some of the most desirable candidates unless you add common-sense alternatives (e.g. a signed offer letter).

Beaker

  • Bristles
  • ***
  • Posts: 336
Re: What is your tenant criteria?
« Reply #11 on: June 02, 2016, 01:25:56 PM »
I have been using MySmartMove for all the background/credit checking, but they've made some changes recently that I don't like so I may be switching.

boo.  that doesn't sound promising.  What did they change which you don't like?

The big thing is that they replaced the plain Credit Score with some custom thing ("SmartMoveScore", maybe?). As near as I can tell, they never explain what goes into that, so I don't really trust it. I'm also not comfortable putting it in my criteria, just in case somebody tries to call me on it (eg, in a lawsuit). They also made their UI really confusing, and even slower than it used to be.


"My PM approved them"
Heh, I tried that. But my PM was batting about 0.500 and charging a lot for it, so I fired them and hired someone better. Just happens that the new manager has my name and owns my properties. And is strikingly handsome to boot. ;)


Often times it depends on the market you're targeting (as others have said), but keep in mind a large portion of the rental market consists of long-distance moves specifically for a job.  Criteria such as these may exclude some of the most desirable candidates unless you add common-sense alternatives (e.g. a signed offer letter).
Valid points, I'll add something like that for next time around.

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 41
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: What is your tenant criteria?
« Reply #12 on: June 02, 2016, 01:29:56 PM »
The big thing is that they replaced the plain Credit Score with some custom thing ("SmartMoveScore", maybe?). As near as I can tell, they never explain what goes into that, so I don't really trust it. I'm also not comfortable putting it in my criteria, just in case somebody tries to call me on it (eg, in a lawsuit). They also made their UI really confusing, and even slower than it used to be.
Isn't that just basically a credit score mashed up with rental-specific history via some clever algorithm to calculate risk in a more specific (tenancy-oriented) fashion?

Quote
Heh, I tried that. But my PM was batting about 0.500 and charging a lot for it, so I fired them and hired someone better. Just happens that the new manager has my name and owns my properties. And is strikingly handsome to boot. ;)
AAHAHAHAHA <3

Beaker

  • Bristles
  • ***
  • Posts: 336
Re: What is your tenant criteria?
« Reply #13 on: June 02, 2016, 01:51:21 PM »
Isn't that just basically a credit score mashed up with rental-specific history via some clever algorithm to calculate risk in a more specific (tenancy-oriented) fashion?

Yes it is. In fact they sorta kinda explain that on their site. But it's long on hand-wavy marketing speak, and short on actual details. So they took away something I mostly understood and mostly trusted (credit score) and gave me something I don't understand and don't trust.

Now, I have no inside knowledge here. Maybe their score is as good as they say. But I have a generally suspicious nature, and I've personally written a few pieces of software that were frankly pretty stupid but ended up sounding a lot like that after the marketing department got done with it.

Bobberth

  • Bristles
  • ***
  • Posts: 311
Re: What is your tenant criteria?
« Reply #14 on: June 03, 2016, 03:40:16 PM »
Here is my spiel. I say it verbatim every time, in person and on the phone: "We do a credit check and a background check. For the credit check, we're not looking for perfect credit, just no evictions, unpaid rent or landlord actions. We don't like to see unpaid utility bills and everything else we want to get a good feeling we will get paid the rent. For the background check we verify all of the information on the application: income is 3x the rent, employment and landlord history. No felonies in 7 years and no sex offenders."

I've got my spiel down pat and I say it fairly monotonous and try to sound as matter of factly as I can. I noticed that people standing in front of me with an application were looking shocked and overwhelmed so I added the "no sex offenders" to the end. Strangely, this acts as 'comedic relief' to the situation and people perk up by laughing it off.

I don't use a credit score as I weigh certain things differently: obviously evictions and judgments for unpaid rent or landlord actions (damages) are the most important. I don't like unpaid utility bills as I think it shows a lack of priorities but it's not necessarily a deal breaker like evictions are. My first rental a couple moved in where he owed $350 in back electric bills so they put the electric in her name. They don't owe me money so it's ok with me. They split up and she left so he had to pay $350 in order to get the electric back on. Rent was late that month. Looking at everything else, if someone has 7 different unpaid phone bills, several car repossessions, and other collections then yes I am very concerned. If somebody has 10 doctor bills in collections from an accident or pregnancy, I care zero about that. If somebody has many student loans, I also care zero--which is why I don't use a credit score, they would get dinged on these issues but I don't find that they have affected my receiving of rent. Some minor unpaid bills or items in collections are ok as my target market is working class people making $10-$15/hour.

I use a screening service so I don't know if I've gotten a bad landlord reference or not? But I use that info more to check out their address history. I've had people apply saying they have been at an address for 5 years but it turns out they have been at 7 addresses in that time and moved into the last one 6 months ago. Hmmmm, you're looking to move 6 months after you just moved into a new place? Did you actually pay any rent or just the deposit? Now if they are off by a year, wrong move in date or something minor, I can let that slide but I've been saved many times by comparing what they put as their last 2 addresses to their credit report.

Missouri has a great state database of all court cases going back to 1980 or so. I run an applicant's name through that first thing. If they have a unique name, the results are fairly accurate. If their name is John Williams, I can look but I can't be sure who is who so that doesn't work as well. This is a pre-screen. I've found many people with prior evictions that I then call back and give them their application fee back. You should check to see if your state has this. Illinois has it but it is still county by county so it's less useful.

I have also started to check facebook. I'm not sure what I'm looking for, and some people have their profiles locked down pretty good so you can't see much but I look to see if I can find or learn anything. The one eviction I have had in 9 years had a bunch of "thuggish" looking people posing while holding guns to the camera on her friend's list. Not sure if that means anything since it's a single occurrence but that is something I am keeping in mind going forward. They ended up selling heroin out of my house so there maybe something to it. Another woman applied saying it was her and her 2 kids. Ok. But who is this guy in your cover photo that is posing with the 2 kids and you but is not on the application? Why is he not on the application???

I like that my criteria is strict but still allows me wiggle room one way or the other. Most of the time I try really hard not to let credit be the deciding factor since leagally they get a copy of their report and it is less cut and dried. Usually I get people to pre-screen themselves and not apply.


h82goslw

  • Stubble
  • **
  • Posts: 184
Re: What is your tenant criteria?
« Reply #15 on: June 04, 2016, 05:51:22 AM »
Great post Bobberth

protossZerg

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: What is your tenant criteria?
« Reply #16 on: June 04, 2016, 03:15:31 PM »

Credit score: 650 includes 2/3 of the US population, is this a good minimum?  Are there other things which you usually look for on the credit report?

I have always struggled with checking for Credit score based solely on a number range.  If they have fantastic credit, they have the option to buy their own home and you will have turn over. 

In addition to the number, I check for any utility delinquencies and what their overall situation is.  There have been situations where I have rented to a tenant with < 600, but I understood their situation.  Some tenants with bad credit scores are good and dependable renters....they are not buying any time soon. 

Also, sorry if I offend anyone, but I never rent to pastors!  No clue why, but I have never had a good experience with pastors.  In fact, top 2 worst tenants were both pastors.

Blindsquirrel

  • Pencil Stache
  • ****
  • Posts: 657
  • Age: 1
  • Location: Flyover country
Re: What is your tenant criteria?
« Reply #17 on: June 04, 2016, 06:33:16 PM »
   I do the standard screening but we always go see what the house the currently live in looks like. Alsways stop by to get a form signed or more detail and ask to use the bathroom. If it is a dump they will not turn my house into a dump.  One of the worst tenants we have ever had made 90k and was a bitch about paying 850 a month.  The looking at the house thing has saved us a couple loser tenants.

gazzamatic

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Re: What is your tenant criteria?
« Reply #18 on: June 06, 2016, 12:21:12 PM »

Thanks for the replies, a lot of good information!

For those in MN, where we're supposed to give written disclosure of "the criteria on which the decision to rent the prospective tenant will be based", is anyone giving a required minimum SmartMove / TransUnion ResidentScore?

Thanks again,
Gary

Slee_stack

  • Pencil Stache
  • ****
  • Posts: 854
Re: What is your tenant criteria?
« Reply #19 on: June 16, 2016, 08:02:56 AM »
I've generally had a RE agent pre-screen applicants (employment, court filings and credit reports) and supply me docs with their comments.  I then go through the histories myself.  The pre screening has cost me one month rent.

I'll then talk to the applicants myself and get some further context (why they are moving, their interests in the area, goals, etc.).  Sometimes, you can sniff out a deadbeat when talking to them.  For other folks, its hard to tell.

I personally won't touch Section 8 applicants or any one with even a single rental court case found. 

My current tenant had a very low credit score at the time she applied, but had a good demeanor and talked freely and had good answers to all my questions.  5 years later she still keeps the property tidy and rarely asks for anything.  She tends to pay mid month vs beginning (when its actually due), but has never missed a payment and has only been really late once and warned me ahead of time. 




DeanW5

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: What is your tenant criteria?
« Reply #20 on: September 23, 2016, 04:20:09 AM »
If you want to find really a good tenants you need to call at least one of his previous landlords. Most property owners consider references as a way to  help the  future landlords rather than previous tenants. So you can be sure that information they tell you is correct. Sometimes the credit and employment history could be great, but when you speak to a landlord it can appear that  tenant not as good as he seems to be.

You can ask for personal references as well. Sure, friends and relatives will do their best to tell the most positive information about tenant, but you but you can still get some useful data. Inquire how long the reference know the tenant and ask to talk about the applicant’s character.