A huge part of the property management process is screening tenants, so today we are sharing guidelines we use at Lighthouse Property Management when we qualify applicants for our properties.
The most valuable piece in the tenant screening process is rental history. It’s hard to get to the bottom of rental history for some tenants. When you’re talking to a current or previous landlord, you want to make sure you have the correct person. One way to do that is to check the tax website of the county where the property is located. Make sure the name listed on the taxes is the same person you’re talking to. If a tenant has a poor rental history, that tenant is probably not going to want to give you accurate contact information. You have to do enough research to make sure you are talking to landlords. Be careful, and remember that if your tenant is unwilling to give you that information on prior landlords, you pretty much have your answer right there.
Try to get this information during your pre-screening conversations. Before you even show the property, ask the tenants where they live now, and how much rent they are paying. If you can begin qualifying people before you even show the property, you’ll save a lot of time.
You can find different reports on your applicants all over the Internet. If you’re not a property manager, you might want to try Equifax.com, because they do a three part report that pulls credit from all three credit bureaus. This is important because each credit bureau reports different information. You’re looking for collections from landlords or previous apartment buildings.
Debt to income ratio is something you’ll hear a lot. Most property managers want a tenant with income that is three times the amount of rent. That means, if your rent is $1,000 per month, you need a tenant who earns a household income of at least $3,000 per month. At Lighthouse, we like to say 3.5 times the amount of rent is required and four times is even better. That’s the perfect tenant because you have to consider taxes, insurance and other expenses that eat up a person’s income.
If you aren’t familiar with fair housing laws, you need to look them up. Go to the resource center on our website, and you’ll have the opportunity to download my eBook: Finding the Perfect Tenant. On the last page, there’s a link that will take you to a place where you can read more about fair housing. You don’t want to get in trouble with federal laws because legal issues can be a huge problem for landlords. Treat everyone fairly, always.
If you have any questions on tenant screening, please contact us at Lighthouse Property Management, and we’d be happy to help you.