Screening the Tenant – Application Packet Requirements
So, you have decided to rent your home! Certainly, you have heard of the risks involved and the challenges associated with maintaining a rental home and giving it to a tenant who may or may not take good care of it. With this in mind, you need to leverage the risk you are taking and find a means to minimize that risk. What to do?
Here’s the foundation of minimizing your risk when working with a tenant :
- RENTAL APPLICATION : Use a legally approved rental application. This means meeting federal, state, and local Fair Housing guidelines. It also means getting enough information to properly screen your tenant so that you may obtain an accurate picture while having leverage in case he/she will default on their lease.
- INCOME VERIFICATION : Obtain the last month of paystubs on a W2 (employed) individual. For self-employed tenants, ask for last year’s 1040 tax return with Schedule C. For tenants obtaining Social Security, Pension, or other forms of income from State or Corporate resources, obtain the last two statements to properly identify income sources. At the end of the day, our preference is to always look at the NET INCOME.
- CREDIT REPORT : Yep…now the fun part. Many tenants rent because they have credit issues and can’t qualify to purchase. There are many resources for credit reports…not to mention types of credit scores that one can pull from! Sorting through this mess can be tricky and we recommend sticking with a simple resource that can assist you in pulling this info accurately and without biased information. Oh yeah…and you don’t want to get yourself in trouble with identity theft. So, stick with : www.mysmartmove.com.
- CRIMINAL BACKGROUND CHECK : In the State of Illinois, or at least the western suburbs of Chicago, many villages like to see landlords run a NATIONWIDE FELONY background check on all tenants over the age of 18. Then, it’s up to the landlord to determine what they are comfortable with when it comes to accepting a tenant on the basis of their criminal background. Meaning…a felony for a DUI from 10 years ago may turn a blind eye away. However, domestic abuse may not. It’s up to you and what you think is safe for your particular rental property.
At the end of the day, it’s like you are the bank deciding whether to give a buyer preapproval to move forward on the purchase of a new home. Only exception, you get to screen employment, references, landlord verification, etc. Then, make the final call! Regardless of how you slice it, the screening process is CRITICAL to minimizing your risk as a landlord over the term of the lease. Finding the balance between tenant supply/demand cycles and a quality tenant takes time and experience to reviewing rental applications. HAPPY LANDLORDING!