As laborious as the rental application process may be, it's a crucial step to renting your property as it protects your investment by ensuring you get reliable tenants.
However, the process won't be as effective if you don't cover all your bases. Rental application criteria are the standards you apply when screening potential tenants for your rental property. Knowing which criteria to include is important to be thorough with the screening process.
Knowing What Criteria to Include for the Tenant Screening Process
There are factors to consider for which criteria to add to your rental application such as business plans, property type, and laws. Tailoring your tenant screening process to your property’s needs is a requirement for your rental business to reach your target market.
Legal Compliance
Each state or city has laws and regulations for the rental industry. Something that all states have in common is federal Fair Housing laws which prevent landlords from discriminating against prospective tenants based on their national origin, sex, age, religion, and more.
There are also local and state laws that have to be followed to avoid legal problems, which can get significantly expensive for the property owner if they don't, depending on the severity of the legal violation they committed. For example, here in Boise, if an applicant because of bad credit, you must provide that information to the applicant.
Relevance to Tenancy
Certain factors may not be relevant to renting, and requiring them may deter tenants from applying. Some of the common and essential criteria include:
- Rental History: The renter's history with previous landlords can help you determine whether they have a record of paying on time since their ability to pay rent will affect your monthly income.
- Credit History: The credit report of a prospective tenant can show you how financially responsible they are. You can establish a minimum credit score to consider to streamline the process.
- Criminal Background: If your property is in a particularly family-friendly neighborhood, a criminal background report might be required to make other tenants and residents feel safe.
- Employment Stability: You can verify the income or employment of an applicant, or just as Wave Property Management does, require the applicant to be employed at the same job for at least six (6) months.
Business Goals
Your criteria should depend on your target, and your target market should be based on your long-term business plan. Do you intend to expand your rental property into a multifamily rental? Do you want it to be exclusively for students?
Administrative Responsibility
As you gather information, it will take time to get through every criterion. Aside from effort, it can cost you to run background checks on prospective tenants. This is where application fees come in. In Boise, there is no limit to how much landlords can charge for application fees. This means you can set your fees based on the applicant screening cost.
Credit Report
Credit history can be extensive if you need them to be. It can include reviewing their bank statements, checking their credit score, and calculating their debt-to-income ratio. Some property managers provide comprehensive tenant screening services. You'll be provided with detailed credit reports from the property manager as well.
Criminal Background Check
Checking an applicant's criminal history is just as important since a credit and background check tells you what kind of tenant you will rent to. You can even ask property managers which database they look into for criminal background checks if you plan on using their services.
Residence History
Some landlords overlook credit checks and criminal histories as long as the tenant has a positive rental history, which isn't advisable. A tenant can have a high credit score and still have a poor rental history. This means they tend to violate lease agreement rules, so it's best to check every factor.
Employment History
A tenant's current employment status and source of stable income say a lot about their ability to pay rent. Their credit score may not reflect the effects of recent unemployment and will not show up in credit screening reports when you verify income.
Gross Income
Being employed may not be enough and establishing income verification may be necessary. You need to learn whether the applicant has sufficient income to afford your unit's rent payment. Wave Property Management requires a tenant to have an income at least three times the monthly rent.
Previous Landlord Reference
You can contact prior landlords as part of the applicant's background check to know if they paid rent or followed the landlord's rules. This can let you foresee what their future behavior will be like.
Checking their eviction record might not be enough since a landlord can give several chances before they kick a tenant out for bad behavior. This step can help you prevent going through the same issues.
Identity Verification
The rest of the tenant screening criteria where you perform a credit check and look into their criminal record may be rendered useless if you don't verify their identity. It can be as simple as asking for their driver's license as proof, or be more meticulous by asking for other forms of verification. Background checks to verify identification is also necessary to combat fraud.
Tenant Screening FAQs
What information is usually included in a tenant screening report?
Tenant screening reports usually include credit scores, criminal backgrounds, rental history, employment verification, debt-to-income ratios, and eviction history, but many landlords tend to include other criteria based on the business or property.
Can I deny an applicant with a lower credit score from my rental property?
While you can consider this as a factor, you can't automatically reject their application based on their credit score. Look at the complete picture to determine if they can pay for your unit's monthly rent.
How much should I charge for an application fee?
That depends on the process and the platform you use. Wave Property Management charges an application fee of $35 for a convenient online application process, along with an additional $25 per pet.
What should my income requirements be?
You should base your income requirements on your monthly rent. The safe amount would be twice your rent cost, but a landlord can aim higher for the sake of security.
What are the applicable laws in tenant screening?
There are several tenant screening laws in Idaho to keep in mind, and it would be best to hire an attorney or a property manager to make sure you don't miss one when creating criteria for your rental application process.
Hiring a Property Management Company to Handle Everything For You
Tenant screening isn't the only thing our company can help you with. Our services can extend to every aspect of the rental business such as:
- Marketing your real estate property
- Screening your applicants
- Collecting rent
- Arranging move-out and move-in dates
- Enforcing lease rules
- Conducting maintenance and inspections
- Handling financials and providing reports
- Taking care of eviction proceedings
Our free rental analysis tool will tell you how much you can profit from your Boise rental business. If you feel like your rental real estate has the potential to earn more, you can schedule a consultation with us to learn how we can maximize the value of your property.
