It is often said that there are only two times when rental housing providers get into trouble selecting renters: (1) when they are rushing to rent quickly, and (2) when they take pity upon someone.  When picking renters, it is only right to remember to rent to someone who will pay on time, tend to their civic duties, and take appropriate care of their homes. As a rule of thumb, it is better to have no tenant, than a bad tenant.

There are some basic steps to selecting a good tenant.  The first step includes validating everything they have said and the information they have provided to you. Validate the information given on a rental application such as phone numbers and addresses.  If you cannot verify the information by matching a utility bill to address on application or find any inconsistencies on pay stub and bank deposits, those are grounds for rejection.

The second step is to have rental policies and standards that all tenants must abide by. For example, set an appropriate income level for your building.  Examples include requiring minimum FICO scores, or three-times (3x) income when compared monthly rental amount.  Only offer reasonable accommodations as appropriate. For example, if a prospective renter does not earn three-times rent but has other assets (e.g., savings account), you may wish to relax your requirements.  In some cases, accommodations may be required by law (e.g., Section 8 participants).  It is fine to refuse a tenant who has been evicted or owes money to a housing provider or has had a past with convictions related to illegal drugs or violence.

Additionally, make sure any applications you receive have been filled out completely.  If the application is not filled out to your satisfaction, the application may be returned to the applicant to be properly completed in its entirety.  Before accepting an application, glance through it to make sure no information is missing.  All areas must be filled out, checked, or have “not applicable” noted. You do not want to have to call the applicant for any incomplete information.  Back up documentation is also very important.  It is a good idea, for example, to ask for several months of past bank statements, or evidence of employment such as pay stubs – you can use these to verify paychecks are being received and deposited, and that deposits match the pay stubs.  With the bank statements, you can also verify that the rent is being paid on time for the amount stated in the application.  You may also want to request a copy of current utility in their name to see if this matches the address on the application, the pay stubs and/or tax returns (if self-employed).

It is a good idea to keep checklists around to help keep you on task. The best time to go through your checklists is when you get a new move-in or application. Just go through your list to make sure not to skip any steps which may be crucial to the move-in/new application process.  Be thorough but try to expedite as we have found that if you do not act quickly your prospective tenant could just move on to next apartment; however, do not let anyone rush you through the move-in process.

A lot of trouble can be avoided by making sure you have given out a qualification list prior to a tenant applying and by setting up what your criteria is ahead of running their credit report, so you do not waste their time and money or yours.  Your qualification sheet should list what you will be checking and what your expectations are for the ideal candidate. This must be done in compliance with Fair Housing laws, which means you should know the current laws and take continuing education to stay up to date on Fair Housing – these classes held regularly at the Apartment Association of Greater Los Angeles (AAGLA).  You should list your income and credit requirements, your occupancy limitations, pet policy, insurance requirements, security deposit policy and any other relevant items that a prospective resident should know before moving in.  Even though the credit report gives information on how well someone pays their bills, it also provides information which you can use to verify their application is accurate and gives you an idea of what the income to expense ratio is.

The most important thing you can do when dealing with tenants is to treat them fairly, be consistent and use the same criteria each time you rent.  Exceptions should only be made if related to a reasonable accommodation. It is perfectly fine to judge prospective renters by their ability to pay the rent; however, you must be able to back-up in writing what criteria was used to make your decision.  It really comes down to having procedures in place, so you do not accidentally violate any Fair Housing Laws.  Illegal discrimination can consist of race, religion, national origin, familial status, color, ethnicity, disabilities, and others as the list can change with new laws passing – stay current.  Legal discrimination includes bad rental history, bad credit, insufficient income, lying on an application, and past eviction to name a few.

Although, it may seem obvious, you need to use a very strong, well written lease and it should cover the local jurisdiction where you own property.  If you use a bad lease you might be unable to evict a tenant for nonpayment of rent, for certain damages, for too many people moving in, and so on.

In conclusion, tenant selection is one of the most important jobs a housing provider has.  A bad tenant takes up space that could be used by a good tenant.  A bad tenant may also cost you by losing good tenants at your property.  Lastly, good tenants can lead to future financial stability and a bad tenant could cost you lots of money.