The summer months generally mean more rental activity. That means we are
receiving more and more applications from tenants. Thus bringing to mind the
question, how do we determine what makes a good prospective tenant and what
makes a bad prospective tenant?
Tenants are the basic element for a rental home. They are the main
contributing factor in your profitability as the investor and homeowner. It
would seem then, that a very important factor in property management is choosing
the tenant. While there is no guarantee that even the best looking applicant
will in fact be a great tenant, there are things you can look for in an
applicant to get a better picture of the kind of tenant they are likely to be.
Let’s take a look at the different components of the application process.
The major components of an application include the credit history report,
eviction records, residential history, and employment and/or income
verification. A good idea would be to check the applicant’s name against the
sex offender list as well.
The credit history of an applicant can reveal a lot about an applicant’s
history of timely payments and can give an overview of the applicant’s current
financial obligations. Although the credit score does indicate the credit
worthiness of an applicant, a low score does not always mean that this applicant
would be a bad choice. In our current market, there can be extenuating
circumstances that led to the score dropping.
The court search for landlord issues and evictions is very vital along with
the previous rental history. This can be very telling into how the tenant will
behave as your tenant. Humans tend to be very habitual creatures. A tenant who
didn’t pay rent on time or leaves the previous rental property dirty or damaged,
most likely will do it again.
The verification of employment and/or income is obviously vital to see if the
prospective tenant will be able to afford the asking rent. Typically
at minimum, 3 times the asking rent is required. Contact their employer to
verify their employment and ask the prospect for the last two paystubs. If
there is other income, such as child support, alimony, military benefits, you
can ask for proof of that income as well.
While an applicant may meet all your qualifications and appears to be a good
tenant, there isn’t a full proof system out there. But making a knowledgeable
decision on the placement of a tenant can minimize the risk you take as an
investor thereby increasing your return on investment.
This article was written by Kim Butler and John Durham, employees of Excalibur Home Management, LLC, an Atlanta
Property Management Company.
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River City Property Management317 Sylvan StreetChattanooga, Tennessee 37405