The Importance of Qualifying Your Tenant

Mike Nelson
Mike Nelson

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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