How Many Applicants Will Your Rental Get & How Do you Choose the Most Qualified?
The perfect tenant rarely just appears on your doorstep the day you're ready to start leasing your rental property. Typically, it takes some work to find the right person, or people. But, there are established steps that can smooth the process and remove some of the mystery involved in sussing out a good applicant.
Applicants will find your rental through word of mouth, an open house, or an ad or online listing. Have a process ready for gathering their contact information. Dated sign-in sheets requesting a name, email address and phone number are perfect for an open house. It's also a good idea to start a file, and then make an entry with a date, name, email address and number each time a potential tenant calls.
Set your expectations for the rental in advance. Decide how many people it can comfortably accommodate, and figure out the monthly income an applicant must earn to cover the rent. The most commonly shared formula is 3-to-1, that is, the combined income of all tenants who will be living in the unit should be three times the monthly rent.
Have these expectations in mind as you collect applicant information. That way, if a family of six applies for your one-bedroom unit, you'll know not to bother sending them an application. If a tenant sends an application listing income that barely exceeds the rent, you'll save yourself and them time by immediately ruling them out.
What is a good number?
You only need one good applicant to fill your rental but if you only receive one application, you may be doing something wrong. You should also be concerned if you are flooded with applications.
Clients of property management software company Rentec Direct received an average of three to four applications per vacant unit in early 2017, according to company President Nathan Miller. However, the Oregon-based company that serves owners across the nation found a broad range in that time.
“We reviewed some statistics from 5,236 rental applications received during the first two months of 2017,” Miller said. “Of those applications, 56 percent of the units we rented after receiving just one application. The remaining units received between 2 and 63 applicants per unit. The average overall was 3.54 applicants per unit to find and place a tenant.”
Time of year and rental unit features will have an impact on tenant interest. Rentals that permit pets and forbid smoking tend to draw the most interest, and interest in units in college towns is likely to peak in Spring.
If you are so overwhelmed by applications that you can't possibly review them all, and you're not in one of the top rental markets, it may be that you priced the rent way too low. Compare the rent to that charged at similar properties and adjust upward. If you set rent too high, you can always lower it in $100 increments.
Applications are the first step
Email or hand out paper applications that collect their basic information, such as name, date of birth, and other identifying information. They will list their income, work history and current employment, number of pets and vehicles. Also, they'll share current financial obligations and whether or not they've ever been evicted.
This data will form the basis of your decision on whether or not to proceed with a background check on an applicant. The information is volunteered by the applicant, and it is not confirmed by an objective party. However, it will give the landlord a starting point for deciding whether to proceed.
An incomplete application, or one that arrives long after the applicant promised to send it, can be a red flags for the landlord. People who are earnest about applying to your rental and believe they are qualified to live there will typically meet or exceed deadlines to share their information.
Tenants vs. occupants
Everyone who lives in a rental will be an occupant, but not all occupants will be a tenant. Typically, tenants are those who sign the lease agreement and are responsible for rent payments.
Occupants, meanwhile, are anyone else who will be living in the rental unit. They include all children and extended family members such as grandparents.
Each adult who wants to live in your unit should complete an application, even if they will not be helping to pay rent, such as an adult child who will be attending college. Landlords have a duty to learn all they can about all people who may occupy an investment property. That's because property laws give tenants the right of legal possession during the lease period.
Although an adult occupant may not sign the lease and pay rent, they will share possession with tenants and therefore should meet a landlord's expectations for conscientiousness and responsibility.
Screening backgrounds is critical
Narrow the pile of applications to several which appear to have the best qualifications to live in your rental. Don't dispose of the others just yet.
Order background checks, or screening, on applicants using a reputable service. A thorough screening will supply a credit score, a complete record of credit accounts and payment history, bankruptcy proceedings and eviction judgments. It will also show possible criminal records.
Screenings carry a fee, and some services will collect the fee directly from applicants. This spares landlords from having to handle money.
Screen every single adult who will live in your property, whether they will be listed as a tenant or an occupant. The cost more than pays for itself by supplying background information that is critical to making a good leasing decision.
Look favorably on applicants who quickly respond to your request for screening. They are interested and believe they are qualified for your unit.
In years past, landlords were required to get a signed authorization form from applicants, giving the landlord permission to check the applicant's background. It was also common for landlords to collect an applicant's social security number in advance. Both of those practices have been largely abandoned. Many screening services now require only an applicant's name and email address and, as part of the screening, verify an applicant's identity.
Narrow the field
Background reports allow the landlord to choose the most qualified applicants. Review credit records and be wary of a record of late payments or bankruptcy. Ask applicants to explain any criminal records that may be returned. They may or may not be the same person. Eliminate those who are unqualified.
Many landlords are quick to dismiss an applicant with a so-so FICO score. Others weigh the FICO score against bill-paying habits, income and employment history. Keep in mind that those with top FICO scores may be more likely to qualify for home purchase, and may not pursue rentals.
Business Insider states that a score between 679 and 739 is good and that any score of 579 or less is poor. Yet, an applicant with a score of 579 who has been screened with, say, a spouse with a score of 745, may be a good choice.
Although landlords have the right to expect applicants will have enough income to cover rent, beware of setting standards that violate anti-discrimination laws. It is illegal under the federal Fair Housing Act to refuse to rent to applicants based on their race, religion, disability, gender, family makeup such as having young children, or other features.
Call references and former landlords and request proof of income
Asking for potential tenants' rental history isn't just a way to flesh out an application. Landlords must call those former landlords and ask if tenants paid rent on time and took care of the rental property. Experts recommend calling at least the last two landlords.
Likewise, tenant references should be contacted and interviewed. Finally, request pay stubs from the last two months to verify income, even if you have already verified that the applicant is employed.
After completing the above steps, you may have more than one top candidate. The decision then comes down to choosing the first qualified candidate. Many landlords also perform a quick gut check. It's important not to get personal or allow emotions to govern property management; landlords don't have to enjoy a tenant's company. However, the landlord should explore any information that gives him or her a feeling that something is not quite right.
Notify applicants you've made a decision
Let potential tenants know that you have accepted their application. It's best to do this with a phone call or a message that requires a reply, so that you can schedule lease-signing with them. It's a common practice to tell applicants that you screened but you haven't chosen that another candidate has been selected.
Set a deadline for lease-signing so that if the applicant decides not to rent your property, you can quickly move on to the next qualified candidate.
If you collect a hold deposit because the tenant cannot move in immediately, be sure to set a deadline for the lease to be signed and for the first month's rent to be paid. Many states have rules on handling hold deposits so be sure to follow them.
Now, you're ready for the big move-in. Give yourself a pat on the back. Vetting tenants is a complex and lengthy process but it gets easier with time.