10 Red Flags to Look for in the Tenant Application Process
If you are an investor looking to rent out your property, you are going to be screening tenants. After all, the last thing you want to do is to hand the keys to your investment over to the first stranger that walks through the door. Instead, you will have the potential tenant apply by completing an application and agreeing to submit to checks, such as a background check and credit check. Of course, you always want to confirm employment and rental history, too.
By collecting all of this information, you are able to paint a picture of the type of tenant the applicant would be. Do you know what you are looking for? Do you know what type of tenant you should rent to and who you should avoid? Do you know which factors are most important to consider and which ones are red flags?
There are certain things that tenants may do, say, or provide that should stand out to you. These red flags should grab your attention. Here’s 10 of them.
1. Bad credit. Sometimes there is an explanation, such as a rough past or a nasty divorce. But. Generally, if the credit is bad, then the potential tenant may be lacking when it comes to responsibility.
2. Eviction history. If there are prior evictions, you may not want to rent to the potential applicant. Evictions can be costly, timely, and messy.
3. Questionable income. You will receive your rent from tenants. Since that is how you get paid, you will want to make sure there is enough of a steady income available to pay the rent and other responsibilities. Many landlords look for a monthly income of up to three times the rent amount.
4. Blanks or illegible answers on the application. Sometimes individuals will purposefully leave an answer blank or write something that you may not be able to read so as to hope it wasn’t left undone. Depending on the question, this could signal to you that the applicant may be hiding something.
5. Staying with a family member. Those potential tenants who claim they are “staying with family” until they find a place may actually be hiding something. For example, they could be hiding a current negative relationship with their landlord or a shady past rental history. There may be a legitimate reason, but risky tenants may often use this scenario when applying.
6. Lies and dishonesty. When you meet with the potential tenant, you are going to chat. Ask general, basic questions, get to know them a bit on the surface. When doing your checks on the applicant, you will find out a ton of information. Paste that together with what you already know and see if it adds up. If you are left scratching your head, you may have another red flag.
7. Frequent moves. You want a tenant who is going to be loyal and, hopefully, is long-term. If someone has moved often over the last several years, you may want to find out why.
8. Unreachable references. Ideally, you will want landlord and employment references. However, some will provide you other references from those who can vouch for their character. But, if you cannot reach these individuals should be a red flag.
9. Bad references from prior landlords. More than a subtle red flag – if a prior landlord recounts a negative experience with the tenant, you may want to push this application aside.
10. Requesting an extension on the security deposit. For a tenant to not be able to pay the security deposit at move-in, he or she must not have a savings or be financially stable. In addition, you are placing yourself in a risky spot with a new tenant and no security.
There you have it. Look out for these red flags next time you find yourself knee-deep in tenant applications.
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out at www.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube,Bigger Pockets and REI CLub and LinkedIn.