If you own an apartment rental property, then you know how important it is to choose great tenants. Choose the wrong renter and it can create a huge headache and certainly cost thousands of dollars in repairs or unpaid rent.
Many owners choose to hire management companies to screen tenants, process applications, and collect the rent every month. This service does cost a hefty sum and is extracted from the bottom line.
Other owners simply cannot afford to hire such a service and must do this on their own.
If you are in the latter group, then many professionals in the real estate industry suggest you be as thorough as possible as you go about venting potential tenants.
It all starts with the apartment application. There are some owners out there who skip this process. Don’t make this mistake.
An apartment application is documentation that almost all apartment complexes and landlords will use to screen a potential tenant. There is a reason why so many premier management companies have such a thorough and strict application process. It’s the first step in collecting a plethora of information about the applicant. All of this information will be used to generate a picture of who this applicant is, and if they will be a good fit in the complex.
The person filling out the application fee should pay a fee for the application fee to be processed. This is usually around $50 per applicant and is the cost of running a full background check. This will include the criminal check as well as the credit check.
There are a couple of ways to go about getting these documents. The state you live in may have promulgated forms on file. This just means that an attorney prepared these for the masses and it can be used by the public. The Texas Apartment Association has prepared an application that is recognized by the state. You will want to explore the rules and regulations in the state you live in.
Another method would be to contact a local real estate attorney. They can prepare a boilerplate application form that you can use for all of your renters. Also, they can answer any questions related to landlord-tenant law that exists in your state.
An application will have numerous blanks that will need to be completed. But here is what you must have to vent the applicant.
The social security number is used to identify who the individual is. This 9 digit number will be required to run a background check which will give you the majority of details like the credit score, which can be used to approve or deny the applicant.
It’s visual proof in the form of a photo of who this person is. There also will be a driver’s license number and physical address.
The majority of apartment complexes require that tenants make 3-3.5 times the monthly rent. Pay stubs, tax returns, or a letter from a new employer stating what the applicant makes should all be viable. If your tenant doesn’t make the required income, you will want to reject the application.
A landlord will want to speak with the previous apartment manager or landlord to verify the rental history. You can get a great idea of what kind of tenant this person may be from your discussions with their previous landlord.
Most renters know what they need for an apartment application, so none of the above information should be a surprise.
There are a couple of classes of renters that you want to avoid. These sorts of renters can cause landlords a great deal of money and hardship. This is one reason why complete background checks should be completed.
There are a couple of different ways to break a lease. When a renter leaves the apartment before they have fulfilled the entire terms of the lease, this is considered “breaking the lease”.
This means they might have left after one month, two months, or more after taking possession of the apartment. The renter still owes money on the lease contract.
As a landlord, it is preferable if you reject all applicants with a broken lease. They left in the middle of the night and didn’t pay the remainder of their lease. Plus, there is the potential for additional damages.
If the applicant didn’t abide by the terms of their lease with their last landlord, what makes you think that they will follow through this time.
How do you know if the renter has a broken lease? When the management company runs the full credit check, they will see broken leases, credit ratings, and other miscellaneous information.
If you do decide to accept an applicant with a broken lease, it would behoove you to collect a larger deposit as well as the first and last month’s rent as well.
Many larger apartment communities are now using the credit score in the application process. Credit scores are calculated using a plethora of proprietary data like credit card debt, charge-offs, and loans. Low scores can tell you a lot about a person.
There is a reason people have high credit scores. And this usually means that they pay their debts on time. This means you get your rent paid on time.
A full background check will include all criminal history. A vast majority of large complexes won’t accept individuals with felons. Many renters with misdemeanors are also finding it very hard to find rental housing.
While this may seem harsh at first, there is probably a valid reason behind this decision.
As a landlord or owner, your job is to lease your rentals out to qualified tenants. Without conducting a thorough review of each customer, you are taking a huge risk in your business.
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