close
Forever renters: Gen Z passing on home purchases for luxury apartment rentals
FOX Business ‘Big Money Show’ hosts Jackie DeAngelis and Brian Brenberg discuss a new study that found Gen Z would rather pay high rent than put a down payment on the house.
As a landlord, finding a reliable tenent to reside in your rental property, or rental properties, can be a stressful task.
Asking for references, doing background checks and taking a look at finances can all contribute to finding a qualified candidate to rent your property.
Through all stages of screening, from the online application, a phone call and maybe even an in-person talk, it is of upmost importance to ensure that, as a landlord, you are following all local, state and federal housing laws.
There are several steps you can take as a landlord to find qualified candidates for your rental property. (iStock / iStock)
RENTAL PRICES MAY BE LOWER IN WINTER, BUT BEWARE THAT OPTIONS MAY BE LIMITED, EXPERT SAYS
Below are expert tips for screening potential tenants.
- Draw up your baseline requirements
- Include references from past landlords in your application
- Conduct background checks and credit checks
- Consider a cosigner
- Keep federal, state and local laws at the forefront
1. Draw up your baseline requirements
When accepting applications for your rental property, you'll want to come up with baseline requirements that tenants must meet in order to be considered.
One common baseline requirement to consider is the rent to income ratio. Rent to income ratio helps landlords make a suitable judgment about whether a tenant can afford to live on the property and make timely payments.
The required rent to income ratio varies depending on the property, but as a general rule of thumb, landlords like to see their tenants make around two to three times more than the cost of rent.
As a landlord, it is important to come up with baseline requirements that applicants must meet for consideration. (iStock / iStock)
TO RENT OR TO BUY? WHAT TO CONSIDER WHEN DECIDING BETWEEN A HOUSE OR APARTMENT
Though this is ideal, it does not account for rising costs.
"What we're seeing since COVID is the cost of living increases on people's income have not been commensurate with the increase in rent," Benjamin Gene, president of Keyes Property Management in Florida, told FOX Business in a phone interview.
"We saw down here in southeast Florida, on average, about 28% increase in rent over a two-year period. Wages were not going up 28% and therefore rent to income ratios have been skewed dramatically. We've had applications where 60% of their income would be going to rent, and that's not something we're comfortable taking, but yes, two to three times the rent is a comfortable space where most landlords would like to be," Gene said.
2. Include references from past landlords in your application
References from past landlords are invaluable when it comes to new tenants.
Asking for multiple references from landlords in the application process is ideal to make sure the information lines up.
"On our application, we're asking for the last two properties that they've rented, who the landlords are, their contact information, because we want to talk to previous landlords," Gene said. "There's no better way to vet somebody than to talk to somebody who's dealt with them, and we always ask for two because the one prior may want them to be gone, so they may give them a glowing review to get them to leave, whereas the person two times ago no longer has any skin in the game, and they're more inclined to be honest about that tenant."
References are a great tool for landlord. Asking for multiple references is particularly helpful to make sure the same message is relayed about the applicant through them all. (iStock / iStock)
RENTING STILL CHEAPER THAN BUYING IN NEARLY 90% OF MARKETS: REPORT
If a person is a first time renter who has no prior landlords to vouch for them, references from others in their life could be helpful.
This could be a coworker or even a friend who can speak to an applicant's character and qualifications to rent the property.
3. Conduct background checks and credit checks
When screening potential tenants, running background and credit checks is another step you'll want to take.
"Once that application is filled out, we do a full background check. So we do a credit check, criminal check, eviction history check, any collections that they might have from either previous landlords or companies, so we can get a better sense of who they are from a financial standpoint in terms of their payments," Gene told FOX Business.
Gene also noted that pay stubs and bank statements are also looked at as a means to verify income.
Credit checks help landlords get an understanding of an applicant's financial status before allowing them to move in. (iStock / iStock)
HOW TO IMPROVE YOUR CREDIT SCORE FAST: 10 PROVEN STRATEGIES
4. Consider a cosigner
Cosigners and guarantors can help those who maybe wouldn't qualify for a rental on their own have the ability to move into a space.
One reason why, as a landlord, you may ask someone to have a cosigner on their lease is if they are a younger applicant with no prior rental history. Someone with little to no credit history may also be required to have a cosigner on their lease.
"There are times, depending on the property, that we will ask for a guarantor or a cosigner. Somebody that would co-sign the lease to ensure that they will be paid if the tenant can't. Oftentimes, that's a parent or a grandparent," Gene said.
Cosigners provide security for landlords that rent will be paid in the event that the tenent themselves is unable to pay themselves. (iStock / iStock)
THESE FIVE CITIES HAVE THE HIGHEST RENT FOR ONE-BEDROOM APARTMENTS
A cosigner provides an extra layer of security for landlords, as there is someone else responsible for paying rent in the event that the tenant cannot.
5. Keep federal, state and local laws at the forefront
Throughout the screening process of potential tenants, it is vital to keep local, state and federal housing laws in mind.
"Landlords must always make sure that they are abiding by all federal, state and local laws, which includes fair housing laws," Jerron Kelley, partner at Kelley & Grant P.A. in Boca Raton, Florida, told FOX Business in a phone interview.
The Fair Housing Act passed in 1968 prohibits discrimination based on seven different factors, which are race, color, national origin, religion, sex, familial status and disability, according to the U.S. Department of Housing and Urban Development's (HUD) website.
Another policy that landlords should be aware of is called "disparate impact," which was issued by HUD in 2013.
Landlords must make sure they follow local, state and federal housing laws while they are screening potential tenants. (iStock / iStock)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"It used to be that you could deny someone if they had any type of criminal record at all, and you could actually put in your advertisem*nts, ‘no criminal records allowed,’" Kelley explained. Today, tenants can only be denied "if the criminal conviction was serious enough that it can be tied to the safety and security of the property or the neighbors," Kelley said.
"Landlords need to be very cognizant of the myriad, the variety, large variety and patchwork of different rules and regulations that regulate background screening, which come from the federal, state and local level, and they need to make sure they're abiding by those rules," said Kelley.
