Finding a new tenant can often seem like finding a spouse. There is love at first sight, dating, marriage proposal followed by a lasting commitment. In the rental world love at first sight may not be as bona fide, but just as time consuming before you tie the knot. Before you end up with Mr. Right-now, you may want to think of some basic strategies on finding Mr. Right. This can come from something as easy as requiring an application fee.
The rental world doesn’t have singles bars where tenant meets landlord, but online dating seems to be alive and well. With sites for searching rentals, online applications and messaging - an entire appointment can be set up online. With the digital age Landlords are being offered access to see a tenant's background screening report in exchange for not requiring an application fee. This does allow for a landlord to search through the tenants traits and compatibility measures, but gives you no insight into how the applicant feels about your rental.
Landlords who have often used the screening report as a reason to charge for an application fee are accepting of this new phenomenon, but the larger more sophisticated rental companies aren’t falling for it. They know that if you want it, then you better put a ring on it. Allowing potential renters to submit applications without an application fee, means flirting around with other landlords as well. This equals more work for landlords as it increases the potential for chasing leads that aren’t serious. The cost of being left at the altar after weeks of teasing can be more substantial than one might think.
While you wait a few weeks for the applicant to slowly respond to emails and phones calls, your rental has sat vacant. If this goes on for a month you may have to lower the rent, as other prospective applicants assume something is wrong with your rental. The worst part is the stress of being single for life sets in and you are willing to take the next person to walk in the door. Vacant rentals lead to distressed decision making as there is no cash flow coming in, but renting to the wrong tenant can cost.
What is the potential cost of not charging an application fee:
- At least one-month’s rent
- Lower rent over the next 12 month lease cycle
- Risk of a bad tenant, which costs you rent and damages
Based on the average rent and make-ready expense in the U.S. this can cost you as much as $1,735. Setting up a process to only be considering committed and interested tenants can save you time and potential losses.
Who is Really committed
Application fees vary by region, with a U.S. average of $35. Landlords have some great products out there to choose from in regards to tenant background checks. At the high end, ($34.95) a full report on a tenant, which includes rental reference history or on the less expensive side $19, which provides the basic eviction history and criminal. Background checks don’t allow room for landlords to pocket much, if any extra money. However, the tenant has expressed real interest. An applicant looking at five homes that all require an application fee will quickly narrow the list to one or two of their favorites to limit costs. Limiting this player mentality towards rentals helps in finding the more serious tenants on which to focus.
Larger property managers have also introduced the “holding deposit”, which can be applied to the the security deposit or first month's rent. This is a great idea if you have many rentals, but if you have a few single family homes then you aren’t getting paid while it sits empty. Wedding bells won’t ring until you can narrow out those applicants that meet your criteria of which move-in date should be a factor. An application fee helps you know which prospects have thought through the requirements and are ready to move forward.
Related: Tenant Screening Background Check & Credit Checks: Why Do You Need It?
Vow to look at all tenants with an open mind
Selecting a mate always starts with some pre-decided expectations and finding a tenant is no different. Make that list and stick to it. Don’t base selection on race, religion, sexual orientation, married, single, families or any other factor that limits you from finding the right tenant. Boldly list your requirements so potential applicants can know exactly for what you are looking. Don’t over charge on the application fee either. Charging too much for an application fee will limit prospects from applying as well. Applicants know what all the other landlords are charging for application fees, so when they come across one that is much higher than the others they will assume the rent is also overpriced. It is also worth noting that most states have restrictions on overcharging for an application fee, so it is best to look in advance.
Related: Best Property Management Software Digital Solutions: How To Improve Application Process
Until the end of the lease do us part
May you take an applicant to be your lawfully contracted tenant to have and to rent. Reviewing applicants should be limited to interested prospective tenants only or landlords are wasting their time. Chasing a lead that doesn’t bring you a lease and holds up the property from other applicants should be avoided. To find the interested tenants a landlord must require an application fee.
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