As we mentioned in part one of this series, categories like credit, rental, and employment history are important to think through when establishing your policies. We also offered an example list of criteria you could use, shown below. This list offers some guidelines that may seem inflexible, but your policy can be much more nuanced. Let’s consider some potential exceptions to this list as you start preparing your guidelines.
- Credit History
- Minimum credit score of 650
- Rental History
- No prior evictions
- No more than two late rental payments in the past two years
- Employment History
- Verifiable employment for the past two years
- Income Requirement
- Proof of gross income greater than or equal to 3x the rental rate
- Public Records
- No criminal convictions that could negatively affect your other tenants or property (e.g., theft, robbery, assault, arson, kidnapping, sexual offenses, and murder).
- No animals, except when medically necessary
- No smoking
- Limit of two people per bedroom, not including infants
Create Nuanced Policies
You can create exceptions to rules you’ve established in your policies as long as you apply those exceptions equally to each applicant. For example, if applicants have credit scores that fall in a range lower than your minimum threshold but they’ve consistently paid rent on time and have verifiable income, you may still want to rent to them. In cases like this, you could create an alternative requirement, like higher deposits.
Another special area of consideration is criminal behavior. It may be that applicants committed criminal offenses when they were young, and they’ve had a clean record ever since. If you’d like to be lenient in these situations, outline the exception in your policies. Also, keep in mind that some states are passing laws that don’t allow landlords to deny rental applications solely on criminal convictions. Be sure to research this.
One important thing to note is that while you can ask applicants if they’ve ever been convicted of a crime, you can’t ask them if they’ve ever been arrested. Whether you discuss this topic with applicants or not, you’ll find out if they’ve ever been convicted of a crime when you conduct a background check, so having this conversation isn’t necessary.
Consider Unique Circumstances
Unique circumstances often come up during the application process. For instance, applicants new to the area may be starting a new job and won’t have two consecutive pay stubs to offer you for employment and income verification, so ask for their offer letters instead. In the case of self-employed applicants, use their tax statements from the past two years as verification. If applicants’ annual salaries don’t meet your income criteria, you can add other forms of what you deem “eligible income”—such as savings and checking account balances, balances from investment statements, and other similar financial statements—to their total income. For students, they likely won’t have much money coming in, but you could count their student loans as income. You’ve probably encountered or can think of other unique situations. Planning for each of these circumstances will help you round out your policies.
Prepare Policies for Each Property
If you own units in different locations, you may want to create different screening policies for each property. Be sure your rental criteria clearly states which property your screening policies belong to and who the contact is for that property. If you are the contact for all your properties, keep your policies straight by having easily accessible copies readily available. These quick references will ensure you describe the right details as you talk to prospective tenants.
Document and Explain Your Guidelines
Once you’ve decided on your policies, describe everything in a written document, one for each property. Detail all the exceptions you’ve thought through as clearly as possible. Be sure to include a statement that explains you follow fair housing laws. Once you finalize your document, pass it by a lawyer to be sure it follows all the necessary tenant-landlord laws. Always keeping up-to-date, well written policies, as well as update logs, will help you consistently use the same standards for every applicant and will explain any policy changes you make over time.
Many landlords like to reference a copy of their policies as they walk interested applicants through the application criteria. This guarantees they don’t miss important points and they cover the same points for each prospective tenant. By talking with applicants about your rental requirements before they apply, you can help them discover on their own if they should apply. With qualified applicants applying to live in your units, you’ll be able to approve the majority of applications you process, spending less time processing applications you ultimately have to deny.
Also, by explaining the criteria to applicants ahead of time and by having it posted on your website through a service like TenantCloud, you can protect yourself. If HUD called you about a discrimination claim, you could send them a link to your policies, describe how you discussed these policies with the potential tenant, and explain that they were preestablished.
Conduct Background Checks as Described in Your Policy
After developing your screening policies, be sure to follow them by setting a process in place. With lots of other tasks on your plate and people competing for your time and attention, it’s easy to get pulled away to work on something else. A checklist will help you keep track of where you were in processing each application. This allows you to break up this larger task of processing an application into smaller, more manageable steps. If you keep hard copy files, staple this paper checklist on the inside cover to find it easily. If you use an online portal, like TenantCloud, to guide the application process, it’ll easily keep track of where you are with each application.
If you use a company to run your background checks, like TenantCloud, this will make the process much easier. Once your vendor has completed the background research for you, you’ll receive an electronic report of the results on your portal, which you can save or print off. You’ll still need to call old landlords and current and past employers, but the report will cover many other details. If after completing the background check, you find you have to deny an applicant, be sure to let them know if something in the report was the reason for a negative outcome.
If you have any additional thoughts on this post, leave a comment below. We’d love to hear your comments!