The tenant-screening process may seem shrouded in mystery. The truth, however, is that all those application forms and probing questions are intended to help a landlord or property manager answer three basic questions:
- Do you have sufficient income and/or assets to pay rent?
- Have you proven your ability and desire to pay rent and other bills in the past?
- Do you have a track record as a good tenant?
That’s right, three basic questions — but I’d be remiss if I didn’t offer a few details:
Can you pay the rent?
When you purchase a home, the bank will let your housing payment gravitate toward a maximum of 40 percent of your gross income, so a 40 percent DTI – debt to income ratio. If you earned $10,000 per month, your maximum housing payment could be $4,000.
When it comes to apartment and home rentals, landlords typically prefer that a tenant’s RTI (rent to income) ratio not exceed 40 percent. Of course there are always exceptions. If, for example, you are unemployed but you have $400,000 in the bank, a landlord would probably happily accept you as a tenant.
A landlord may also want to know how long you’ve worked at your current job and, perhaps, your salary history. A decade with the same large, nationally known company indicates your income is probably more stable than if you just started a new job two months ago. On the other hand, if your new job is in the same professional field and you switched companies to earn a higher salary, the landlord may consider your new position a mitigating factor in your favor. Either way, you should be prepared to provide pay stubs and work references that confirm the information you provided on your application.
Have you paid your bills in the past?
Some people make plenty of money but are horrible at paying bills on time. Landlords also have bills to pay. Don’t be surprised, then, when a property manager or landlord asks for your permission to pull your credit report. Late payments, charged-off accounts, bankruptcy or evictions will serve as a warning that paying your rent likely wouldn’t be a priority for you.
Of course, not everything about a credit report is black and white. If you had a foreclosure, short sale, bankruptcy or medical bills that clobbered your credit profile, a rental agency or landlord may be willing to work with you if you can prove you have now steady employment and are back on track paying your bills. Be truthful on your rental application; explain the specifics of your situation. Your honesty indicates a willingness to assume responsibility for your personal finances – which is precisely what a landlord seeks in a tenant.
Have you been a good tenant in the past?
There’s a chance your past landlord will get a call to check up on late payments, how long you lived there and how well you kept their property. Your case is not going to be helped if your previous landlord says he had to hunt you down every month to get the rent.
Again, honesty is the best policy. If you had to break a lease, explain how you handled the situation and did everything you could to mitigate your landlord’s losses, like helping them find a new tenant or leaving the property in great condition. Remember: Showing that you acted responsibly is always in your best interest.
There are other facts your landlord will want to know: Do you have a criminal history? Do you work on cars in the driveway? Do you run a business out of the home? Are you in a rock band that plans to practice at the property? How many people will be living with you at the property? Do you have any pets – especially dogs that may be considered aggressive breeds and thus excluded from the landlord’s insurance policy?
That’s it. There’s no veil of secrecy, no deep, dark mystery. In fact, ensuring you’re open and honest is the best way to start any renter-landlord relationship. Establishing — and maintaining — a good working relationship with your landlord is much better than waiting until you’re in the midst of an unpleasant situation to start speaking the truth.
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- Your Credit Report is an Important Asset
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Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a guest blogger on Zillow.com, the author of several books including “Real Estate Ownership, Investment and Due Diligence 101”, and loves kicking the tires of a good piece of dirt! See more at ProfessorBaron.com.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.