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Creating Lease Applications

Lease Applications

Lease Applications

No doubt, if you ask landlords to name a key step in their rental process, one of the top answers would be screening tenants.  If you are using a credit report service, it is easy enough to run a report and get a credit score. But, is that all there is to screening?  What does it mean when your report comes back with a 680 credit score?

Credit scores are just one part of the screening process that attempts to predict the risk that you will have a late payment from that applicant.  While timely payments are certainly an important part of the mix, it’s not the only thing that matters.  You should also verify their past rental experiences.

  • Do they complete their lease obligations or do they break leases, leaving landlords to replace them much sooner than expected?
  • Worse yet, were they required to leave (evicted) for non-payment or for breaking other agreements within the lease (objectionable tenancy)?
  • If they don’t want you to know something, is this something they will likely volunteer on the application without being asked?  Probably not.  It is up to you to ask it on your application and then speak to someone who would know from their previous addresses.
  • Do they get along with neighbors?
  • Did they have any pets?  If they did, are they bringing them to your property?
  • Do you even allow pets?  If so, do you charge extra for the rent or deposit? (Excluding pets allowed in accordance with Fair Housing laws.)

As a landlord, spending a little time getting the right renter can save you a lot of time trying to get the wrong one out!

You should be looking for someone who:

  1. Pays the rent on time
  2. Respects your property
  3. Respects the neighbors

Set your rental criteria to meet these standards and verify the information to be sure you are on the right track for a successful tenancy.

In addition to being sure the applicant has the legal right to be in the U.S. for the duration of the rental agreement, make sure that they have the ability to read, understand and agree to the terms within the agreement (which may be done with an interpreter if necessary).  There are some standards that you may want to incorporate in a written format to be displayed at your rental office or as a handy reference when meeting with rental candidates.  Be sure to display Fair Housing compliance statements as well.

History of timely payments.   You want someone who can prove they have a habit of paying bills on time.  If a credit report does not include a score but shows there is a history with no late payments or judgments for accounts that are closely related to housing or living expenses (i.e., utilities, cell phones), this is a good sign.  Proof of timely payments could be verified directly with the account if a credit report is not an option.  If rental managers are unable to verify more than the rental dates, then ask to see cancelled checks where the date cleared is within a few days of the rental due date.

Verifiable income / employment.  You will want candidates to have a history of employment with gross income equal to 3 to 4 times the amount of rent or liquid assets that will be able to cover the annual amount they will owe.  Require proof of the income – not just a statement that it is so on the application.

Rental experience.  Verify with landlords. Did they fulfill their lease terms?  Did they leave any damages or have problems with any neighbors?  You may find it is easier to get this kind of information from individual owners as opposed to apartment managers.  Try to appeal to them by asking as a professional courtesy, “Could you tell me would you rent to them again?”  If you can’t get a verbal or written recommendation, you may want to consider this as a reason to deny an application if you’re getting other red flags such as missing information.

Occupancy Standards.  Check with your local zoning code.  You may want to limit occupancy to recommended standards of two people per bedroom.  A room that is a den (or a closet) by your local code would not count as a means to add two more people.  You may want to consider the exception of an infant/child up to 16-months-old for a one-bedroom.  Don’t forget that additional people mean additional wear and more water/sewer expenses which you may be responsible for if they are not metered and billed directly to your tenant.

Pets.  Will you be allowing pets?  Studies show you may be severely limiting the number of rental candidates if you do not allow pets.  The key is to select from responsible pet owners who understand that having a pet is a privilege that comes with additional responsibilities.

The Humane Society offers some helpful resources for managing pet-friendly properties:

Give your rental criteria some thought. After you have decided what standards you will use, apply them across the board to avoid issues with Fair Housing.  Be fair, but firm in your dealings and teach those who act as agents on your behalf to do the same. You can read previous blogs on Fair Housing for more information.

Jim Aviza
Rich Dad Education Elite Training Property Management Course Instructor

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2 responses to “Creating Lease Applications

  1. Luis Paredes September 26, 2013 at 1:17 pm

    Hi I want to ask you I want to make an appointment for the next seminar for stock

    On Tuesday, September 10, 2013, Rich Dad Education – Real Estate Blog wrote: > Rich Dad Education posted: ” Lease Applications No doubt, if you ask landlords to name a key step in their rental process, one of the top answers would be screening tenants. If you are using a credit report service, it is easy enough to run a report and get a credit score. But, i” >

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