Properly Vetting Prospective Tenants

Hi There,

Please take the time to read this short but VERY IMPORTANT step in owning or managing rental properties! Since the folks you rent to will be living in your home and maintaining it you need to be selective and have procedures in place to properly vet applicants.  There are many things I have learned that have proven to limit risk and increase profit and I'm going to share that with you today.

You will want to be well versed in HUD protected classes, landlord tenant law, and your state laws regarding rental properties.  At no time should you discriminate against someone (or multiple people) for familial status, religion, disability, race, color, national origin, or gender.  Your state may also have additional protected classes or additional laws regarding habitability. 

I have implemented a list of minimum qualifications that we require prospective tenants to review prior to even showing them a property.  We want them to be aware of what we are looking for and to assure them our standards are in line with landlord tenant law and protected classes.  We have received good feedback from our tenants.  They like knowing what the landlord is looking for before they waste their time looking at properties they can't qualify for  This also gives you a template to apply to all applicants equally and keep you inline with HUD regulations. 

Remember, the goal is to have a template that is equally applied to everyone!  .  Your minimum qualifications should address income, rental qualifications, criminal information, job requirements, and credit criteria at minimum.  You need to have procedures in place to handle folks who do not meet your minimum qualifications. If you are willing to accept a co signer, this should be addressed on the minimum qualifications.  It's imperative to supply an individual with an adverse action letter if their application is not approved based on credit.  This is a newly implemented law and you don't want the fines or headaches associated with not doing this step.

Make sure all prospective tenants are provided with the same application.  You will need their social security number, name, current and past addresses, employer information, number of occupants, pets, etc.  They will need to sign an authorization allowing you to process the information and to contact the people or entities needed to acquire the desired information. 

I have run into many licensed real estate professionals who are unaware of many of the laws affecting rental properties.  If you are a licensed real estate broker you will be held to a higher standard than the general public.  You ABSOLUTELY MUST get educated about the laws regarding your personal rental properties or properties you are managing for your investors.  I suggest taking classes or joining NARPM.  It's a relatively small cost and it's worth it!!

I will probably post more detailed instructions on our processes at our Property Management How To Blog.

Sincerely,

Daniel Muldoon
Muldoon Associates, Inc.
www.muldoonassociates.com