Perfect 10 — Or Problem Tenant? Part II: The Money

2013-07-27

Perfect 10 — Or Problem Tenant? Part II: The Money

Otherwise excellent people sometimes have amazing difficulties dealing with money.

In Part I, we pointed out the most basic tenant-screening questions that we hope landlords everywhere are using to keep the worst of the riff-raff out of their properties — but we stopped short of talking about financial questions, because they’re a bit more complex and require more investigation and judgment than others. Let’s get into that now.

How clean is their credit history? “Clean” means they have a decent credit score, but it means more than that as well. Look in the depths of their report for previous addresses they didn’t report to you (call and ask their landlords about them), repossessed vehicles and judgments levied against them (indicates an inability to handle money).

How much of their income can be documented — and is it at least three times the rent? There are definitely a lot of people out there who have to go to surprising lengths to document their income. That’s not a bad thing in and of itself, but it can be a yellow flag – or a red one – if they insist there’s just no way to document it at all. If they show little income on tax returns, but claim to make more (or have no tax returns), you may be able to use the average of six months’ of bank deposits as income.

In the end, if they have acceptable credit, decent assets in the bank, and there are no other concerns, then letting them go without 100% income documentation may be okay – just be sure you understand the risk you’re taking.

Do they want to pay their rent in cash? This may be a personal bias, but at Royal Rose Properties, we never take rent in cash. It opens us up to too many potential liabilities. It may be counterfeit, it may be stolen money, it may be drug money — you just never know. Literally any other method of accepting money is safer for you than cash. If they’re not capable of taking money from their cash-only job and getting a money order, you probably don’t want them renting from you in the first place.

When it comes to financials, you’re obviously going to have to vary your standards based on where your rental property is located, the condition it’s in and what is common for that area.

Think we’re done yet? Not quite — more next week on some sneaky ways of learning more about potential tenants that you’re not quite sure about.

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