A bad tenant can lead to thousands of dollars of losses via unpaid rents, legal fees and property damages. We’re one of
the few property managers that require W-2’s and a bank statement and we go way beyond the traditional, “income must =
3x rent” qualifier.
Below is more information about what our Applications Department does to screen applicants and find the best tenants
possible for your property.
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- Required Info
We require the following from each applicant over the age of 18, that is not a dependent of another
applicant (as evidenced on a tax return):- Copy of acceptable state picture ID
- Recent YTD paystub
- Recent W-2
- Recent Bank Statement, all pages, no info blacked out
- Recent tax return if self-employed
Applicants are often slow about turning this information in, asking us why we need it and then taking
several days to submit. Then they complain that our process takes too long! - Credit History
Many companies use credit summaries, but we find these rarely tell the whole credit story. So, we obtain
a full credit report and review collections, chargeoffs, age of credit accounts, active accounts, etc.
to build an overall credit evaluation.
- Required Info
| FICO Score | Pct of Population | Default Probability |
|---|---|---|
| 800 or more | 13.00% | 1.00% |
| 750-799 | 27.00% | 1.00% |
| 700-749 | 18.00% | 4.40% |
| 650-699 | 15.00% | 8.90% |
| 600-649 | 12.00% | 15.80% |
| 550-599 | 8.00% | 22.50% |
| 500-549 | 5.00% | 28.40% |
| Less than 499 | 2.00% | 41.00% |
- Public Records
We also obtain data from national databases about evictions, convictions and sex-offender histories. These all
require applicants to submit an acceptable Letter of Explanation addressing each specific issue and occurrence. - Rental History
Because a current landlord may say anything to get rid of a bad tenant out of desperation, we also require
information for the previous landlord of all applicants. Verifying rental history often takes a long time to
complete due to applicants not giving us correct landlord contact information, landlords not returning our calls
or refusing to give us any details.We also deal with applicants trying to have family or friends pose as their
landlords. To address this, we verify the property owner per government records and use this information to vet
imposters.Anything that seems suspicious will lead to us requesting an acceptable Letter of Explanation to
address. - Analyze Income
Many landlords require a month of paystubs from applicants and just use these to calculate a monthly qualifying
income. In our opinion, this doesn’t result in a viable income amount or analyze income stability. We use a YTD
paystub and last year’s W-2(s) to calculate income several different ways:- Hourly or salary income calculated to a monthly amount
- YTD income divided by number of YTD months
- YTD + W-2(s) income divided by the corresponding number of months
If these numbers vary too much, then we investigate and require an acceptable Letter of Explanation.
- Employment Stability
Unless an applicant has exceptional credit, we strive to determine their stability of employment to make sure
they’ll always be able to pay the rent on time. So, we require a detailed employment history for the last two
years and verify as much of it as reasonably possible. - Assets
We are one of the few management companies that requires a bank statement as part of our application process. We
think it’s important as it allows us to check for Non-Sufficient Funds (NSF) issues and to determine if an
applicant is living paycheck-to-paycheck. Bouncing payments or only being an illness or accident away from not
being able to pay the rent, are issues considered by our underwriting. - Letter Of Explanation
Any time there are credit issues or we discover an inconsistency, we require a written letter of
explanation (LOX). Many applicants just want to tell us their excuses over the phone, but if they won’t take the
time to put it in writing, we find they rarely end up being good tenants. - Underwriting
Traditionally, landlords have only looked at the income of applicants and approved those having income equal to
three times the property rent. This crude method ignores all the other debt payments tenants have. Given that
many tenants will make their car payment before their rent payment, we’ve copied the mortgage industry’s method
of debt-to-income (DTI) ratios. We calculate rent plus all debt payments as a percentage of gross monthly
income.
Our underwriters strive to analyze and balance all the information above to determine the statistical likelihood
of a tenant paying their rent on time. - Approval
Once an applicant is approved, we require a nonrefundable Holding Fee to make sure they are serious and don’t
change their minds. We actually keep marketing your property and accepting back up applicants until your
property is actually occupied.