I have a rental property that just became vacant, or actually unbeknownst to me has been vacant for two weeks while my tenant skipped town without paying rent. But anyway, the point of this post is not to rant about my rotten tenant, not about the fact that she not only didn't pay rent but that she left with a word putting me in a situation where I was losing rental income every day it sits vacant.
No, this post is about tenant selection criteria. I've decided to revisit my criteria to update it with new laws and make sure that it is as solid as possible to protect myself as best I can for the worst case scenario.
First off, I have to follow the criteria that the lawmakers in my home state of Oregon decided I should adopt. I guess I should thank them for making decisions for me, right? These include;
Eviction
It is now illegal to consider an eviction if it was 5 years ago or more.
Criminal Acts
Crimes that warrant rejection are limited to: sex offense, person crime, drug-related crimes, crimes involving financial fraud, and any other crime that would affect the health or safety of other tenants, the landlord, or property manager.
Tenant Screening
A landlord may charge an application fee but it is limited to the actual costs to obtain the tenant screening reports. In addition, the landlord must have a written tenant screening criteria, and the tenant must be provided with: A receipt, notice of the amount, copy of the landlord's screening criteria along with the typical process that is followed i.e. where data is pulled from. Of course the landlord is also required to abide by the provisions of the federal Fair Credit Reporting Act.
If a landlord does not comply with these rules, a penalty of $150 plus twice the amount of the application fee collected can be awarded to the tenant.
Disclosure
The Landlord must disclose the rent and deposit amount as well as whether or not the tenant is required to purchase renters insurance. As well as a list of other available properties with an estimated number of applicants.
With all of those decisions made for me, thank you very much lawmakers, I have just a few more criteria that I can think of.
Smoking
I have always had a no smoking policy at my rental properties because of the damage it does to the interior of the home. I don't own any multi-unit properties but if i did I would consider a no smoking policy outside the residence as well as inside to ensure the other residence can enjoy there apartment.
Pets
The properties I own that have all hard floors I generally allow pets with an additional deposit because I can charge a premium for the rent. I won't rent to someone who has a breed of dog that is not covered by my homeowners insurance such as the oh so popular pit bull because it is just to much of a liability.
Number of Occupants
I keep the number of occupants limited to two/bedroom. The more people you have in your home the more wear and tear the property receives.
Income/debt ratio
I like to keep the income to debt ratio below 30% and require that income is 2.5 X s there gross income.
Acceptable Credit Score Range
With the housing market crash and the downturn of the economy I have had to rethink my payment and collections history acceptability. I used to say a minimum score of 650 but since so many people have lost there homes to foreclosure or lost there jobs I've had to analyze the report more carefully and look at delinquent payments in the last 6 months.
References/Employer/Past landlord
If a prospective tenant gets a poor review by an employer or past landlord I won't rent to them. I have found that the majority of people don't want to talk poorly about someone else so if I get negative feedback that is a bad sign.
What else should I be considering in my tenant selection criteria? Do you do anything different for any of the criteria that I have listed above? I would love your feedback.
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Dulcey is a member of Rentec Direct who provides Property Management Software, tenant ach payment processing, tenant credit check, and criminal reports for property managers and landlords. The information in this post is just that, informational and should not be used as a substitute for legal consult or advice.
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