Property Management Blog

Top 5 ways to properly qualify tenant

Chris Knight - Wednesday, May 24, 2023

Top 5 ways to properly qualify tenant 

Hey, guys. Oh, sorry. Looks like I forgot to take off my sunglasses. We're finally getting into the spring and summer season here in sunny Indiana. I love wearing my sunglasses, plus I look good in them. All right, guys, here we go. My name is Chris Knight, business development manager with Red Door Property Management. And we are about to get into how you properly qualify a tenant for your rental property. So with Red Door, what I explained to our new owners is essential, in a nutshell, it is a five-step process. And just to highlight that process, it is we check the National Sex Offender checklist, do a background check, credit check, check their two previous residences, and check their current employment verifications. So what that essentially means is we want to verify that they do have enough income to qualify for the property. So I'm going to dive into just highlighting each individual section.  

Number one 

Now, starting with number one, checking the national sex offender checklist. Seems like a no brainer, right? But you absolutely want to do this. I mean, there are state laws that require so much distance for a sex offender to live. Plus you might want to consider not putting someone that you might consider dangerous into your rental property. So that is going to be the first area that Red Door is going to check. I would suggest being on your first checklist as well. 

Number two 

Now, number two, employment verification. We are going to obtain at least 30 days worth of pay stubs. And what we want to verify here is that their income level meets at least three times the monthly rent. So this is kind of a national standard just to really prove that they do have the funds necessary to pay the monthly rent. Also important in this area is checking their debt to income ratios.We really don't want anything above 25% debt to income. So that's an area that you're going to want to compare their expenses versus their current income levels.

Number three

Number three is we're going to check out their driver's license. Now this is something Red Door is a little bit more secure on, is the word I would use because we do require photos of their driver's license as well as their Social Security cards. And the reason for that is scammers have become extremely prevalent and very, very good at what they do. What we're going to do, and what we see very often, in fact, is Scammers will upload a photo of their driver's license and very well, they will manipulate the data in the driver's license information section.So they will change the name to properly fit maybe the credit report that we're going to be pulling, or change the date of birth, whatever information they need to manipulate or change on that photo to make it look as realistic as possible. And we've had to become somewhat of forensic scientists to really analyze those photos and this would go with Social Security numbers as well. When we require a photo of that Social Security Card, they will oftentimes manipulate those numbers to meet, well, the credit report that we are pulling or that they've stated on their credit application. So you have to be very diligent when looking at that. Does it look like it's been something that's been manipulated by a computer or does it look like an actual security card and driver's license as you would expect it to look in a photograph? 

Number four

Number four is going to be the rental verification. So this is very simply just going to be checking with their previous landlords and checking to determine what that experience with them has been like. Would they rent to them again, did they have any late payments with them over a twelve month period? This information is extremely important and extremely telling on what you might expect going into the twelve months lease term that you're about to enter in with them. So checking with their previous landlord is extremely important. If you can have a form ready to go, send it over to their previous landlord for them to very simply fill out and send back to you. That's really the best way to do it so that you have something to include in your documents that you're keeping on hand, if not a phone call, which I really wouldn't advise as you never know who is really on the other side of that phone call, which really same thing, maybe go with a document that you're emailing over. But still there is a security measure in place there for just having that document to send over and have them fill out and actually sign on the dotted line that they are verifying that the information that they're providing is accurate.

Number five

And then lastly, and I'm going to cover two things in this last part at once, so this is going to be number five is going to be the pets and security deposits. So security deposits I would absolutely suggest securing no less than one month rent as a damage deposit and that's for no additional pets or anything like that. Now you can have a risk meter here. So, for example, if someone doesn't really have that credit score that you're looking for when you pull that credit report, which here at Red Door, we really prefer nothing under a 620. But if they do happen to go below that, all other meters or measurements during their qualification process have been outstanding. We might compromise on that credit report credit score, rather, and negotiate a larger security deposit to kind of be a risk deterrence for them for breaking the lease or not following the lease by the terms that are established there on the front end. So by that I mean maybe one and a half times the rent as a security deposit. If any of those previously mentioned measurements fall just slightly short but you feel like they might be a good fit for your property. So that is what I would suggest for the security deposit. Now, if they have a pet, I Would absolutely require an additional pet deposit.Right? But when screening, when they have a pet, this is extremely important. Pets can be extremely damaging to a property. What we at Red Door will require is that we require photos of that animal to be uploaded so that we can verify that the breed that they reported on the rental application actually meets what we would expect to see in a photo of the animal. Also, we require vaccination records to be uploaded. Not only does this help keep your insurance rates low by obtaining all this additional information, it also lets you know that you're very serious with the tenants when they enter into this contract that these measures are going to be watched. And they are important to you so that they are going to properly maintain the condition of the property when they have an animal on the premises.

So that is what I would suggest. The rules that you follow when you're qualifying your tenant for your next property, check in with Red Door for additional information. Look through our YouTube channel. Be sure to like and subscribe. This is a lot of valuable information. And if you haven't already looked at our market reports for the Indianapolis Metro area, be sure to check into that extremely valuable information. Chris Knight, Red Door Property Management. We'll talk to you in the next video.