As a landlord or a property manager, you want to avoid bad tenants and pick responsible, reliable individuals who will take care of the property and pay rent on time. To achieve this, a thorough tenant screening process is essential.
While some tenant red flags during tenant screening are obvious, others may not be so apparent. In this comprehensive guide, we will explore the top 10 warning signs to look out for when evaluating tenant applications, helping you avoid potential headaches down the line.
Key Takeaways
- Conducting a detailed tenant screening process helps landlords avoid leasing to problematic tenants, ensuring a steady income and well-maintained property.
- Identifying red flags such as inconsistent employment, incomplete applications, or poor credit history early in the application process can prevent future issues like late payments or lease violations.
- Always verify all information provided by applicants through reliable sources. Following up on any inconsistencies or missing details can save landlords from significant headaches and financial losses down the line.
1. Incomplete or Incorrect Information
Applicants may leave sections blank or provide vague answers for several reasons. For instance, some might leave out their previous rental history or fail to provide contact information for their current landlord. This could be an attempt to hide a history of late payments.
In another example, an applicant may omit details about their employment or provide a vague job description without contact information, possibly to avoid revealing unstable employment or insufficient income. Occasionally, an applicant may not understand what’s required or genuinely lacks the information.
To handle incomplete or incorrect information, request clarification from the applicant and verify all critical details through multiple sources. Ensure your policies are clear, stating that missing or false information could lead to denial. This approach helps protect your property and ensures a reliable tenancy.
2. Insufficient Income
The current best practice for evaluating an applicant’s income is that the prospective tenant should have a wage verification letter showing a monthly income of three times the monthly rent. If potential renters meet this requirement, you can usually assume the rent is affordable to that applicant.
As judged by the above standard, tenants who do not have sufficient income likely cannot pay the rent along with other bills no matter how much they insist they can cut corners.
3. Poor Credit Score
A credit score of less than 600, especially combined with bankruptcies or multiple collection notices, can indicate a history of financial irresponsibility and a potential inability to pay bills on time. It can also suggest that the potential tenant has chronic cash flow problems.
In either case, a poor credit report with low scores is probably not the kind of person you want to depend on to pay rent consistently.
► READ MORE: How to Run a Credit Check on a Tenant
4. Employment Instability
A history of frequent job changes or gaps in employment may indicate financial instability and pose a risk to consistent rent payments. For example, if an applicant has switched jobs multiple times within a short period, it could suggest they struggle to maintain steady employment.
This pattern might reflect underlying issues such as job performance problems, difficulty adapting to work environments, or a lack of commitment. Such instability may lead to irregular income, making it challenging for the tenant to meet their rental obligations on time.
In addition, tenants with a history of job hopping might also relocate frequently, increasing the likelihood of breaking a lease early. This scenario can create vacancies and additional costs for landlords, who must find new tenants and potentially face periods without rental income.
In any case, it’s imperative to verify employment, understand the reasons behind these employment patterns, and evaluate the applicant’s overall capability to fulfill rental commitments.
5. Prior Evictions
According to a recent study on evicted population in the US, 2.7 million households receive an eviction filing every year — and your potential tenant might be one of them.
Evictions indicate a failure to meet lease obligations and a lack of respect for rental agreements. While there may be legitimate reasons for one eviction, multiple evictions demonstrate a pattern of non-compliance and can lead to future problems. Avoid renting to individuals with a history of evictions to protect your investment.
6. Criminal History
Every one in three adults has a criminal record in the U.S. While not all criminal infractions carry the same weight, certain convictions, such as domestic violence or multiple DUIs, may indicate aggression, poor decision-making, or substance abuse problems.
Consider the nature of the offense and its potential impact on the safety and well-being of your rental community.
Tip
Keep in mind that some cities and states restrict or prohibit criminal background checks, so it is important to know your local laws and regulations.
7. Unreliable References
References from previous landlords can provide valuable information about an applicant’s rental history. Be cautious if an applicant provides glowing references that seem too good to be true, as they may have asked friends or relatives to pose as landlords.
Always follow up with previous landlords to verify the information provided and gain a more accurate understanding of the applicant’s rental behavior.
What should you ask the previous landlord?
When seeking a landlord reference, focus on the applicant’s rental behavior. Ask about any late payments, early lease terminations, and how much of the security deposit was refunded. Red flags include forfeiting the entire security deposit and consistent late payments.
8. Multiple Short-Term Rentals
There could be legitimate reasons for moving several times in a year, but this is something you should investigate. Consistent short-term stays may indicate instability in a tenant’s living situation or a lack of commitment to maintaining a long-term residence. This can be concerning for landlords seeking reliable, long-term occupants.
In addition, frequent moves could be a sign of unresolved conflicts (e.g., late payments; terminating a lease early) with previous landlords or neighbors, making the applicant potentially problematic for community dynamics.
9. Prior Lease Breaches
Tenants may have had cause to break a lease once. However, if they have a habit of doing so, you should be wary of renting to them. Prior lease breaches, whether it be delaying rent payments or having a forbidden pet, indicate a tenant’s history of not adhering to contractual obligations, suggesting potential future non-compliance.
Whether it’s unpaid rent, property damage, or violating community rules, these infractions can result in financial losses or disruptions for the landlord. Moreover, a tenant with a record of breaches might pose challenges in maintaining a harmonious living environment for other residents.
10. Questionable Application Details
Discrepancies and missing or inaccurate information on a rental application are concerning indicators. They can suggest a lack of attention, an attempt to conceal facts, or even dishonesty. For instance, claiming no prior evictions but having such a record discovered during screening raises red flags.
It’s vital to scrutinize any inconsistencies between the application and tenant screening reports (and don’t forget to obtain permission before you do a background check to get the reports). Make sure you verify all information to obtain an accurate understanding of the applicant’s background.
How to Spot a Fake Rental Application
- Financial Instability: Unverifiable income, missing or cut-off pages in credit reports.
- Lack of Stability: Multiple residences over a short time period, no contact info for current or previous landlords.
- Suspicious or Fraudulent Tenant Behavior: Incomplete applications, rushing the application process, immediate move-in requests.
- Inconsistencies: Information that doesn’t match screening reports.
Less Obvious Red Flags to Watch Out For
While the above red flags are fairly common, there are also less obvious signs that an applicant might not be the best fit for your rental property. Here are a few to keep an eye out for:
- Too Eager to Move In: Approach an applicant’s urgency to move in quickly with caution. While legitimate reasons may exist, such as a sudden job relocation, it’s crucial to investigate the situation further. Determine if there are any underlying issues, such as unpaid rent or problems with their current landlord.
- Unexplained Gaps in Rental History: If there are significant gaps in an applicant’s rental history, it’s important to ask for an explanation. A legitimate reason might be a long-term travel or a job relocation. However, unexplained gaps could be a red flag.
- Applicant Seems High Maintenance: If an applicant seems overly demanding or difficult to deal with, it’s a good sign that they might be high maintenance as a tenant.
- Refusal to Sign Necessary Documents: Applicants who refuse to sign necessary documents, such as a rental application or lease agreement, may be trying to avoid legal obligations.
- Frequent Address Changes: Frequent address changes, especially over a short period, could indicate a pattern of instability or financial problems.
The Importance of Careful Tenant Application Evaluation
Identifying red flags early in the application process can help prevent leasing to problematic tenants, saving time, money, and stress. Here are a few real-life examples that highlight the importance of careful tenant application evaluation:
Spotting Inconsistent Employment History:
A landlord received an application from a potential tenant who seemed perfect on paper: excellent credit score, high income, and a friendly demeanor. However, upon closer inspection of the employment history section, the landlord noticed frequent job changes with no clear explanation.
Once the landlord called the applicant’s previous employers, it turned out they had been fired from several jobs for misconduct. The landlord avoided renting to someone who could have been unreliable and potentially problematic.
Identifying Financial Red Flags:
In another instance, a landlord received an application from a potential tenant who had a solid income but carried a significant amount of debt. While the tenant had a stable job, their debt-to-income ratio was concerning. The landlord decided to dig deeper by reviewing the tenant’s bank statements, which revealed a pattern of late payments and financial mismanagement.
By paying attention to these issues, the landlord avoided a situation where the tenant might struggle to make timely rent payments due to overwhelming debt obligations.
Ignoring Incomplete Information:
A landlord ignored an incomplete application because the applicant seemed trustworthy and had a good explanation for the missing information. The applicant had omitted details about previous residences and provided minimal employment history. The landlord, in a rush to fill the vacancy, approved the tenant without asking for additional details.
Shortly after moving in, the tenant began causing disturbances, skipped several rent payments, and eventually had to be evicted. Had the landlord taken the time to request the missing information and conduct a thorough background check, these issues could have been avoided.
In Summary
Investing time and effort in evaluating tenant applications will pay off in the long run. By choosing tenants who meet your criteria and demonstrate responsible behavior, you can protect your rental income and enjoy the benefits of a thriving rental property business. Remember to comply with fair housing laws and treat all applicants equally throughout the screening process.
