The Centers for Disease Control and Prevention’s (CDC) eviction moratorium was struck down by the Supreme Court a few weeks ago, and some landlords now may be looking for new tenants to fill the apartment vacancies left in its wake.
“Those landlords that have been burned right now by COVID, they really have to make sure they find the right [tenant] this time around because they have a lot of making up to do,” Michele Harrington, COO of First Team Real Estate told Inman.
But after the rocky year-and-a-half landlords and property managers have faced, how can they be sure to find the right renter who will be reliable? Here are a few things landlords can do when vetting their next round of potential tenants.
Run a thorough credit check
Running a credit check can reveal a lot about how reliable a tenant will ultimately be in their rent payments. Most reports should provide information on number of late payments, number of credit cards canceled as a result of nonpayment and what an individual’s debt-to-income ratio is.
“That’s important these days,” Adjina Dekidjiev, a broker at Warburbg Realty, told Inman. “Perhaps more so than in the past.”
Look for a history of stable employment
“When we get tenants applying [for a unit] that have been on the job for a long time, or maybe not on this job for a long time but have a really good work history, then that makes us really happy,” Harrington said.
Harrington added, however, that the pandemic threw the notion of job stability out the window for many people who otherwise might have had a record of steady employment. Individuals who work in the service or hospitality sectors, for instance, are likely to have a gap in employment starting around April 2020, and landlords should keep in mind that this will be a common occurrence for those applicants.
Likewise, property owners need to keep in mind that potential tenants whose source of income is Section 8 or a similar rental assistance program cannot be discriminated against in accordance with fair housing laws, and their application should be given the same consideration as others who do not participate in these programs.
Talk to others about the applicant
Making a quick call to an applicant’s former or current landlord will also help property managers sifting through applicants to get a more accurate picture of what an individual will really be like as a tenant. This step is especially important for smaller time landlords who just own a few properties that they rely on for income, Harrington said, because it’s an opportunity to hear first-hand what a tenant will be like.
Don’t just rely on a written letter of recommendation either.
“If an owner wants to get rid of a tenant, sometimes they’ll write anything,” Dekidjiev said. “So it’s actually better to call in some cases and check landlord references.”
After witnessing renters not pay their rent simply because they knew they didn’t have to with the renter protections in place, Harrington said having a third party vouch for an applicant has become more important, which has led her to seek out referrals for new tenants.
“You can get referrals from friends, you can get referrals from people you know that are looking to rent properties in your community, and you might have a lead on somebody that knows somebody,” Harrington said. “After what I went through and after what a lot of landlords went through, I will wait to find the right [renter]. I used to just jump at the first application and get somebody in there and I really didn’t look that hard. I think a lot of landlords are going to change that process now.”
Look out for red flags
Co-Founder and CEO of Holton-Wise Real Estate James Wise advised Inman in 2019 to keep an eye out for a number of red flags when screening prospective tenants. A history of past evictions and/or violent felonies were at the top of his list.
Tenants with multiple pets and tenants who ask for a lower rent rate upfront are also bad signs Wise flagged. Even one poorly behaved pet can cause serious damage to an apartment, but if a tenant has several pets, it increases the chance of any damage being incurred. Still, landlords must accept therapy or emotional support animals by law.
Meanwhile, tenants who establish the relationship by trying to bargain on rent may also be foreshadowing future issues.
“Asking for discounted rent during the application process is usually a sign of problems to come, and taking someone up on this offer will almost always put you out,” Wise said.
Upgrade the unit
Making substantial upgrades to a unit before leasing it to a new tenant is an effective way to both increase the rental income on the unit and attract tenants who are able to afford that higher price point (and are more likely to be financially stable).
Dekidjiev said that landlords should consider what competitors in their area are doing to upgrade their units, but some things that are typically a good investment include stainless steel appliances, a built-in microwave, a dishwasher and a washer/dryer unit (if the unit’s plumbing setup allows).
“In order to get the highest [rent] price, if they can afford it right now, that would be a great way to increase rent,” Dekidjiev said. “And [owners] are only legally allowed to increase rent by a certain percentage if they do capital improvements to the apartment and the building.”
Consider requiring lease guarantors or co-signers
Another measure that can add a level of protection for landlords is to require an individual or institutional co-signer to serve as a lease guarantor. Having an additional person or organization on the hook to be sure that rent gets paid on time can help keep everyone accountable.
If prospective tenants don’t have a friend or family member willing to co-sign with them, there are a number of companies that provide these services to renters now, typically for a fee of about one month’s rent, but these fees vary from company to company.
Work with a real estate broker
In the wake of the pandemic, renter protections and fair housing laws have been on people’s minds perhaps a bit more so than in recent memory. That’s why it can be extremely helpful for owners, landlords, property managers and the like to work with a real estate broker to list their apartment.
Brokers are required to keep up to date on new housing laws and regulations, Dekidjiev pointed out, which can be a valuable resource for owners, especially those who are located in a different state than their rental.
Brokers can also help ensure that uniform documentation and requirements are requested from each applicant to preserve the integrity of the application process. Additionally, brokers have a number of resources at their disposal for marketing a unit and potentially obtaining a wider pool of renter applicants.
“The advantage of using a broker is that we can take better photos, we know how to market the apartment, we can do showing and accessing of the apartment … where the owner doesn’t basically have to spend all of their time trying to rent their apartment, especially if they have more than one vacancy,” Dekidjiev said. “If I were an owner right now, that’s what I would do.”