Are you a property manager looking to streamline your tenant screening process? Or perhaps you're a prospective tenant wondering what landlords are really looking for in a rental application.
Look no further! In this article, we'll examine rental criteria and why they're used in property management and the rental world in general.
So, what exactly are rental criteria?
Simply put, they're the standards landlords use to evaluate tenant applications and determine who will be the best fit for their rental property. These criteria typically include financial requirements like income and credit score, rental history, and other factors that help predict a tenant's reliability and ability to pay rent on time.
Types of Rental Criteria
A rental criteria disclosure will typically include various categories that cover everything from finances to criminal history and more. Let's explore a few rental criteria types in the sections below.
Financial Criteria:
At the heart of any solid tenant screening process are the financial criteria. Landlords want to ensure that their tenants have a stable, verifiable income that can cover the monthly rent and then some. Typically, they'll look for a credit score that meets a certain threshold and a clean credit history free of major red flags like collections or bankruptcies. Many property managers also require additional information like bank statements or pay stubs to verify income.
Failure to meet this criterion may result in a denial or additional requirements, such as a higher security deposit prior to moving in.
Rental History:
Another key component of rental criteria is the applicant's rental history. Landlords will often reach out to previous landlords to get a sense of the tenant's track record. Did they pay rent on time? Did they take good care of the property? Were there any issues with the security deposit or evictions? The landlord may also review the tenant's rent history as reported to the credit bureaus when they pull a credit report on the tenant. This information can be incredibly valuable in predicting future behavior.
Failure to meet this criterion may result in a denial or additional requirements, such as a guarantor, higher security deposits, first and last months rent due prior to move-in, or other requirements.
Tenant Screening Criteria:
Beyond financial and rental history, many property managers also have specific tenant screening criteria they use to evaluate applicants. These might include criminal background checks, employment history verification, and occupancy standards that comply with fair housing laws.
If the applicant cannot provide proof of employment (or income) or has a criminal background that exceeds the limits of what the property allows, the application will generally be denied without recourse.
The Legal Side of Rental Criteria
The Fair Housing Act prohibits discrimination based on protected classes like race, religion, or familial status, so it's important to apply screening criteria consistently and avoid any practices that could be seen as discriminatory.
Crafting legally compliant rental criteria is one of the single most important things a property manager can do before ever listing a property for rent.
By creating clear, objective standards and communicating them transparently, you can build trust with potential tenants while still ensuring you're getting reliable, qualified residents for your property—and remain well within the boundaries of the law at the same time.
Common Screening Mistakes New Landlords Make
Some of the most common mistakes among solopreneurs who are new at being a landlord, as well as small property management companies just getting started in the rental industry, are also some of the most risky mistakes you can make with a rental property.
Here are some things you should research and avoid doing when screening tenants:
Which Applicant Is Better
Holding in-person “applicant interviews” and then deciding which applicant is "better" can be a dangerous practice in the rental application process because it opens the door to subjective and potentially discriminatory decision-making.
When a landlord or property manager starts comparing applicants to determine who is the "best fit," they may subconsciously be influenced by personal biases or preferences that have nothing to do with the applicant's ability to pay rent and follow the lease agreement.
For example, a landlord might prefer an applicant who shares their hobbies or cultural background, even if another applicant has a stronger financial profile. Decisions made using that method would likely be in direct violation of The Fair Housing Act.
It's generally better to have a set rental criteria and approve the first qualified applicant. In fact, some local governments now require that rentals operate based on a “first qualified applicant" policy.
Violating Privacy Laws
There are specific requirements you must follow when handling personal, private information such as social security numbers, dates of birth, income information, personal addresses, and other information provided as part of the rental application process. Failure to properly store and protect that information can be detrimental to any rental business.
Not Sending Adverse Action Notices
The FCRA (Fair Credit Reporting Act) requires that if you use a consumer report to make a decision on whether to approve or deny an applicant for something, you must provide them an Adverse Action Notice within a specific time frame (typically 30 days or less), with very specific information included on that notice.
Ask About Protected Characteristics
The Fair Housing Act protects a wide range of things. Something as seemingly as harmless as asking if an applicant is married, or has kids, could result in claims against you for violating the Fair Housing Act.
Here are some examples of familial status protections and why asking seemingly harmless questions could put you at risk:
- Refusing to rent to families with children
- Charging higher rent or security deposits to families with children
- Limiting families with children to certain buildings or floors
- Advertising a preference for adults-only or no-children policies
- Imposing overly restrictive occupancy standards that disproportionately exclude families
And that's just one protected class. There are more. Be careful about the questions you are asking during the rental application process, and what you're putting on your rental criteria disclosure.
And Many More Mistakes
There are other common mistakes, such as:
- Improper Use of Criminal History
- Inconsistent Screening Criteria
I could keep going, but I'll spare you the neverending list for the sake of time and your sanity.
The bottom line? Make sure you spend extra time and attention on your rental criteria and how you pre-screen and screen your rental applicants.
Setting Up Your Rental Criteria
So, how do you go about setting up effective rental criteria for your property?
Start by determining your standards for key factors like monthly rent, income requirements, and minimum credit score. These will likely vary depending on your market and the type of property you manage.
Next, create a form as a part of your rental application that includes all your criteria, along with any additional security deposit requirements or other conditions. Make sure your lease agreement aligns with these standards as well.
Communicating your criteria is just as important as crafting them.
Free Rental Criteria Template Download
Applying Rental Criteria in Tenant Screening
With your tenant selection criteria in place, it's time to put them into action during the tenant screening process.
As you gather all the information, refer back to your established rental agreement criteria to guide your decision-making. By letting your written standards lead the way, you can ensure a fair, objective screening process that results in reliable, qualified tenants.
Special Considerations and Exceptions
Of course, every applicant's situation is unique, and there may be times when you need to consider exceptions to your standard rental criteria. For example, you might encounter an applicant with limited rental history or a lower credit score who can still demonstrate their reliability through additional security deposits, cosigners, or other means.
In some cases, you may also need to make reasonable accommodations for tenants with disabilities, such as allowing an assistance animal even if your property normally has a no-pet policy.
By being open to these special circumstances and working with applicants to find solutions, you can expand your pool of potential tenants while still maintaining your standards.
Required Accommodations and Exceptions
In fact, when it comes to accommodations and exceptions for things such as assistance animals, you typically won't have another option. If the criteria are met, it's required by the ADA (Americans With Disabilities Act) and other laws.
Things like lack of credit history or even using a credit score to approve or decline rental applicants are no longer permitted in some places around the US either. So, it's important to familiarize yourself with your federal, state, and local laws before you decline a rental applicant.
Technological Advancements in Rental Management
In today's digital age, there are countless tools available to streamline the rental criteria and tenant screening process. From online rental applications and owner login portals to automated background checks and digital property management systems, technology can help you work smarter, not harder.
These tools can save time, reduce manual tasks, and create a better experience for your applicants and tenants. Plus, with everything digitized and centralized, it's easier than ever to stay organized and ensure consistent, compliant practices across your entire portfolio.
And you can do all of that right here on TenantCloud.
Case Studies and Examples in Property Management
To see rental criteria in action, let's look at a few real-world examples from property management professionals.
Sarah: A Seasoned Property Manager
Sarah, a seasoned property manager in Seattle, once had an applicant with a lower credit score but an otherwise strong application. By requiring a higher security deposit and a cosigner, she could approve the tenant while still protecting her owner's investment. The result? A reliable, long-term tenant who took great care of the property.
Michale: A New Property Manager
On the flip side, Michael, a new property manager in Phoenix, learned the hard way about the importance of consistent screening. He made an exception for a tenant with a history of late payments, only to end up with months of missed rent and an eventual eviction. From that point on, he committed to following his rental criteria to the letter, with no exceptions.
Frequently Asked Questions for Owners and Renters
Q: What is a typical income requirement for renting?
A: While it varies by market, the criteria most landlords have is a monthly income of at least 3 times the rent amount. So, if the rent is $1,500, the tenant should earn at least $4,500 per month.
Q: Can a landlord deny me for having a low credit score?
A: With state and local governments actively changing the laws regarding rental screenings, this may not be permitted in your state or city. But yes, they can in general, as long as the credit score requirement is applied consistently to all applicants. However, some landlords may be willing to work with lower-credit applicants if they can provide additional security deposits or cosigners.
Q: Are there any exceptions to pet policies for assistance animals?
A: Yes, under the Fair Housing Act, landlords must make reasonable accommodations for tenants with disabilities who require an assistance animal, even if the property normally prohibits pets. However, the tenant must provide proper documentation of their need for the animal.
Q: What kind of information can a landlord ask for in a rental application?
A: Landlords can typically ask for information related to income, employment, rental history, and credit. However, they cannot ask about protected characteristics like race, religion, or familial status.
Conclusion
In short, having clear, consistent rental criteria is essential for the long-term success of any property manager or landlord. By carefully crafting standards, applying them fairly, and staying compliant with all applicable laws, a property manager can attract reliable tenants, protect your investment, and create a positive rental experience for all involved.
Happy renting!
