Protecting Your Property
A bad tenant can mean more than a few missed rent payments. It can mean the destruction of your property. In some places, even if a tenant deserves eviction according to the law, it can take many weeks or months to get them out. This is how things are in California. Accordingly, it’s absolutely fundamental you find the right tenants as a landlord.
Still, finding good tenants isn’t something so cut-and-dry as simply excluding applicants with bad credit. The way credit is determined in America leaves much room for improvement. Oftentimes bad credit is no indicator of financial irresponsibility. Someone who has no debt and never has may have terrible credit even though they shouldn’t.
In all likelihood, any given landlord will experience some situation where there’s poor credit, but the potential renter would be a good tenant for your unit. Following, we’ll briefly cover several ways you can protect yourself in this situation.
Higher Rental Rates And Initial Deposits
When someone has bad credit, and you aren’t sure whether or not they can be relied on to fulfill the terms of their lease, a good way to keep them honest and protect your financial standing is to increase the rate of rental. Lower credit may require higher monthly rates.
Additionally, you might ask for a higher deposit, as well as both the first and last month’s rent upfront. This makes it so that if the individual does end up fulfilling your worst fears, you have a minimum of two months’ profit from them, in addition to a deposit for circumstances beyond your control.
To get an idea of how much it makes sense to charge, consider patterns in Grand Prairie apartments business form the linked site. Similar sites like this can help you pin down the right range.
The Reason Behind The Poor Credit
Sometimes the reason a person’s credit is bad has more to do with ways credit agencies determine credit than it has to do with the negligent financial activity of a prospective tenant. In such situations, use additional means of “vetting” potential tenants in order to protect your assets.
Proof Of Current Rent
Most who are applying to live in a given apartment have rented elsewhere before, or are currently renting from somewhere. If they’ve got bad credit, ask them for their rental receipts to determine whether a pattern of reliability can be established.
Finding A Co-Signer
If a potential tenant has poor credit and can’t provide proof of rent, you might see if they can find a co-signer with good credit to vouch for them. This is very difficult for individuals that are struggling with their credit. When you’ve got a co-signer, should a tenant turn out to be underhanded, you have additional recourse.
Pay Stub Provision
As with rental receipts, asking potential tenants to provide pay stubs can help you determine if they’ve got an existing stream of income from which to pay their rent. If you’re using this route to vet a low-credit renter, be sure pay stubs are current. What use is pay stubs from several years prior to their application to rent your property? You want something within the last month.
See whether or not a potential renter has existing financial resources. As was noted, sometimes someone has bad credit simply because they haven’t taken out any loans, or pursued other actions that establish credit. It may be no indicator of their financial wellbeing. Ask them for a bank statement to determine what assets they’ve got available.
If you’ve got a minimum lease of six months at $1,000 a month, then you’d be looking for someone who has at least $6,000 in their bank account. Ideally, they’d have more, as monthly expenses definitely dip into a person’s existing assets. Still, if they can cover your initial deposit, as well as the first and last month’s rent, then you’re reasonably secure.
Finding The Right Tenants
The more qualified renters you can bring to your property, the more financially secure you’ll be. But not all renters are the same. If you encounter potential tenants with bad credit, don’t immediately dismiss them.
For potential renters with low credit, determine if they have receipts from other rental arrangements, proof of funds, pay stubs, a potential co-signer, or a good reason for poor credit. Lastly, charge them more initially to cover yourself. Tactics like these will help you maximize your rental surface area while minimizing associated risk.