8 Ways to Select the Right Tenant for Your Rental Property

We’ve all heard the nightmare story about the tenant from hell: 6 months of unpaid rent. Moving random people into the apartment. All of this coupled with months and months of court dates and legal bills piling up. Where did it all go wrong?

While there’s no 100% foolproof method, there are steps that you can take as a landlord to select the right tenant for your rental property. I’ve spent almost a decade advising clients on how to pick the right tenant.

The eight steps below detail some of the best practices that I always use when trying to find the right tenant.

#1 Verify Income

The most important goal of a landlord is to get paid. This is MAJOR. In order to get paid, your tenant needs verifiable income. There are also special considerations for those who are self-employed or those who own their own business. Questions you will need to ask:

  • Is the applicant employed?

  • If they are employed, how long have they been employed for?

  • How much does the applicant earn annually, and can they afford the rent? 

There are various formulas used to calculate the so-called monthly ‘rent burden’

You will need to collect proof of employment and proof that your prospect earns the amount they claim on their rental application. A potential applicant should be able to show at least one year of employment, and should be able to show that they can pay rent easily based off their monthly income.

#2 Verify Credit

Unpaid electricity bills, multiple late payments and a high debt-to-income ratio. Does this applicant sound ideal to you? A less-than-stellar credit report and score could mean that you won’t get paid (see step #1, first sentence). According to Money.com The average American’s credit score is 682, which is considered ‘good’ by industry standards.

There are many factors that go into calculating a credit score such as payment history, debt:income ratio and the length of credit history (note that a credit score differs from a credit report—obtain both).

It is important to remember that people do fall on hard times & things happen. Late payments from years ago can be overlooked.

If there are multiple blemishes on the report, you might want to seek a third-party guarantor. I recommend: The Guarantors.  

It’s also in important to keep in mind that credit bureaus make mistakes and that there may be incorrect information on someone’s credit report. Always send a copy of the report to the applicant and allow them to dispute any past judgments or errors that might appear.

#3 Verify Liquid Assets

How much is enough savings? The truth is it’s never enough, but the motto ‘cash is king’ applies here. You’d want your future tenant to have enough in the bank to pay first month’s rent, the security deposit, and the broker fee at least.

But what happens if your tenant loses their job? Will you get paid? These are important considerations to keep in mind.  It’s recommended that tenants have at least 3 months of living expenses saved up, however, this is not always the case.  

#4 Obtain Identification

Your prospect tells you that their name is ‘Jane Doe’. You draft a lease with the name ‘Jane Doe’ as tenant. Turns out, they’re not Jane Doe, they’re Emma Brown—what now? You want to make sure that you are renting to the right person! If there is a legal dispute, you need to know the name of the person that you are taking to court.

Verify the legal name of the applicant—use government issued photo identification only. You may want to ask for:

  • A driver’s license
  • A passport
  • Military I.D.

You will also want to ensure that any identification provided is current and not expired.

#5 Landlord Reference Letter/Proof of Rent Payment

If your prospect has lived in a rental before, their prior landlord might be able to draft a landlord reference letter for you. But keep in mind—this could be a Trojan horse.

Landlords often draft positive reference letters to entice nuisance or tardy paying tenants to move out of their rental properties.

In addition, anyone can go on Microsoft Word and type up a letter, or have a friend impersonate being a landlord on their behalf.

I prefer to obtain rent receipts or cancelled rent checks, which are often harder to manipulate. Once again, these methods never guarantee 100% success, but they get you closer to it, which is your goal.

#6 Trust Your Gut

How do you feel about this person? Do they seem trustworthy? Someone might appear good on paper, but something doesn’t sit right with you. Now of course your instincts can be subjective, but if there are too many red flags, you may want to pass on this applicant. Keep in mind, you’re going to be working with this person for 6-12 months, and potentially beyond if they renew their lease.

That being said, I’ve also rented apartments to people who I’ve felt iffy about, but I decided to make a decision based on their documentation and they turned out to be great tenants.

#7 Familiarize Yourself with Fair Housing

“I don’t rent to Martians, they tend to pay late ”

While we may never be able to know the veracity of this statement, we should always give every applicant a fair chance—Martians too.

There are certain laws that you must familiarize yourself with regarding Fair Housing. Federal law prohibits housing providers from refusing to rent to someone on the basis of race, skin color, creed, religion, national origin, familial or handicap status.

It’s also worth pointing out that there may be additional state and local regulations.      Landlords in New York City rentals are barred from discriminating due to sexual orientation, lawful occupation, and legal sources of income. There are additional protected classes in New York City that you will need to familiarize yourself with.

You should apply the same standards for all prospects—even if the interested party is a relative or friend. Being mindful of Fair Housing regulations is important not only to defend yourself, but also to provide a fair, transparent and satisfactory rental process for all involved.

#8 Hire an Experienced Real Estate Agent

You have a full-time job or operate a business. You do not have the time to devote to marketing your property and interviewing applicants.

An experienced real estate agent can handle the marketing and make the rental process seamless and efficient for you. The right agent already has a list of qualified clients seeking housing, can vet interested parties, and is aware of scam artists and the tricks they pull. A real estate agent can also offer you the opportunity to maintain privacy and create a natural barrier between yourself and the tenant.

You will also want to ensure that the agent is part of the Real Estate Board of New York.

The best part is that all these services are offered at no cost to you. In New York City, the tenant almost always pays the broker fee.

After the lease is signed and the funds are paid, here comes my favorite part: handing over the keys.

There’s a great feeling about providing housing to someone—a safe place where they can come home to and create memories. The above steps are not 100% foolproof, but they do help put you in the right position to select the right tenant.

Whether you’re looking to buy a new home or you’re a landlord seeking a new tenant, many will agree that Dondre D. Roberts is an expert in the complex field of New York City real estate. Having sold and leased $10 million dollars in real estate, Dondre can be counted on for his expertise, drive and tenacity to fight for his clients.​ He has worked for Nest Seekers International, a global real estate firm, large landlords and mom and pop owners alike. In his spare time, Dondre enjoys brunching, dog-sitting, traveling, coffee sipping, and reading the New York Times. He also likes Darth Vader, is a proud Bronxite, and is left-handed.