It is a wonderful thing when your real estate investment is running on auto pilot. Rents are paid on the first of the month (every month), tenant does their own repairs (and improvements) and you never receive a phone call from the tenant. Sweet.
But now your beloved tenant is leaving for another landlord. The work begins. Multiple open houses, carefully vet future tenants like the CIA to ensure the least amount of headache down the road. Thank goodness everything is so easy to do on Kijiji nowadays.
The general rule of thumb for a landlord is for renters to make at least 40X the monthly rent as annual income. In other words, if the rent is $1,000 a month, the minimum the tenant should make is $40,000 a year. Prospective tenants should bring in their latest two paystubs and prior year’s NOA (Notice of Assessment).
Duration of Employment
The longer you are at one company the better. If there’s a history of moving around every year, the landlord will put you in the bottom pile because the last thing a landlord wants is to have to go through the entire tenant screening process again so soon. Landlords want a tenant who will ideally stay for two years or longer.
It is preferred to have six months of rent in liquid savings or semi-liquid investments or more. A landlord’s fear is that a tenant loses his or her job, runs out of money in several months, stops paying rent, turns into the psychopath and destroys all your property! Letters of Reference
Almost every single landlord will experience some type of problem tenant if they landlord long enough. Letters of reference are important to verify a tenant is worthy. Please also provide the telephone number(s) of previous landlords so we can speak to them about their experiences with you. Many times, letters or emails don’t mean anything because the landlord is just being nice so that you can hurry up and get out of their place! As a result, please also provide work references or outside activity references as well. Credit Report and Credit Score
The first thing landlord’s check is the credit score. The credit score is always used for screening purposes if there are many applicants. Even if there are only a couple applicants, a credit score is still used to gauge the tenant’s ability to pay the rent on time. It doesn’t matter how much you make or how much is in the bank if you aren’t a responsible payer. You need an actual score along with your credit report, otherwise, your landlord will suspect something is wrong.
One can do all the screening they want. At the end of the day, choosing the right tenant is a leap of faith. It’s the same for hiring someone for a job or admitting them to a school. You never know how the person will turn out until after they settle in. Bring a friend to meet with prospective tenants as well. We are often blinded by our unconscious biases about people that it is always good to have a different perspective.
The ideal tenant is someone who knows what he wants, has her financial ducks in order, and has a track record for stability and responsibility.