Documents Needed When Renting An Apartment
After two years, my beloved tenant is leaving me for another man. My tenant is a single woman in her 50s who sold her house on the east coast to start a new life in San Francisco. She’s always wondered what the west coast fuss was all about so she decided to see for herself. After a year of work, she met someone and is now moving in with him.
I’m so sad to see my tenant go as she’s been wonderful. Yet, I’m so happy she’s found new love! I don’t know what it is about my rental property but every single tenant ends up marrying or finding someone special. Good feng shui perhaps!
As I wrote in my real estate vs. stocks post, real estate takes more effort to manage. I’ve got to now host multiple open houses and carefully vette my future tenants like the CIA to ensure the least amount of headache down the road. Thank goodness everything is so easy to do on Craigslist nowadays. I’ve got all the application forms and after almost 10 years of being a landlord, I know exactly what to look for.
If you are an aspiring landlord or a new renter in a hot market, this post should help provide some prospective to getting what you want.
CRITERIA AND DOCUMENTS NEEDED WHEN APPLYING TO RENT
* Income and Paystubs: 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 $2,000 a month, the minimum the tenant should make is $80,000 a year. Prospective tenants should bring in their latest two paystubs and prior year’s W2 if you feel comfortable. If you operate a business, then please highlight your income statement.
* Duration of Employment: The longer you are at one firm 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. Seeing a letter from your Human Resources department verifying your employment and duration puts your landlord at ease. Landlords want a tenant who will ideally stay for two years or longer.
* Assets: 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 from the movie Pacific Heights, and destroys all your property! Bring a copy of a bank statement and brokerage accounts that show liquid assets. You don’t have to show everything, just enough where the assets cover at least 6 months worth of rent. If you have tons of assets, feel free to show up to 36 months worth of rent but not much more. Having too much money makes your landlord think you’re only here for a pitstop until you find something better.
* 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/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 landlords 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. You can check your free credit score at TransUnion here.
* Emphasis On Duration: It should be deduced from your rental and employment history whether you are a short-termer or a long-termer. However, if you really want to increase your chances of snagging that apartment, write an explicit e-mail or letter stating your intentions of staying for the medium-to-long term. The sweet spot is around 3-5 years. Any longer and the landlord might start wondering whether they’ll be able to keep up with market rents and get their units back in case something doesn’t work out, or if they want to move back in.
* General Feel: 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. Tenants should consider bringing a friend as a good sounding board for the property they are considering. Landlords should also 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. For example, men go stupid over beautiful women. If you are one of those men, then bring a female friend who will think straighter during evaluation time.
ARE YOU THE IDEAL TENANT?
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. Tenants should also try and get a feel for the landlord’s character. Is he super anal to the point where he is always checking up on you over e-mail or ringing your doorbell? Does he have a list of handymen for you to contact in case something goes wrong? Can you tell your landlord really cares about the property based on the upgrades? It’s as much a leap of faith for the tenant, but with much less financial fallout.
If both parties can be as upfront as possible about their requirements, I’m optimistic in a harmonious relationship between the landlord and the tenant.
Recommendations For Tenants Or Landlords
* Check Your Credit Score: Take a moment to check your free credit score through GoFreeCredit.com, a company I trust. If you are in a hot rental market, or really want a particular rental, you should have your credit score as part of your application for your landlord. I am a multi-property landlord and highly value a credit score and report. Those who come to me with their credit score stand out above others who don’t. If you do not want to pay for the credit monitoring, simply cancel within the grace period.
* Get the best home insurance possible. In order for your property to grow in value you must protect your property from damage. Fires, floods, leaks, theft, and other accidents happen all the time. If you have cut-rate insurance, you could very well pay way more than you should. I highly recommend checking with USInsurance.com online to find the best home insurance rates. They have a huge network of providers that will compete against each other to provide the most tailored home insurance coverage possible that is affordable. It’s important renters get Renters Insurance when moving into a new place. Leverage the internet to save money and protect your largest asset.
* Make sure you refinance your mortgage. If you haven’t refinanced your mortgage in the past 6-12 months, I strongly suggest you at least check the latest rates online with Quicken Loans, the largest online mortgage retailer. They were founded by Dan Gilbert, also owner of the Cleveland Cavaliers. Because they have the largest online network, they can provide the lowest rates. They also seem more streamlined in the refinancing process than traditional bricks and mortar banks as well. Interest rates are at all time lows and won’t stay this low forever. My latest refinance was for a 5/1 jumbo ARM at 2.625% from 3.125%. Might as well check because it’s free and there’s no obligation.