Landlords face a difficult decision when renting to a credit risk or a preferred tenant. Credit reports are a good indicator of creditworthiness, but landlords should also consider whether they can afford to lose rent or deal with unexpected vacancies or property damage. It is recommended that landlords have stringent approval guidelines to avoid long-term repercussions.
Making a decision to rent an apartment to a candidate can be difficult. Often landlords find themselves having to decide whether or not to rent a property to someone they personally prefer, but who they deem to be a credit risk. Or a landlord may incur losses on vacant property and is financially motivated to lease the property to the first applicant, regardless of credit risk or financial standing.
It should be noted that renting an apartment typically represents a large and legally binding commitment for both the tenant and the owner. The tenant commits financially to the landlord, agreeing to pay a certain amount of money over the term of the lease. The landlord agrees to deliver the owner of a daily property to the tenant.
The tenant does not know whether or not the landlord will keep the promises and agreements made when renting a property. Likewise, a landlord is essentially betting that the renters chosen to live on the property will not cause major damage to the property during their residence. With such a large commitment, it is equally important for both tenant and landlord to do their “homework” to make the most educated decision possible.
Landlords are generally interested in two main factors when considering potential renters. The first factor is whether the renter will consistently pay the rent on time. The second factor is whether or not a renter will take care of the property while residing there.
Most landlords rely on credit reports as part of an applicant’s approval process. A credit report is a detailed listing of a person’s credit history and is a good indicator of whether a person is creditworthy or poses a credit risk. In addition to an applicant’s credit history, information about possible evictions or amounts still owed to a previous landlord can also be found in a credit report.
Factors landlords should consider when deciding whether or not to rent to an applicant who is a credit risk include:
• Can the landlord afford not to receive rent payments as originally planned?
• Can the landlord afford an unexpected vacancy if a tenant leaves without notice or is evicted for non-payment of rent?
The average total cost of an apartment vacation in the United States is estimated to be $3,000 US Dollars (USD). This amount takes into account lost revenue, maintenance, cleaning and general delivery costs, as well as time and labor spent preparing a property for a new renter. Therefore it is recommended that the landlord with limited financial resources to withstand any unplanned vacancy, outstanding rental payments, and extensive property damage, be very cautious about renting to an applicant who is at credit risk.
In most industries, there are a large number of charter applicants who have a proven track record of making payments on time and meeting their obligations. Many landlords have found that having more stringent approval guidelines is financially prudent. While it may be tempting to fill a vacancy with an applicant who is a credit risk, the long-term repercussions can outweigh any possible short-term gains.
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