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Renting an apartment is a big commitment for both the landlord and the tenant. Landlords should consider an applicant’s credit history and ability to care for the property. It is recommended that landlords with limited financial resources be cautious when renting to applicants with credit risk. Stricter approval guidelines may be financially prudent.
Making a decision to rent an apartment to a candidate can be difficult. Landlords often find themselves in a position to decide whether they want to rent a property to someone they personally like but whom they consider to be a credit risk. Or a landlord may be incurring a loss on a vacant property and is financially motivated to lease the property to the first applicant, regardless of credit risk or financial strength.
It should be noted that renting an apartment usually represents a large and legally binding commitment for the renter and landlord. The lessee makes a financial commitment to the landlord, agreeing to pay a fixed amount of money over the life of the lease. The landlord agrees to hand over day-to-day possession of a property to the tenant.
The lessee does not know whether or not the landlord will keep the promises and agreements that were made at the time a property was leased. Likewise, a landlord is essentially betting that renters chosen to live in the property will not cause serious damage to the property during their residency. With such a big commitment, it’s equally important that the renter and landlord 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 or not the tenant will consistently pay rent. The second factor is whether or not a renter will care for the property while residing there.
Most homeowners rely on credit reports as part of an applicant’s approval process. A credit report is a detailed listing of an individual’s credit history and is a good indicator of whether an individual is credit worthy or poses a credit risk. In addition to an applicant’s credit history, information about possible evictions or monies still owed to a previous landlord can also be found on a credit report.
Factors landlords should consider when deciding whether or not to rent to an applicant with credit risk include:
• Can the landlord afford not to receive rent payments as originally planned?
• Can the landlord offer an unexpected vacancy if a tenant vacates the apartment without notice or is evicted for non-payment of rent?
The average total cost of an apartment space in the United States is estimated to be $3,000 (US). This figure takes into account lost revenue, maintenance, cleaning and general hand moving costs and the time and labor spent to prepare a property for a new tenant. Therefore, it is recommended that the landlord with limited financial resources to withstand unplanned vacancies, late rent payments and extensive damage to the property, be very cautious when renting an applicant with credit risk.
In most areas, there are a large number of rent applicants who have a proven and positive track record of making timely payments and meeting their obligations. Many homeowners have found that having stricter approval guidelines is financially prudent. While it may be tempting to fill a vacancy with a candidate who is a credit risk, the long-term repercussions could outweigh any potential short-term gains.
Asset Smart.
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