The key to sustained rent growth levels is stability, and the single most important element for rent stability is the tenant. Each time a tenant moves, the landlord has usual and customary expenses associated with renting the unit to someone new. The unit must be inspected and cleaned. The vacancy must be advertised. The landlord must spend time reviewing new rental applications, verifying rental histories, verifying employment, and contacting references.
All of those expenses are normal, but they also all reduce the profit a landlord makes from a unit in a given year. Statistics from the U.S. Census Bureau show that renters are four times more likely to move from a dwelling than a homeowner. To maximize profit and minimize the expenses associated with finding new tenants, landlords have to minimize renter turnover.
Renters move for a variety of reasons, and many of these reasons are beyond a landlord’s control. It’s important, therefore, to control the factors that can be mitigated. For example, a landlord cannot do much about adjoining properties where residents routinely cause disturbances, and it is understandable that a good tenant wouldn’t want to live next to that situation. Landlords can, however, eliminate residential disturbances from properties that they also control. If a landlord doesn’t rent to problems, then there are automatically fewer problems in the landlord’s units.
It’s the same with finances. A prospective tenant credit check gives a landlord confidence that tenants have met financial obligations in the past. Banks use credit checks to decide whether or not to make a loan. Car lots run credit checks before financing a car. Landlords should always run a tenant credit check to gage the likelihood that a person will pay rent on time. Good renters are stable renters. They don’t move away in a few months when they can’t cover the rent. Neighborhoods where tenants stay long term becomes known as stable neighborhoods. Residents get to know one another and take better care of rental property. Good tenants want to live in neighborhoods like that. Nearly 13.6 percent of renters are over 64 years of age. Renters in this age group are far more likely to remain with a unit than younger tenants who may move because of employment or relationship changes. On the other side of that coin, 12.7 percent of renters are under the age of 25. This is a highly mobile age group with a tendency to mismanage finances.
Landlords cannot discriminate against younger tenants based on age, but it is perfectly reasonable to base renting decisions on a credit history. This is why a landlord needs to know a potential renter’s background. A history of bounced checks or missed utility payments is a strong indication that the person has trouble meeting financial obligations. Listed references are always going to check out – because who would list a reference who will say that their friend is unreliable? A solid credit check for tenants is a far more credible reference. If a person pays his or her bills on time, then that person is likely to pay rent on time.
Landlords should always minimize problems by proactively looking for problems before they occur. This is true with plumbing and roofs, and it is equally true with tenants. A credit check for all renters prior to signing any lease is simply good business.