Making a decision to rent an apartment to an applicant can be a difficult one. Often times, landlords find themselves in a position of having to decide whether or not to rent a property to someone they personally like, but who they deem to be a credit risk. Or a landlord may be incurring losses on a vacant property and is financially motivated to rent 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 renter and the landlord. The renter makes a financial commitment to the landlord, agreeing to pay a set amount of money over the life of the lease term. The landlord agrees to turn over the day-to-day possession of a property to the renter.
The renter 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 gambling that the renters chosen to live in the property will not cause severe damage to the property during their residency. With such a large commitment, it is equally important for both renter and landlord to do their “homework” to make the most educated decision possible.
Landlords are generally interested in two major factors when considering potential renters. The first factor is whether or not 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 the approval process of an applicant. A credit report is a detailed listing of an individual’s credit history and is a good indicator of whether or not an individual is credit worthy or represents a credit risk. In addition to an applicant’s credit history, information on possible evictions or monies still owed to a previous landlord can often be found on a credit report as well.
Factors that 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 rental payments as originally planned on?
• Can the landlord afford an unexpected vacancy if a renter vacates the apartment without notice or is evicted for non-payment of rent?
It is estimated that the average total cost of an apartment vacancy in the United States is $3,000 US Dollars (USD). This amount takes into consideration lost revenue, maintenance, cleaning and general turn over costs and the time and labor spent to prepare a property for a new renter. Therefore it is recommended that the landlord with limited financial resources to weather any unplanned vacancies, delinquent rental payments and extensive damage to the property, be very cautious about renting to an applicant who is a credit risk.
In most areas, there are a large number of rental applicants who have a proven, positive track record of making payments on time and of fulfilling their obligations. Many landlords have found that having more stringent approval guidelines is financially prudent. While it can be tempting to fill a vacancy with an applicant who is a credit risk, the long-term repercussions may outweigh any possible short-term gain.