Selecting tenants for your rental property can be stressful, as you’ll have to go through numerous applications, narrow your search to a few qualified candidates, and contact references before finally making your decision. You might also have to show the property multiple times and keep it spotless for prospective renters wanting to view it.
This process gets even more challenging because you must worry about your reasons for denying certain rental applications to ensure they’re legal. You can’t reject an application on any discriminatory basis, including race, age, sexual orientation, familial status, or participation in a subsidy program, so you must be careful with the explanations you give for approving or declining an applicant.
The good news for landlords is that you can use some steadfast justifications for denying an application to reduce your chances of encountering problems as long as you’re transparent with your selection criteria. This guide explains why choosing suitable tenants is important and examines some valid reasons to deny rental applications in the D.C. area.
Why Selecting the Right Tenants Is Vital
The entire point of the application process is to get to know prospective tenants better so you can choose the ideal people to live in your investment home. Tenant turnover costs you time and money, so finding long-term renters is in your best interest. Selecting the right tenants is also helpful because they’re more likely to do the following:
Take Care of the Property
Finding tenants who will care for your property like it’s their own is crucial because it will likely minimize the damages you’ll encounter. These renters will be careful with the home, and you won’t have to worry as much about their actions cutting into your investment’s profitability.
Pay Rent on Time
Carefully vetting tenants makes it more likely you’ll choose someone who pays rent on time. A late rent payment once in a while probably isn’t a big deal, but tenants who are habitually late cause stress and could force you to temporarily cover expenses while waiting for payment.
Follow the Rules
Respectful tenants will typically follow your property rules, so you won’t have to deal with complaints from neighbors, parking violations, and unauthorized residents living in the house. Having your renters follow the rules also reduces stress and limits turnover because you can avoid potential evictions.
There’s tremendous value in finding the right tenants for your rental property because they’ll increase your profitability and reduce your stress. You’ll also need to learn why you can reject inadequate applicants to ensure you don’t violate any laws.
Seven Valid Reasons to Deny Rental Applications
The U.S. Department of Housing and Urban Development’s Fair Housing Act states that you can’t deny a renter’s application for discriminatory reasons. There are some perfectly valid reasons to deny rental applications, but you’ll have to clearly present these eligibility criteria to prospective tenants before accepting applications. Some justifications you can use to reject an application include the following:
1. Doesn’t Earn Enough Income
You’ll want to ensure your tenants can afford to pay rent every month, so rejecting an application for lack of income is valid. There isn’t a set amount of income your tenants should have, but landlords typically look for a 3:1 income-to-rent ratio to reduce their risk. Your eligibility criteria should clearly state how much you expect your renters to earn monthly.
2. Lies on the Application Form
Discovering information on an application form that’s unverifiable or false is a valid reason to reject the applicant. This misleading data could include fake references, employment history, or other information that makes it seem like the renter better matches your eligibility criteria.
3. Smokes Cigarettes
You can reject an application if the applicant is a smoker. Asking for this information up front is advisable because you’re well within your rights not to want someone who smokes to live in your investment home because of the smell and residue it creates. You can also make being a nonsmoker part of your criteria.
4. Doesn’t Submit to a Background Check
Your screening process might ask for a criminal background check, and you have the right to reject an application if the applicant doesn’t submit one. Remember that you can only use criminal convictions occurring within the last seven years for certain crimes as reasons for denying an application after making a conditional offer.
5. Has Poor References
Checking applicant references is a vital part of the inquiry process, and poor feedback from previous landlords is a valid reason to reject the tenant. The information you gather as you speak with past landlords is invaluable because it provides insight into how you should expect your experience with the renter to go.
6. Won’t Agree to Your Rental Terms
You can reject an applicant who refuses to agree to your rental terms or sign the necessary paperwork before finalizing the tenancy agreement. You have the right to set rental conditions, and you don’t have to let any tenant who doesn’t agree to these terms live in your rental home.
7. Has Bad Credit
Landlords in D.C. can’t use a poor credit score to reject an applicant outright, but they can use the specific information the credit report presents to deny an application. You can ask for a credit report as part of the application process, and if the prospective renter has multiple late payments or credit defaults, it provides a valid reason to reject the application.
Understanding your rights as a landlord is essential as you navigate the rental application process. You don’t want to face legal problems in the future because you didn’t understand how these applications work and the legality of the reasons you give for rejecting one.
Property Management Assistance
Marketing your property and vetting potential tenants takes significant time and effort, and you also have to worry about Fair Housing Act violations throughout the process. Getting assistance managing your investment property makes sense because you can earn passive income while leaving the hard work to the professionals.
Nomadic Real Estate offers property management services in the Washington, D.C., area. Our team will vet all prospective renters before accepting any applications, ensuring you end up with tenants who will care for the place and pay rent on time. Contact Nomadic Real Estate to learn more about how a property manager can help you.