RentandLeaseHousing’s Blog

Signing a Lease with a Tenant

1) Rental Application
2) Credit Check
3) Signing the Lease
4) Security Deposit

Rental Application

When you have someone interested in renting your property, have them fill out a rental application.  A rental application will provide the information you need to pull a credit report, verify past rental history, verify current employment, check references and anything else that might be helpful for you to make a decision on renting to this person.

Here is a sample rental application:
http://www.citicredit.net/applications/Free_Rental_Application1.pdf

Credit Check

Once you receive the rental application back, you will want to run a credit check on your prospective tenant.  Once you have pulled the credit report, you need to analyze your tenant’s credit history to determine whether your prospective tenant is a creditworthy tenant or not.

Warning Signs:

1) Multiple trade lines with late payments.  The credit report will report the number of times a person has paid their bills 30, 60 and 90 days late.

2) Multiple collection accounts.  Now, there are some collections that will mean more than others.  For example, 1 or 2 small medical collections can be certainly overlooked because sometimes insurance and medical bills can fall through the cracks.  However, if your prospective tenant has utility bills, credit cards, or auto loans in collection, you should ask some questions and proceed with caution

3) Judgments - Judgments are a court order against the debtor to pay a creditor.  Judgments could mean the prospective tenant’s wages or salary are being garnished.  Not to mention, a judgment is the result of this person not living up to a debt.  If you see a judgment(s) for not paying rent, you will really want to think twice before renting to them.

4) Bankruptcy - Don’t automatically turn down someone if they have filed for bankruptcy because there could extenuating circumstances why they filed; nevertheless, if you see more than one chapter 7 or 13, you will want to reconsider your prospective tenant.

Signing the Lease

After running through the credit report and determining that the prospective tenant can afford to rent the property, you will have them sign a residential rental lease.  If you are not familiar with rental leases, please consult with a reliable real estate agent or attorney.  A quality lease will save you a lot of headaches if the worst should ever happen.

In the lease, you define:

• Monthly rent
• Security deposit amount
• Term of lease (fixed-term or month-to-month lease)
• Consequences of breaking the lease
• Late charges
• Who pays the utilities
• Pets
• Alterations
• Subletting
• Etc.

Sit down with the new tenant(s) and go over the lease with them.  The tenant should read over the lease to make sure that they agree with everything before they sign it.

Security Deposit

The tenant will give you the first months rent and security deposit after signing the season.  Here is some information about security deposits:

• The rule of thumb for security deposit is one month’s rent. (this could change for tenants with poor credit)
• As a responsible landlord, you should take pictures and note any imperfections in and outside of the rental property before renting to the new tenant(s) (have the tenant initial the list before you sign the lease so that he or she agrees to the list before they move in)
• Remember the security deposit is the tenant’s money, so it set aside in a separate bank account that preferably earns interest (check with your state laws to see if you have to pay interest on a tenant’s security deposit)

Introduction: Do Not Sell Your House, Rent It
Step 1: Renting vs Selling - Analyze Your Situation
Step 2: Renting Your House: Create a Plan
Step 3: Signing a Lease with a Tenant