Before you can effectively lease your California rental property, you need to make sure it’s ready for the rental market and the highly qualified tenants who are looking for a new home.
We’ve created blogs and videos before about the steps you need to take to rent out your property, and today we’re taking a deeper look at the requirements of providing applications and screening tenants in California.
An important thing to note is that the rental laws in California have changed dramatically in the last year. If you’re managing your own rental home, make sure you understand the fair housing requirements as well as what you can and cannot do when you’re screening tenants. It’s now prohibited to reject Section 8 tenants if they are otherwise qualified, for example. And, if you’re renting out a home in the city of Oakland, you can no longer run a criminal background check or even ask for permission to run that check during the initial screening process.
The laws are complex. One of the areas in which landlords frequently make expensive legal mistakes is the screening process. If you have any doubt at all, please contact a professional property manager in your area.
Let’s take a look at how to effectively screen California tenants for your rental property.
Providing a Rental Application
Every adult who is 18 years of age or older should be required to fill out an application. You want to make sure you’re gathering screening data on every adult. Tenants may be moving in with children who are under 18 years of age, and you’ll want to document who they are and their ages.
Your rental application should start with the basic identifying information. You’ll need to collect every resident’s name, age, date of birth, and social security number. Ask for income and employment information, and be sure to collect phone numbers for references so you can call and verify employment and rental history.
You can require supporting documentation with your application as well. Most tenants are going to expect an online application, so make sure you have a platform that’s easy to accept and upload the data and information that you’ll need. If you’re providing a paper application, it may take a little longer to collect the necessary information and check through it manually.
A good application will also ask for information about prior evictions and reference information for current and previous landlords. Make sure you have the applicant’s last two or three addresses so you can verify that against the credit report.
Make sure the application is signed and that the application fee is paid. Remember that California landlords are limited in the amount they can collect in an application fee. Recently, the limit has been $50, and it increases annually based on the Consumer Price Index (CPI). Don’t charge more than the legally required application fee limit.
Establishing Standard and Consistent Rental Criteria
Fair housing laws are easy to follow, and most of the landlords we work with do not intentionally set out to discriminate against anyone. However, it’s easy to make a legal mistake without meaning to. Thus, it’s important to have a written set of rental criteria that you’ll use to evaluate every application you receive. This needs to be in writing and provided to prospective tenants before they apply. When your screening process is documented and you follow it consistently every time you receive an application, you’ll be able to protect yourself against potential fair housing lawsuits or tenant complaints.
When you provide your standard rental criteria, prospective applicants will have a good idea of whether or not they’ll qualify. This will save all parties some time and money during the application and screening process. If you require a certain income level, for example, and they don’t meet it, they should know that before taking the time and spending the money to apply.
Items you might include in your rental criteria could include:
- Minimum credit score
- Minimum income level
- No evictions in the last five, 10, 15 years, etc.
- Verifiable rental history
Check with your local laws when it comes to fair housing and screening. As we mentioned earlier, in Oakland criminal histories can no longer be used at all. Different cities and counties throughout California may have their own laws on how you can screen tenants.
Screening for Credit and Income
Credit checks are a standard and important part of the tenant screening process. Some landlords and property managers like to attach a specific credit score to their standards and decide that they will only allow tenants who have a credit score of at least 600. This is one way to screen tenants, but many times, we have found that the credit history is even more important than the credit score. A lot of things can impact a credit score, and not all of those things really matter to you as a landlord.
Take a look at the debt on the credit report. Not all debt is created equally when you’re renting out a home. For example, if you see a long list of overdue bills that are owed to former landlords, property managers, or apartment buildings, that’s a huge red flag. Maybe a prospective tenant meets the credit score threshold you’ve established but owes $500 to a utility company. You don’t want to rent to tenants who can’t or won’t keep up with their housing-related bills. Student loan debt can be overwhelming, and so can medical debt. Those things can drag down a credit score pretty dramatically. But, you might be more cautious renting to someone who has a lot of unpaid cable and utility bills.
Income is important because you want to be sure your tenant can afford to pay the rent on time every month. Most California landlords look for an income that’s at least two-and-a-half or three times the monthly rent. This is a good standard, and you should always verify the income that’s reported by collecting pay stubs, tax forms, or bank statements.
In California, housing vouchers are now considered acceptable income. You can no longer deny a Section 8 tenant simply because that applicant has a housing voucher. You are required to accept that prospective tenant’s application, and to screen it the same way you screen all other applications. Income can include Section 8 benefits.
Screening for Rental History and Prior Evictions
Prior evictions are often a huge red flag for rental property owners when they’re screening tenants. Some landlords won’t accept any applicants with an eviction on their record. Others will allow older evictions. Decide what your standard will be, and stick to it. If an applicant has met all of your other criteria and had an eviction 22 years ago, you might be okay renting out the property. If an applicant has been evicted twice in the last five years, you might want to deny that one.
We recommend conducting a complete check of rental history. Talk to current and former landlords. Ask if rent was paid on time, the property was taken care of, and pets were well-behaved. Find out if appropriate notice was given before move-out and if the security deposit was returned. Always ask if they would rent to that tenant again. This can give you a good idea of what your experience will be like with this tenant.
Screening for outstanding California tenants is time consuming. If you’re worried about the legal implications and you don’t have the resources and tools to adequately screen a tenant, get some help from a professional California property management company. We can help. Contact us at Progressive Property Management.