From a tenants perspective, there are a plethora of websites with tips on how to navigate the rental market for first-time renters. Whether you are new to property management or a seasoned landlord, these newcomers will be at your door looking for that opportunity.
When my daughter left home some years ago she needed a co-signor to get approved for her first apartment. My son recently struggled, by no fault of his own, to find a place to rent although he’s been on his own for years renting a room while he finished at university.
It can be tough not only for those leaving home or those college graduates moving from dorms or room rentals, but also for newly divorced previous homeowners, and others with no to low rental history.
If you do not already have a first-time renter program in place, consider these tips to create a rental policy with criteria to ease into accepting these first-time renters.
Ask for a Rental Resume
If a first-time renter hands you an application with missing rental history (or they’ve told you directly they are newbies) you might want to consider a different approach and ask them to create a rental resume to accompany the application.
A rental resume may allow you to get a glimpse of who they are as a person and will allow them to put a little more detail on other areas where they might shine.
Just like an employment application, ask for references. Even if your application already requires some, it doesn’t hurt to ask for additional references to call upon.
Let them take the lead and see what information they bring. The rental resume might include hobbies where you find out they breed rabbits in their spare time or play in a garage band. Ok, not the best items to find out. But then again, maybe you learn they graduated with honors, are active in community service, and are an ideal rental candidate. At the very least you’ll have extra information about that individual to help you make a good decision.
Ask for Additional Documentation
Supporting documents are helpful in any rental decision, and especially so from renters with little to no rental history.
Bank Account Statements
Checking, savings, trust funds, mutual funds, or any other financial statements can be enlightening. Some management companies require three months of statements as additional proof of income and help in calculating debt-to-income ratios.
Letters of Recommendation
Even if you call on all their references, letters of recommendation add a layer of insight into the applicant. It’s one thing for someone to agree to be a reference for a quick phone call but a recommendation from a trusted source such as an employer, teacher, religious leader, etc. elevates the likelihood that the renter is trustworthy.
Alternative Forms of Credit
Perhaps these applicants not only lack rental history but may also be facing a non-existent or low credit score. Even with good credit, you might wish to ask for proof of credit and/or alternative credit to see how they handle their financial obligations. Types of alternative forms of credit would be cell phone bills, jewelry retailer accounts, and an auto insurance policy.
Conduct a Rental Interview
Regardless of rental history, it is important to conduct a rental interview. If you are requiring a co-signor or guarantor, be sure they have also filled out an application and attend the rental interview.
Remember during the interview to be very careful to only ask acceptable questions. The Federal Fair Housing Act does not allow age, marital status, or arbitrary discrimination. Do not discuss age or family status with anyone in attendance. Additionally, there are local regulations that might hinder certain questions even further. Be sure to stay informed with those local and state laws.
These do’s and don’ts of a tenant interview are important to understanding limitations. From that understanding ask questions from the documentation they provided (applications, additional supporting documentation, rental resume, and recommendations).
Screen Every Applicant and Co-Signor
If an applicant self-reports little to no credit and/or rental history you may be tempted to skip the screening process hoping to save time and money, but don’t fall into that trap. You hope to not find these first-time renters on a criminal or eviction report but you never know. Screen every potential renter, co-renter, and co-signor to protect yourself from discrimination concerns and to avoid any surprises.
Credit History
Having little to no rental history doesn’t translate to no credit history. There are many students building (and other adults rebuilding) their credit. It’s popular in today’s society to prejudge your millennials or gen Z applicants, but many are very credit savvy.
For instance, when our children were young we started them in a learn to earn program with the local bank. We then taught them how to build credit early; by the time they left home, their credit was established and was one less concern. Running a credit check on all applicants and co-renters may pleasantly surprise you.
Rental History
My son signed a rental agreement and lived in a rented room for years while he obtained his degree. Although he had that consistency of payment and good conduct, because the home was owned by his out-of-state uncle, he found it difficult to get a foot in the door to be considered for an apartment.
He’s not alone. Many landlords discount time rented from friends, family, corporate housing, or dormitories. You may not be offering student housing, but housing students could be lucrative taking the right precautions. Although it may not be a traditional source of history, you may wish to consider the circumstances and situation prior to a quick denial.
If you’ve decided to take a chance on these first-time renters, be sure to call on and research all past living arrangements. It is a good sign when someone is upfront and proactive with information that they’ve rented from a relative or friend. There is a big difference from a legitimate rental relationship with a relation vs. someone attempting to fake rental history. One might be considered charming where the other is certainly alarming.
Employment History
Call their current and former employers. Verify that all information on the application and rental resume’ match the information provided by their employers. Be sure to only ask appropriate questions allowable by your local and state laws.
Offer First Time Renters Flexibility
If you’ve found a candidate that seems perfect but you are still hesitant to rent to them for lack of rental history, consider being flexible with some of the terms to create a win/win for both parties. Check with your local and state laws but when appropriate:
- In addition to requiring first month’s rent upfront, ask for the last month’s rent as well to cover a flight risk.
- Ask for the maximum security and holding deposit.
- Require that the co-signor agree to and sign the lease as a guarantor.
- Offer shorter rental terms such as a month-to-month or a short term lease of three or six months vs. a longer lease term.
Set Expectations
Once approved, during the lease signing be sure to set clear expectations. They have never rented, they may be naive to what you and seasoned renters would find commonplace. Be sure to review policies, rules, and regulations concerning:
Pets
Amenities
Insurance requirements
Quiet enjoyment standards
Lease renewal
Roommate restrictions
Offer First Time Rental Guidance
When my son finally found a place to rent, the property manager took him under their wing like a sweet auntie. That might not be your style but anyone can become a reliable source of helpful information. You can offer this information in a welcome basket, a tenant handbook, or other creative ways. Include items such as:
Utilities
Give your first-time renters information on how to contact all the utility companies and what to expect when establishing a utility account. It may come as a surprise to your new resident that many new renters will be required to pay a utility deposit when establishing a utility account. A heads up will help them budget for this unexpected expense.
Local Information
Have useful area information available can set you up as a trusted resource. Even if they are not new to the area, having information on public transportation, post office locations, local restaurants, and shopping can be very handy. Consider adding some take out menus and local gym or theatre information in their welcome packet.
Take a Chance on First Time Renters
New renters could turn out to be your best renters. We all started somewhere. If your occupancy rates are high and you need your rentals filled, perhaps it’s time to take a chance on first-time renters. Between college students and new adults leaving home for the first time, many new faces are coming into the rental market and perhaps it’s time to give these fresh faces a chance.
