We are always asked how to find good quality tenants for properties. Our belief is that it’s all about the Chicagoland tenant screening process. When we are screening, we look at five things: credit, criminal, income and employment, identity, and rental history if it applies.
Tenant Screening Chicagoland: Ratios
We use ratios to qualify the tenants who apply for our properties. For income, we look for a ratio of 35 percent of the tenant’s gross monthly income. That means if a tenant makes $5,000 per month, you multiply that by .35 to get $1,750. As long as the rent is at or below $1,750 per month, the tenant will qualify on an income basis. With debt, we look for a 50 percent debt ratio. So, take that same $5,000 per month and multiply it by .5. You want to include the rent for the property because that’s a new debt the tenant is taking on. So, as long as rent and debt make up no more than 50 percent of a tenant’s gross income, you should be okay.
Tenant Screening and Risk Mitigation
While we try to rely on our ratios, these things are never etched in stone. In some circumstances, there are situations that arise and we know that otherwise good tenants have some ratios that don’t work out. For example, a tenant might have recently gone through a short sale or a foreclosure. Perhaps there was an ugly divorce or a tenant was out of work for a while. These things can impact debt and debt ratios. So, you’ll want to protect yourself by asking for an additional security deposit, or collecting some prepaid rent in advance of signing a lease. It’s all about minimizing your risk.
If you have any questions about finding a tenant or anything pertaining to Chicagoland property management, we’d be happy to be a resource for you. Please contact us at Baird & Warner Property Management.