A new survey just released by credit reporting service TransUnion shows that while millennials would prefer to purchase their homes, more than 40% won’t realize that dream due to poor credit.
According to the survey results, 43% of individuals aged 18-34 have subprime credit scores — between 300-600.
In addition to low credit scores, 60% of millennials say they would struggle to scrape up enough for a down payment, and a solid majority won’t qualify for lower interest rates — all factors that keep homeownership just out of reach.
That means landlords can expect to see millennials applying for rental vacancies. Given the size of this demographic, it may be wise to embrace the trend. But that may require adjusting leasing policies to accommodate younger renters:
Rental ads need to be mobile and Internet-based, with lots of information and photos included. Millennials work on a 24/7 cycle, so it’s important to carry a cell and be available as much as possible to answer questions. However, it’s not a good idea to make the leasing process — especially tenant screening — entirely automated. It’s important to meet prospective tenants face-to-face.
The level of service becomes an even hotter issue with younger renters, who rely on other people’s reviews and ratings. Negative comments must be resolved or a rental property may decline.
With rents soaring, roommates are a reality for younger renters. Be sure that tenants understand the rental doesn’t have a revolving door — if a roommate leaves, the lease is terminated, and then it’s time for another lease negotiation if others want to stay on.
There’s a difference between a tenant who has little credit, and one who has unrealistic expectations and has been overspending on lifestyle purchases. Pay special attention to the tenant who is pushing the limits of his or her budget. How has this person been handling financial responsibilities?
It’s great to court millennial tenants by switching to online ads, setting up a website or Facebook page so tenants can access house rules, the lease or property information 24/7, and answering your phone when it rings. However, tenant screening is more effective when it’s done in person.
Consider the tenant credit threshold needed to get into the property. When do you reject a tenant? When do you allow a co-signer? This is important to determine ahead of advertising a vacancy, because these policies have to be applied uniformly to each and every applicant.
Don’t skip the tenant credit check because the applicant may not have much credit. It’s still crucial to see if they’ve defaulted on loans. While many millennials are carrying student loan debt, those creditors often restructure loans to allow for lower payments. Defaulting on the loans altogether is a bigger deal.
First-time and younger renters may need some help working through their rights and responsibilities. Provide that information on social media or websites so it is easy to access at odd hours. Allow for electronic payment options. Go over rules, even those that seems basic, so that your renters will understand the boundaries. Good communication is a must.
It also is possible to assist millennial renters in building good credit. One of the best ways to do that is to Report Tenant Pay Habits. Good tenants are rewarded for on-time rent payments.
These tips may be directed toward younger renters, but in reality, these policies can apply to all tenants, no matter the age. The key is to simplify the rental process while still setting limits.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.