In order to guarantee landlords’ rental income, we need to do a very thorough vetting of the prospective tenant – we are, after all, taking on the risk. The fact that a prospective tenant may wear a fancy watch and drive a shiny new car is no guarantee that they are good for the money come rent-time – in fact it might indicate that they have totally different priorities when it comes to their finances!
In this article we offer some insight into how we go about vetting prospective tenants and also what landlords can do to speed up the process – the easier our job is, the quicker we can have an answer for you.
In a nutshell, we need to ensure that the tenant is who they say they are, can afford the rent, have a secure and reliable source of income and have a good payment history. The tenant fills in our Rental Application form, in which they give us a breakdown of their income and expenses, as well as contact details of their current employer and landlord and permission to draw a TPN RentCheck credit report.
Before we even start – the deal-breaker: affordability
A tenant must earn at least three times the monthly rental amount after income tax has been deducted from their salary. We add in any other deductions – such as medical aid, housing, pension, etc – that the employer may have deducted. If the tenant does not make the affordability means test, they may ask a co-tenant (usually a partner, but it could be a flat mate) to be a co-signatory on the lease agreement. In this case we can combine their salaries.
The paperwork. All the paperwork
Signing up to RentMaster’s service is a two-part process. The landlord needs to sign a mandate and give us supporting information and once they have found a prospective tenant, the tenant fills in the Rental Application form and sends through supporting information (copy of ID, most recent salary slip, most recent three months’ bank statements). We can only commence with vetting once we have all the information – complete and up-to-date – in hand.
Please also ensure that the information supplied on the forms is legible. (Ideally, please open our forms in Adobe Acrobat and type in your information – this saves us many hours of deciphering!)
In certain cases, we will require additional information to vet a tenant, including:
- Self-employed tenants: we need EITHER
- a letter from a certified Accountant confirming Gross and Nett income and Independently verified/audited Financial Statements of the latest financial year.
- OR SARS IRP5 for last tax year or SARS assessment (ITA34)
- Tenants who do not have an SA ID
- Copy of Passport
- Valid Residency or Work permit
We would never decline a tenant simply because they don’t have an SA ID or are self-employed but be aware that it may take longer to complete the vetting because of the additional information required.
Time to start vetting
Now we check all the information against each other:
- Does the salary the tenant claims to earn reflect with the salary slip and the bank statements?
- We call the employer to establish if the tenant is permanently employed
The tenant makes a declaration of their income and expenses on the rental application form. In cases where we there are many risk factors, we may escalate the application to our legal manager for an opinion of the financial maturity of the applicant. If, for example, a tenant claims to spend R100 per month on dining out, and the evidence in the bank statements reveals that on average the amount is tenfold that, it may indicate a lack of financial acumen that could count against the tenant.
The TPN RentCheck credit report is a powerful resource in the vetting process. We draw this report for every tenant who will be signing the lease agreement. It gives us an indication of the likelihood of the tenant paying their rent based on their past financial behavior and includes information on the tenant’s payment of their rent, credit cards, store cards, mobile phone account, unsecured loans, motor vehicles payments – any debt that they pay off on a monthly basis. It also lists any judgements of debt against the tenant.
In our next article we will take an in-depth look at the TPN RentCheck report.