VA LOAN CAPTAIN BLOG & Learning Center

Being a Landlord

By: Grant Moon 02/19/14 09:54 am

Being a Landlord

When VA eligible borrowers buy their first home, it’s typically at a younger age. There’s no need for a down payment and closing costs are lower so the VA loan is an easy choice for those that qualify. Yet later in years as the borrowers have the wherewithal to buy and finance a home using a conventional mortgage, sometimes they decide to keep the existing home and collect the monthly rent each month while at the same time building additional wealth as the property appreciates over the years. If this is you or it might be, what can you do to be a good landlord?

The best way to be a good landlord is to find good tenants. That means getting a lease signed for at least a year by tenants with good credit and employment. How do you make sure your tenants are qualified? You first need to determine whether or not they’ve paid their previous rent as well as their monthly bills on time. By having the prospective tenants sign a credit authorization form, there are several online credit services designed for landlords allowing you to pull a credit report. Make sure you pull your own report and not review one provided by the future tenants.

When reviewing the report, look for any recent negative activity. There might be late payments or even collection accounts but if they’re resolved and more than two or three years old with good credit since and the negative credit documented, you should be fine.

And you want to make sure your tenants can afford the rent as well. Banks typically allow one-third of a borrower’s income to be dedicated toward housing and you should employ the same formula. Taking in to account your rent, add any additional monthly payment shown on the credit report. And by looking at a recent pay check stub showing month to date and year to date income, if the monthly payments are near the one-third benchmark, then affordability can be determined. If it’s much more than that, you may need to keep looking for someone who has demonstrated responsible credit and can easily afford the monthly rent.


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