Rental reference letters can be a valuable addition to a thorough background check of prospective residential tenants.
Property managers who require them as part of a rental application use them to determine the full scope of a tenant’s reliability. Credit scores and payslips will show you whether a tenant can pay, but not whether they broke their previous lease terms or damaged the last property they lived in.
Some tenants might also request a reference letter to bolster their application if they appear risky on paper (e.g. low credit score) but have proven to be reliable. A commonly occurring example is self-employed individuals.
You can do a good tenant the favor of writing them a positive recommendation. But property managers are also within their rights to share any negative experiences they’ve had with lower-quality tenants. You could be saving their future property manager a lot of hassle and expense.
What to include in a rental reference letter
First, keep the letter simple; avoid using flowery language. If you want to make sure your letter is concise and to the point, you can use a template.
Following a salutation, limit the first paragraph to a few key details: your name and contact information, the tenant's name, the address of the rental property, the dates of the tenancy, and the monthly rent amount.
The body of the rental reference letter is where you’ll provide a brief, unbiased assessment of how the tenant treated you and the property. Did they pay in full and on time? Did they keep the unit in good condition? Did they violate any part of the lease?
It’s important to be careful about disclosing personal information when writing a reference letter. Your former tenants are still protected by the Fair Housing Act, and potentially by state or local laws too. Any statement that looks like a reference – intentional or not – to their age, sex, religion or any other protected characteristic can put you at risk of a lawsuit.
Be prepared to back up your claims with evidence. The right property management software can be useful in this regard – PayProp keeps an indelible record of every action that’s ever been taken on the platform, including rent receipts, arrears reminders, and maintenance tickets.
Finally, close the letter with whether or not you would recommend the tenant. Be sure to proofread!
If all else fails…
In short, rental reference letters are a great tool to ensure that you and your peers only work with the best tenants.
But if worse comes to worst and a bad tenant slips through the cracks, the best you can do is to minimize and even undo the damage caused. PayProp’s proactive automated payment reminders and instant arrears alerts can help recover the rent your landlords are owed.