Choosing Tenants
November 9, 2004 12:44 PM Subscribe
I have a rental property and am about to rent it out for the first time. The trouble is, my potential tenants seem shaky to me. Two single mothers with a total of three kids. One has a foreclosure in the past and they have a few credit glitches. My property manager says he is 80% good on them. I'd like to give them a chance, but I am afraid I will get screwed. This is the first bite we've had on the property after a month of listing. Advice/horror stories/divine inspiration?
Renting to these people is a bad idea. My father used to own around 140 units and his rule of thumb was to never rent to anyone who has bad credit. Keep it listed for another month and see how it goes. One month of lost revenue is a lot less than excuses after excuses for months on end without payment, not to mention the eviction costs. Resist the temptation.
posted by repoman at 1:03 PM on November 9, 2004
posted by repoman at 1:03 PM on November 9, 2004
Did they pay on time ?
Were they ever late on the rent ?
Did they have problems with other tenants in the building,
or with the neighbors of the house, where they rented ?
Did they have a lot of visitors ?
Did they do any damage ?
Were they quiet ?
Always demand three rental references and grill the managers to whom you talk concerning all of the above questions. If the previous managers fudge--oh, they were late once or twice--or seem evasive, there's a bright red flare indicating wreck on the highway ahead. Less than three positive rental references is a sure sign of trouble in my experience.
Upon review: Demand enough money to cover an eviction if they are hinky in any respect. Here that amount is around $1000.
Oh, yes--in my experience, the younger the tenants, the more likely there will be trouble in regards to the questions above. If their parents are helping with the rent, ask for a $1000 deposit plus a parental co-sign on the lease for each tenant.
posted by y2karl at 1:19 PM on November 9, 2004
Were they ever late on the rent ?
Did they have problems with other tenants in the building,
or with the neighbors of the house, where they rented ?
Did they have a lot of visitors ?
Did they do any damage ?
Were they quiet ?
Always demand three rental references and grill the managers to whom you talk concerning all of the above questions. If the previous managers fudge--oh, they were late once or twice--or seem evasive, there's a bright red flare indicating wreck on the highway ahead. Less than three positive rental references is a sure sign of trouble in my experience.
Upon review: Demand enough money to cover an eviction if they are hinky in any respect. Here that amount is around $1000.
Oh, yes--in my experience, the younger the tenants, the more likely there will be trouble in regards to the questions above. If their parents are helping with the rent, ask for a $1000 deposit plus a parental co-sign on the lease for each tenant.
posted by y2karl at 1:19 PM on November 9, 2004
Maybe you're listing it at too high a price? You might get a bigger pool of acceptable folks if you knock $100 off the rent.
/obvious
posted by luser at 1:20 PM on November 9, 2004
/obvious
posted by luser at 1:20 PM on November 9, 2004
Two single mothers with a total of three kids.
This is another red flag. I want one party or family to be responsible for the rent and upkeep, not two. Otherwise if you have a problem, one of them can just blame the other. Plus, if one moves out, the other will look for someone else to share the space and you start losing control of who uses the property. I'd wait for a better tenant.
posted by letitrain at 1:23 PM on November 9, 2004
This is another red flag. I want one party or family to be responsible for the rent and upkeep, not two. Otherwise if you have a problem, one of them can just blame the other. Plus, if one moves out, the other will look for someone else to share the space and you start losing control of who uses the property. I'd wait for a better tenant.
posted by letitrain at 1:23 PM on November 9, 2004
My property manager says he is 80% good on them.
Meaningless, unless you can hit him for the rent when they disappear one day, or wreck the place.
Find better tenants, you will thank yourself later.
posted by contessa at 1:28 PM on November 9, 2004
Meaningless, unless you can hit him for the rent when they disappear one day, or wreck the place.
Find better tenants, you will thank yourself later.
posted by contessa at 1:28 PM on November 9, 2004
An 80% good on them means there's a 1 in five chance they'll rat on you.
Bad odds and a huge, huge nightmare you can avoid by not renting to them.
Bad rentors suck and getting them out can be a long and very, very expensive process.
If you have to end up renting to them, take a huge security deposit, first and last month's rent and get an iron clad rental agreement.
Good luck!
posted by fenriq at 1:40 PM on November 9, 2004
Bad odds and a huge, huge nightmare you can avoid by not renting to them.
Bad rentors suck and getting them out can be a long and very, very expensive process.
If you have to end up renting to them, take a huge security deposit, first and last month's rent and get an iron clad rental agreement.
Good luck!
posted by fenriq at 1:40 PM on November 9, 2004
My father has rented one unit to a number of different tenants for nearly 30 years. He's never done a credit check and never called a reference. For our current tenant he required a signature on a form that permitted him to do a credit check. I think he intended to perform the check but we never bothered. We've never had any problems. The previous tenant was reliably late with the rent but there was never any concern on our part that it wasn't coming. This may not be a reasonable expectation in other neighborhoods.
Recently there were as many as seven vacant apartments on our very small street. Many were vacant for a few months and at least one was vacant for several months. That's a certain loss of slightly less than $1k per month versus the chance that you may lose money. Further, my father collected first, last and a deposit of one month's rent. So passing over a potential tenant with weak credit is betting that something bad will happen AND that this will result in a loss greater than two months rent.
posted by stuart_s at 1:53 PM on November 9, 2004
Recently there were as many as seven vacant apartments on our very small street. Many were vacant for a few months and at least one was vacant for several months. That's a certain loss of slightly less than $1k per month versus the chance that you may lose money. Further, my father collected first, last and a deposit of one month's rent. So passing over a potential tenant with weak credit is betting that something bad will happen AND that this will result in a loss greater than two months rent.
posted by stuart_s at 1:53 PM on November 9, 2004
Although it's outside my own experience, an acquaintance who owns a rental duplex has discovered to her chagrin that having a lease, at least here in Texas, actually protects deadbeat tenants from eviction more than a month-to-month arrangement. She's got a deadbeat, and has spent something like 3 months trying to pry him out legally. This probably varies from state to state, but it would be worth checking out.
My cold-hearted instinct would be to pass here. The potential downside is considerable.
posted by adamrice at 1:58 PM on November 9, 2004
My cold-hearted instinct would be to pass here. The potential downside is considerable.
posted by adamrice at 1:58 PM on November 9, 2004
Most people who are renting are going to have one or two items one their credit report otherwise they'd be buying.
Your real problem is your asking too much. You should try to price yourself slightly under the market. This does two things. First you get a wider pool of applicatants and second you get loyalty. If your at the top of the market people will jump ship as soon as they can find someplace cheaper. Unless your property is someplace with extremely tight rental market your much better being $50 under the going rate and keeping a tenant for 5 years than being $50 over the mean and having five tenants in five years.
If your price is realistic and if the two women have been renting together for a while and are employed at a stable jobs that pay 10% or more over minimum wage I'd take the chance. But everyone has groups they won't rent to because of bad experiences. My mother won't rent to single women; my father will only rent to people on social assistance and I don't rent to smokers or dog owners.
IMHO the worst people to rent to are rich people.
posted by Mitheral at 1:59 PM on November 9, 2004
Your real problem is your asking too much. You should try to price yourself slightly under the market. This does two things. First you get a wider pool of applicatants and second you get loyalty. If your at the top of the market people will jump ship as soon as they can find someplace cheaper. Unless your property is someplace with extremely tight rental market your much better being $50 under the going rate and keeping a tenant for 5 years than being $50 over the mean and having five tenants in five years.
If your price is realistic and if the two women have been renting together for a while and are employed at a stable jobs that pay 10% or more over minimum wage I'd take the chance. But everyone has groups they won't rent to because of bad experiences. My mother won't rent to single women; my father will only rent to people on social assistance and I don't rent to smokers or dog owners.
IMHO the worst people to rent to are rich people.
posted by Mitheral at 1:59 PM on November 9, 2004
We do a credit check as well but my owner is open to renting to people with bad credit if they are upfront about it from the start and are willing to pay a hefty eviction insurance sized deposit.
posted by y2karl at 2:10 PM on November 9, 2004
posted by y2karl at 2:10 PM on November 9, 2004
Two mothers + three kids = problem renters. They're probably looking for a place together because they can't afford a place on their own, which unfortunately happens a lot, but I personally wouldn't risk it. If the previous landlord had recommended them "100%", then fine. But 80%? That translates to: "Missed a couple of rent payments" or "Were always late, but eventually paid."
My GF's mother is in the process of trying to get rid of deadbeat tenants, and I can tell you it is a ROYAL pain in the ass, not to mention expensive.
posted by Civil_Disobedient at 2:30 PM on November 9, 2004
My GF's mother is in the process of trying to get rid of deadbeat tenants, and I can tell you it is a ROYAL pain in the ass, not to mention expensive.
posted by Civil_Disobedient at 2:30 PM on November 9, 2004
Most people who are renting are going to have one or two items one their credit report otherwise they'd be buying
Do you really think that's the case? Sure it is for some ppl, but I don't think its fair to generalize. I'm a renter, have perfect credit and am currently just waiting for the right property to buy. There are many other renters who just may not have the down payment for a purchase, are not ready for the commitment of owning or prefer the flexibility of renting.
posted by trillion at 2:41 PM on November 9, 2004
Do you really think that's the case? Sure it is for some ppl, but I don't think its fair to generalize. I'm a renter, have perfect credit and am currently just waiting for the right property to buy. There are many other renters who just may not have the down payment for a purchase, are not ready for the commitment of owning or prefer the flexibility of renting.
posted by trillion at 2:41 PM on November 9, 2004
Any chance your property qualifies for HUD Section 8 housing? When we were poor starving college students/parents we were in the Section 8 program, and HUD paid all but about $100 of our rent, meaning it was guaranteed that the landlord was going to get 90% of the monthly rent no matter what.
posted by mr_crash_davis at 2:46 PM on November 9, 2004
posted by mr_crash_davis at 2:46 PM on November 9, 2004
Response by poster: Any chance your property qualifies for HUD Section 8 housing?
Not sure actually.
Thanks for all the advice, peeps. I tend to agree with the "listen to your gut" people.
posted by Kafkaesque at 2:51 PM on November 9, 2004
Not sure actually.
Thanks for all the advice, peeps. I tend to agree with the "listen to your gut" people.
posted by Kafkaesque at 2:51 PM on November 9, 2004
_Most_ not all. I'd WAG 75% of people who are renting in the markets I'm familiar with (western canada - Vancouver) have one of three things on their credit report in the last 24-36 months:
1) At least one reported missed payment
2) multiple addresses or multiple jobs.
3) a history shorter than 36 months.
But I'll concede the word most for majority instead.
posted by Mitheral at 3:02 PM on November 9, 2004
1) At least one reported missed payment
2) multiple addresses or multiple jobs.
3) a history shorter than 36 months.
But I'll concede the word most for majority instead.
posted by Mitheral at 3:02 PM on November 9, 2004
FWIW -- I have a rental property as well and my first tenants moved in at the beginning of last month. I didn't lease it directly - I went through a broker, who in exchange for 15% of the annual rent, showed the property, vetted potential tenants, ran credit checks, and is my middleman for tenant issues. This was a bonus to me because I had no idea how to act as my own realtor for the property. That was the up-side.
The down-side: it sat on the market for 3 months because another broker was pricing identical units at $100-$150 below market rent (which try as I may, I cannot figure out) whereas I priced at market. When I lowered the rent A LOT, I got a tenant, but for the first 2 weeks it was constant phonecalls back and forth, between the renters and the agent, and the agent and me. In the end it was very expensive, setting up pest control and appliance maintenance contracts and all that, since I'm no handywoman.
When you factor everything in -- the cut the agent is taking, my outlay for annual contracts, on top of my mortgage/taxes/fees etc...I'm essentially subsidizing their housing to the tune of $140/month. The only reason I won't let this eat away at me is that eventually it will all (or most of it will) be tax-deductible and in the long run the hit isn't as grievous. But man...just be careful.
posted by contessa at 3:02 PM on November 9, 2004
The down-side: it sat on the market for 3 months because another broker was pricing identical units at $100-$150 below market rent (which try as I may, I cannot figure out) whereas I priced at market. When I lowered the rent A LOT, I got a tenant, but for the first 2 weeks it was constant phonecalls back and forth, between the renters and the agent, and the agent and me. In the end it was very expensive, setting up pest control and appliance maintenance contracts and all that, since I'm no handywoman.
When you factor everything in -- the cut the agent is taking, my outlay for annual contracts, on top of my mortgage/taxes/fees etc...I'm essentially subsidizing their housing to the tune of $140/month. The only reason I won't let this eat away at me is that eventually it will all (or most of it will) be tax-deductible and in the long run the hit isn't as grievous. But man...just be careful.
posted by contessa at 3:02 PM on November 9, 2004
Response by poster: I'm using an agent too, as the property is 500 miles away. This guy is taking 125$/mo.
But yeah, at this point we're about brekaing even with the mortgage.
posted by Kafkaesque at 3:06 PM on November 9, 2004
But yeah, at this point we're about brekaing even with the mortgage.
posted by Kafkaesque at 3:06 PM on November 9, 2004
The first thing you have to do is decide what degree of charity you can afford to involve in your decision. I have acquaintances who have decided they were well-enough off to take a risk on someone with a hard-luck story but who might come out OK. They did it because they could afford to and wanted to be that kind of person. If you can't afford it, all the "don't do it" advice in this thread is probably pretty good, and you need to understand it so that your decision is a business decision unclouded by guilt. If you can afford it, then taking a chance may be something worth doing.
posted by weston at 4:56 PM on November 9, 2004
posted by weston at 4:56 PM on November 9, 2004
"Two single mothers with a total of three kids.
This is another red flag. I want one party or family to be responsible for the rent and upkeep, not two. Otherwise if you have a problem, one of them can just blame the other. Plus, if one moves out, the other will look for someone else to share the space and you start losing control of who uses the property. I'd wait for a better tenant."
what letitrain said is key. imperfect credit history could play out ok, but you definitely only want 1 signator on the lease otherwise you're up a creek if you end up having to evict.
posted by juv3nal at 5:50 PM on November 9, 2004
This is another red flag. I want one party or family to be responsible for the rent and upkeep, not two. Otherwise if you have a problem, one of them can just blame the other. Plus, if one moves out, the other will look for someone else to share the space and you start losing control of who uses the property. I'd wait for a better tenant."
what letitrain said is key. imperfect credit history could play out ok, but you definitely only want 1 signator on the lease otherwise you're up a creek if you end up having to evict.
posted by juv3nal at 5:50 PM on November 9, 2004
you definitely only want 1 signator on the lease otherwise you're up a creek if you end up having to evict
Check your lease's terms before following that advice. Typically a lease specifies that each tenant is "Jointly And Severally" responsible, which means no one gets to weasel out of their obligations by pointing fingers at someone else. If so, get a signature from every adult occupying the place; more signatures = more better. :-)
Regarding some of the other topics that have come up--
Roommates Sharing quarters is swell, but never give up control of your property. Put it in writing: no one new is allowed to move in without going through the same process the original tenants did. If they want to add a roomie, or swap a roomie, they deal with you or the manager just like any other prospective tenant would. My tenants have always lived with that rule, and it's never been a problem. In fact, there have been a few times when a tenant has even gratefully used me as the heavy to turn down some prospective roommate that they were on the fence about. When someone new is being considered, there's a sort of partnership because the remaining tenant and I share a common interest at that point: ensuring that the new person isn't going to stick either one of us with an unpaid bill. But even if you plan to just rubber-stamp new roommates' applications, it's still good to require the completed forms. (There's a lot of info there becomes invaluable if you ever have to evict, or sic a collections agency on them.)
The current applicants You're doing a good thing by sticking with your gut. I've seen landlords get scared into rash decisions by a tough market. I've done it a few times, too, against better instincts. It rarely ends well. The single best way to avoid the expense (yours) and misery (also yours) of eviction is to choose your tenants well; when you've got a responsible tenant, so much else takes care of itself. Do what you need to get a broad pool of applicants, then pick out someone that you can feel really good about.
Fair housing Tread lightly. Federal law prohibits discriminating against families. If you do decide turn these mothers down, make sure you've set a clear standard for why, and that you apply that standard to everyone else too. They deserve your fairness, and of course you deserve to select excellent tenants without inviting trouble from the fair housing enforcement department.
Poor credit history (a) Don't let anyone else make your financial decisions for you. A manager is very useful, but when doubts arise don't hestiate to ask for specifics so you can fully evaluate the situation for yourself. 80% sounds like a lot of doubt for someone who is supposed to know their qualifications best. Without talking to the tenants and references yourself, and without looking at a credit report, his 80% should be your 40% at best. (b) Shit happens to a lot of people. Medical bills are a big factor, some reports claim it's the #1 factor, in U.S. personal bankruptcies. So having a past bankruptcy isn't *necessarily* evidence of bad character. If everything else looks good, ask them to explain the bankruptcy and to persuade you that they're not deadbeats. Here's the other thing about a bankruptcy: a recent one can work in your favor. There's a time limit (5 years? 7?) after a bankruptcy where they're ineligible to get another. If a person with a clean record winds up owing you a big debt, s/he could file for bankruptcy and you're SOL. (c) People with really bad credit know they need to work harder to get a place. Many are prepared to do what's necessary to prove they can be great tenants. So if you need more reassurance, there's a good chance they'll agree to stricter lease terms and/or a larger deposit. A lease is just another contract; terms are negotiable.
posted by nakedcodemonkey at 10:17 PM on November 9, 2004
Check your lease's terms before following that advice. Typically a lease specifies that each tenant is "Jointly And Severally" responsible, which means no one gets to weasel out of their obligations by pointing fingers at someone else. If so, get a signature from every adult occupying the place; more signatures = more better. :-)
Regarding some of the other topics that have come up--
Roommates Sharing quarters is swell, but never give up control of your property. Put it in writing: no one new is allowed to move in without going through the same process the original tenants did. If they want to add a roomie, or swap a roomie, they deal with you or the manager just like any other prospective tenant would. My tenants have always lived with that rule, and it's never been a problem. In fact, there have been a few times when a tenant has even gratefully used me as the heavy to turn down some prospective roommate that they were on the fence about. When someone new is being considered, there's a sort of partnership because the remaining tenant and I share a common interest at that point: ensuring that the new person isn't going to stick either one of us with an unpaid bill. But even if you plan to just rubber-stamp new roommates' applications, it's still good to require the completed forms. (There's a lot of info there becomes invaluable if you ever have to evict, or sic a collections agency on them.)
The current applicants You're doing a good thing by sticking with your gut. I've seen landlords get scared into rash decisions by a tough market. I've done it a few times, too, against better instincts. It rarely ends well. The single best way to avoid the expense (yours) and misery (also yours) of eviction is to choose your tenants well; when you've got a responsible tenant, so much else takes care of itself. Do what you need to get a broad pool of applicants, then pick out someone that you can feel really good about.
Fair housing Tread lightly. Federal law prohibits discriminating against families. If you do decide turn these mothers down, make sure you've set a clear standard for why, and that you apply that standard to everyone else too. They deserve your fairness, and of course you deserve to select excellent tenants without inviting trouble from the fair housing enforcement department.
Poor credit history (a) Don't let anyone else make your financial decisions for you. A manager is very useful, but when doubts arise don't hestiate to ask for specifics so you can fully evaluate the situation for yourself. 80% sounds like a lot of doubt for someone who is supposed to know their qualifications best. Without talking to the tenants and references yourself, and without looking at a credit report, his 80% should be your 40% at best. (b) Shit happens to a lot of people. Medical bills are a big factor, some reports claim it's the #1 factor, in U.S. personal bankruptcies. So having a past bankruptcy isn't *necessarily* evidence of bad character. If everything else looks good, ask them to explain the bankruptcy and to persuade you that they're not deadbeats. Here's the other thing about a bankruptcy: a recent one can work in your favor. There's a time limit (5 years? 7?) after a bankruptcy where they're ineligible to get another. If a person with a clean record winds up owing you a big debt, s/he could file for bankruptcy and you're SOL. (c) People with really bad credit know they need to work harder to get a place. Many are prepared to do what's necessary to prove they can be great tenants. So if you need more reassurance, there's a good chance they'll agree to stricter lease terms and/or a larger deposit. A lease is just another contract; terms are negotiable.
posted by nakedcodemonkey at 10:17 PM on November 9, 2004
This thread is closed to new comments.
posted by mathowie at 1:00 PM on November 9, 2004