Help me lower my eviction ratio 12 posts by 9 users

Posted: 05/22/2008 at 10:54PM

I have had a rash of evictions lately for non-payment and it has caused me to look introspectively at what I am doing or not doing when screening these tenants, that may result in me allowing bad tenants to slip through my screening process.

Although I own lots of investment property, I wonder if I can't see the forest through the trees. I am looking for some practical advice.

Background: Most of my properties are 2-4 unit buildings in Minneapolis. I own in many parts of the city, but have 95% of my evictions in the lower income (but not bullets flying) areas. I do full credit, criminal, and rental history checks through an agency.

Here are some questions (please tell me the way you really do it and not the pie in the sky hard-ass landlord canned reply):
[list] Do you have an income to rent ratio the tenant must pass? If so, what is the ratio?
Do you allow any evictions or collections on their record? If so, how old does it have to be for your to excuse it?
If it was 2 weeks before your apartment was vacant, would you (Or do you) lower your standards instead of losing a month's rent?
Have you also found some correlation between your bad tenants and something on their background check?
To stay honest with yourself and your rules, do you use a point system for each applicant?
Do you have buildings or units that you are willing to lower your standards on because they are more difficult to fill or some other reason?[/list:u]

Thanks in advance.

Posted: 05/23/2008 at 07:17AM

Interesting thread. Interesting posts.

My income to rent ratio is 3:1 and can be alimony, welfare, food stamps, disability, job, etc. Of course this can change if they get fired or the shack-up moves out, so it's just a move-in qualifier.

I allow no evictions unless it's over 5 years old and I can talk to some landlords since then, the most recent of which will probably lie to me just to get rid of a problem tenant. But of course, what do you do when the tenants say they've been staying with Sis since the old eviction?

I try not to lower my standards just to rent out a place, but you better believe I'm tempted. I have one multi-family like that and I'm going to sell it, hopefully at break-even or better.

I guess I do use a point system to rate my applicants, but it's sort of instinctual and cumulative. Tattoos, gross piercings, skulky demeanors, unruly kids, smelling of beer at ten in the morning, living with Sis for the last five years, the list goes on. The most recent was a lady who drove an expensive SUV but couldn't afford the low rent; well, gee, there's some money-management problems there.

Look, I know the consensus is that in low-income land 'screening right' eliminates most tenant problems, but it still seems to me kind of a crapshoot, too, where sometimes you get lucky and sometimes not. My last two evictions were tenants that passed all the screening and had glowing recommendations from previous landlords. So what made them 'go bad'? Who knows. Maybe my next roll of the dice will turn up a winner.

Posted: 05/23/2008 at 09:47AM

Screening in " low-income land" is definitely a crapshoot. Even with all of the recommended screening efforts, you can end up with a terrible tenant. Like Frank says, sometimes you need to let these properties go.

I just unloaded a few properties where eviction was the norm. I wasn't willing to deal with that nonsense anymore and got out. Sometimes, the best move is to cut your losses.

Posted: 05/23/2008 at 05:04PM

I have 2 sets of screening criteria. One for the companies that contain nice SFHs and one for my low income apartment buildings.

For all tenants, I require income of 3 times the rent (including whatever government assistance they receive).

For my SFHs, I don't allow any evictions within the past 5 years. For my low income apartments, I don't allow any evictions within the past 3 years.

For my SFHs, I don't allow any felonies within the past 5 years; for the low income apartments, I don't allow any felonies within the past 3 years. In either case, if they did have a previous felony, I require them to be out of prison for the 5 and 3 years respectively.

For my SFHs, I don't allow more than 2 misdemeanors within the past 5 years; for the low income apartments no more than 2 misdemeanors within the past 3 years.

For my SFHs, I don't allow any illegal drug activity on their record within the past 5 years; 3 years for the low income applicants.

I also check for any tendancy for the tenant to sue people. I won't take anyone with that inclination.

With my SFHs, I make the tenants sign a one year lease. With the low income tenants, I won't sign anything longer than a month to month lease, because I can't enforce it anyway.

As I have been growing my business, I have been evicting 1% of the tenants per month. That includes the inherited tenants. If you only include the tenants I have screened, I am evicting .25% to .50% per month.

Of course there is a tradeoff between having vacancies because of doing a thorough screening and having terrible tenants due to not doing a thorough screening. Where is the right mix? I don't know. One of our local landlords does absolutely no screening. He has a lower vacancy rate than I do, but he does a lot more evictions than I do. He also has more tenant damage. However, that still could be a better strategy if it results in a higher income over time.

Mike

Posted: 05/23/2008 at 06:46PM

[list]

Do you allow any evictions or collections on their record? If so, how old does it have to be for your to excuse it?

If it was 2 weeks before your apartment was vacant, would you (Or do you) lower your standards instead of losing a month's rent?

Have you also found some correlation between your bad tenants and something on their background check?

To stay honest with yourself and your rules, do you use a point system for each applicant?

Do you have buildings or units that you are willing to lower your standards on because they are more difficult to fill or some other reason?

Posted: 05/24/2008 at 04:07AM

You can't enforce a low income lease because the people have nothing for you to get. You can't even get their BATV or their old leaky clunker. Besides if they turn out to be really bad tenants you just give them 30 days notice to leave.

Exactly, you can't get blood from a turnip. Low income tenants usually don't own anything. Even if they do, if you try to collect on a judgment, they'll just move and play the shell game. I've got a few judgments against deadbeats, anyone want to buy them at 50 cents on the dollar?

Mike