Over the years, I have made many mistakes on tenant selection. There is always value to a landlord education, even if provided by a tenant, and in the real estate game, the education can be very pricy. Almost all landlords have made similar mistakes, and it costs them dearly. Only the well capitalized or lucky landlords live to try it again.
One of my first rental investments was a couple of duplexes. I had one all cleaned up and ready to rent. Since I knew Section 8 was a guaranteed way to get rent, I figured “How can a landlord go wrong with that?” After all, most people are decent people and want to respect the property and the landlord. I quickly learned the hard way that tenants are not always that way.
6 Landlording Stories That Prove the Importance of Tenant Screening
The Migrant Roofers
One of my duplexes had quite a bit of work to be completed. The windows were rotted, the place needed carpet, and the built-in kitchen cabinets were from 1920. There was no shower, and the tub was like sandpaper, the finish had worn so much. I was preparing to get it rented when a nice young couple came to rent it with a couple of friends, a total of four people. They were migrant workers and needed a place to stay. I did not know anything about credit scores, background checks, or even what to look for if I had a background check.
They promised to rent the place as-is, and they would help painting so that they could move in that weekend. I received the rent in cash, and they moved in; and now there were six of them. That was two per bedroom, which was OK. Soon after, there were a few more, but the rent was always paid. Then a few more moved in. The unfinished basement had a few mattresses people were sleeping on, and each bedroom had three or four mattresses in it. I believe there were approximately 20 people living there at one point — I was never really sure. My 2-yd dumpster was completely full of beer bottles every week.
I always got the rent in cash — for about a year and a half. Then the work dried up, and they could not pay. After a couple of warnings, around mid-month I told them, “You all have to leave and cannot sleep here tonight.” They vanished by the morning. I had a mess and a lot of work to do.
Lesson: Always do a background check and know what to look for. Do not rent to people without social security cards, you cannot do a credit check without a SSN. Keep an eye on the number of occupants. Watch out for people who want to move in right away.
The Fighting Neighbors
I had both the upper and lower units of a duplex rented via Section 8. I was amazed at how easy the program was. I passed the inspection without any difficulties, although I worried about the inspection for a month before it occurred. What if I fail? Will I let the renter down if they cannot move in and they are without a home? Lots of items were running through my head.
The renter moved in downstairs, and shortly thereafter her felon boyfriend did, too. They did not get along with the upstairs neighbor, and eventually the two neighbors filed restraining orders against one another. At the court date, both residents wound up in jail for fighting in the courtroom.
Lesson: Renting to low credit score tenants is always full of drama. Most people do not act or respond in the way low credit score tenant’s act. Credit score can predict a person’s personal behavior, but I did not make the connection yet.
The Water Leak
There was a day I was over checking on the laundry equipment and furnace in the common area of the duplex, and I saw a water leak. Not just any water leak — it was at least a gallon or two a minute leaking into the basement onto the cement floor and draining to the floor drain. I quickly ran upstairs and shut the water off under the sink. The kitchen sink stop valve was leaking profusely. I asked the tenant how long that had been happening, and he said, “Only for a couple of days.” Wow, thank goodness I had a floor drain.
While I was fixing the valve, I was making small talk with the tenant’s (unauthorized occupant) live-in boyfriend, and I asked if he was a football player in high school. He was a large person, built like a linebacker and was wearing a football jersey. He said he did play football and was going to be drafted to play in college, but he was shot four times and could not play anymore. He said it was a case of mistaken identity.
This was an eye opening conversation. He said he had two other brothers who were murdered, although one was ruled a suicide.
I grew up extremely poor, but I did not know anyone who was shot or murdered.
Lesson: Low credit score tenants do not care about your property; they can just move on to the next property. They have nothing to lose. Tenants with limited income may move extra people in to help pay bills, without even thinking it might be a lease violation. Whenever you think you have a boring life, talk to your tenants; you will realize how good you have it.
The Kitchen Fire
The upstairs Section 8 resident of my duplex wasn’t too bad, but could not ever seem to pay her portion of ~$50 a month in rent. She received her move-in deposit from the county. Every year or so, she would go to the county emergency assistance and get her outstanding rent paid. At one point, she started a kitchen fire, and it cost me a bit to have it repaired. Luckily for me, it was mainly smoke damage. At some point, after about three years, she moved and left me with a big mess to clean up.
Lesson: Low credit score people have more insurance claims; this is statistically in line with insurance company studies. When a tenant does not have any motivation to get their deposit back, the landlord will wind up the loser.
The Finger Biter
I had a family living in one of my units for a little over a year. They invited their nephew, who was ~40 years old, to live with them temporarily over the holidays. I noticed the extra tenant and inquired about him. They told me he was from Gary, Indiana and was an ex-cop. What better tenant than an ex-cop?
The guy seemed great, but I still wanted him gone. My costs go up when extra people are living in the unit, and there is no benefit to me for extra tenants. After several stories about him leaving in “just a couple of weeks,” the event happened.
My tenants, a husband and wife, were arguing over a video game. The video game was missing, and the husband, who was ~40 years old, wanted to play it. I think it was headed for a domestic abuse situation, but the ex-cop stepped in the way to help his aunt. My tenant attacked him, and in the course of the fight put his finger in the ex-cop’s mouth. The fingertip of his index finger, according to the police report, was promptly “bit off and spit out.” He grabbed the fire extinguisher and attacked the ex-cop. The ex-cop grabbed a knife, and was fully prepared to stab (and kill?) my tenant. Soon the cops came and hauled the ex-cop away.
He was charged with a felony and served ~4 months in jail awaiting trial. At the trial, he plead guilty and was released with a penalty of time served.
I gave the tenants immediate notice to move out after the incident. I was shorted a month’s worth of rent and took the tenants to court. I received a garnishment and eventually collected on it about a year later.
Lesson: Do not rent to anyone without a stable, garnish-able, income source and a solid credit score. If you have to go after them for damages, you need be able to get the money from them. The tenants need to be concerned how a judgment will impact their credit score.
I was renting to a non-section 8 couple: she had a 750+ credit score, and he had no score. He had dropped off the credit score reporting radar and had many collection items. He had a job making over $100K a year as a headliner at many large blues concerts and festivals. He was out of town on tour for six months out of the year. She had just moved to Minnesota to live with him from another cold weather state.
His credit report was horrible, and the landlord references even worse. He had a domestic abuse conviction from 10+ years prior. Without his partner, there is no way I would have let him rent from me.
I knew the female with the 750+ score was going to make sure the rent was paid. She would also keep the place organized and in good condition. I was a bit concerned, so I required a double damage deposit, which they had no problem paying and kept them on a month-to-month lease. I did not think he would be a problem, as he would be gone most of the time. She would be good as long as she had access to money to pay rent.
After about a year, the problems began. It resulted in a domestic abuse situation, where the male began his physical abuse. This was not just a one-time slap; it was a battle that lasted over thirty minutes, starting before she took a shower, and continuing until after she got out and the police were called. He was charged with a felony and was convicted of a gross misdemeanor. He was never allowed back in the apartment without a police escort after the arrest.
Lesson: All tenants on the property MUST have a decent credit score. A tenant’s criminal record must be looked at for the original charges, not the conviction charge. Limit your risk with a month-to-month lease and a larger deposit. By this time, the correlation to credit score and personal behaviors was pretty clear in my head.
I have had my fair share of problem tenants — and have had many great tenants. I have quite a few more stories and all the “good” (i.e. interesting) stories are with low credit score tenants. My current screening criterion is working great and is making my life a lot easier. With 25 tenants, I do not have time for drama.
There is no exact line where everyone above a certain credit score number is good — and below that is bad — but the line is somewhere close to the 600 mark. No matter what line you draw, you will exclude some potentially great tenants. When you turn down good people, it may make you feel bad but in the long run it is necessary.
Tenants with income of less than 3x the rent, and credit scores between 600 and 625, will be late on the rent; it is almost a given. They will not necessarily be a problem other than the late rent. They have difficulty paying due to not having enough income to make the rent payments.
Tenants with a lower than 600 credit score, regardless of their criminal record, are a problem waiting to happen. Extra roommates, guests who are unsavory, and people who are oblivious to damage being done to your building are common of the sub-600 credit score tenants. Avoid them at all costs.
What types of tenants have you had problem with? What ones have you have the most success with?
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