Accept or Deny or Compromise?

20 Replies

I have a tenant application today who paid the application fee. However, he said he cannot pay the deposit until next Friday and the first month rent the Friday after, the day he would move-on. The credit score and references are great. I am worry he might just live paycheck to paycheck. Should I:

1 - Deny the application

2 - Accept it and sign a lease now and receive the deposit/1st month later (maybe I cannot show my place int he meantime though)

3 - Compromise: sign a lease now contingent to receiving the checks for deposit/1st month and still show the place to others?

I would choose option 4: Accept his application and tell him you will process it this week.  If he qualifies, you will offer to rent the unit to him and will expect a holding/security deposit no later than Friday October 17 (less than a week from when you offer to rent) and will expect him to sign the lease and pay first month's rent on Friday October 24... the day his tenancy will commence.

His current cash flow situation may or may not be indicative of his future cash flow situation. I wouldn't worry about it. If it concerns you, talk with him about it. However, realize that it is not uncommon for people to have extra expenses when moving from one home to another, which may be one reason he can not pony up all of the money at once. I don't see his request as unreasonable. At least he is being open and honest with you.... that's a good sign. Just make sure all money is paid prior to handing him the keys.

Actually after checking the background & credit (not just hearing him…):

1 - Credit is less than 650 (I don't know the exact number)

2 - He has one eviction, 4 years ago

3 - He has some records for traffic and shoplifting.

Still accept such application?

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Well, the credit score is almost a non-factor, as long as it is above your minimum. 

In your OP, you said references were great - what type of references were they, and how did you go about verification of them?  Because eviction and theft are not usually great to see ...

Originally posted by @Matt Smith:

Actually after checking the background & credit (not just hearing him…):

1 - Credit is less than 650 (I don't know the exact number)

2 - He has one eviction, 4 years ago

3 - He has some records for traffic and shoplifting.

Still accept such application?

Easy pass.  I don't care about credit score but if people can't pay their rent then that's the point where I start caring. 

First red flag is he has NO money now at all to hold the place.  People that have no money at all when they're looking for a rental will probably have no money again at some point when the rent is due.  He has a prior eviction and will most certainly have a future one, do you want to be the next landlord that has to evict him?  Keep looking.

Originally posted by @Matt Smith:

Reference is the previous landlord.

I place a minimum at 650 for the credit. I don't know how much below 650 it is.

 Is it actually the landlord is a friend posing as the landlord?  I'd check public records and confirm the person you're talking to is the owner.  I've also seen current landlords give positive references to get rid of a trouble tenant because it's easier than an eviction. 

I also wanted to add that you should NEVER sign the lease until you have all of the funds from the tenant.  Even if you wanted to approve this application I wouldn't take it off the market or promise it without at least the security deposit in my hand.  I would tell the tenant that he is approved (but in this case I'd flat out reject) but I will continue to show the property and reserve the right to select a different applicant until I receive a non-refundable deposit (the security deposit) to hold the property. 

Once you sign the lease you have a tenant, whether you've collect the money or not, and you cannot rent it to anyone else.  That tenant has a lease and can begin moving in upon the start of the lease even he hasn't paid you and you would have to evict to regain possession of your property. 

@Matt Smith  With the additional information you provide, does he still meet your minimum criteria to rent? I am assuming you have established your rental criteria prior to advertising your unit as a rental. If your minimum criteria allows for evictions and theft, proceed with caution and a hefty security deposit. If not, then deny him based on his not meeting your rental criteria.... he does not qualify. 

You also stated your minimum criteria for a credit score is 650 and he doesn't meet that. So you already have your answer. You may want to think again about the value of setting credit score criteria, as many of us in the industry don't put much weight or confidence in such numbers. There are many other factors that are better indicators of a prospective tenant's probability of being a good tenant.

Does this guy pass the 3X rent income test, and is that verified? 

From personal experience, this is a great way to turn a little desperation on the front end into a lot of desperation, and cost, on the back end. Good tenants are worth the wait IHMO ... and experience.

Originally posted by @Matt Smith:

Actually after checking the background & credit (not just hearing him…):

1 - Credit is less than 650 (I don't know the exact number)

2 - He has one eviction, 4 years ago

3 - He has some records for traffic and shoplifting.

Still accept such application?

 Eviction is a BIG NO!

No deposit, no lease. You keep your option open until you see deposit. 

I require 3x rent, no evictions, copy of orders if military, clean background, and I do not hold. Therefore I require the security deposit at time of lease signing and first month rent when keys are provided. I have a established "rules" as it takes the emotion out of a business decision. So I would not go with him if he didn't fit my rules. Again I have class A properties.

His girl friend is apparently making more money. I am checking her background/income/credit. She might be the official person to sign the lease. In this case…it's not as important her bf has eviction/bad credit/etc.?

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@Matt Smith   - NO NO NO. He has had an eviction. Unless you are renting a D-class property in a D-class neighborhood to D-class tenants there should be no reason to take an eviction. History says he will stiff you for rent.

Classic bait and switch with the move to the girlfriend. EVERYONE living in the unit over 18 must sign the lease, must be screened and must pass the screening process.

Chances are very good that this couple is going to give you a first class education and it is going to cost you big time.

Remember this, a vacancy is a blessing compared to a bad tenant. This guy has "bad tenant" written all over him.

You don't sound like you have a lot of experience as a landlord. Find a tenant with No evictions and then move forward.

most likely the landlord is a friend, check his address and ownership online, or mag be his current landlord is trying to get rid of him by facilitating.

Originally posted by @Matt Smith:

His girl friend is apparently making more money. I am checking her background/income/credit. She might be the official person to sign the lease. In this case…it's not as important her bf has eviction/bad credit/etc.?

 They both sign the lease , what happens when the girlfriend moves out after the first month?????

Absolute pass. Shoplifting = dishonest. I would not accept a past eviction either. And full rent should be paid BEFORE move in. I agree with other posters, it will cost you less in money, stress, and time to wait for the right tenant. I speak from experience on that. Good luck and you were smart to ask for input on this. 

@Matt Smith    Don't do it.. Based on my criteria he wouldn't work.  If he has had a prior eviction, you don't want to go there.  Theft, sounds like he has had some issues, you don't want him to be your issue.  It is easier to make the decision now and pass, than to have to evict him and start the process over.  It will cost you less money in the long run to find a stronger tenant now.

No thanks! Find a better qualified tenant. DO NOT be in such a hurry that you accept someone you know has a bad history. History does repeat itself!

Judging by what his background said, I'd deny him if I was putting him in one of my houses or apartments.  If eviction pops up, I don't care how long its been, that's a no for me.  However, if he was going into my mh park, I probably wouldn't care.  Credit score is not a huge indicator (for me) that the person is going to pay or not, people get their credit screwed up sometime and its a long, uphill battle to regain it. 

Like I said, in a background check I care about evictions, megan's law, and major felons.  What kind of area is this rental in?  How much a month?  Whats your target tenant? 

One thing Ive learned is that you may find a great tenant, but they might not fit in a certain area where the rental is located (EVEN IF THEY THINK THEY WANT TO LIVE THERE! - Ive made this mistake before).  For example, you cant put a single post grad girl from the suburbs, in the ghetto - believe Ive tried.

My mobile home tenants (in one area), are flirting with the poverty line; government assistance, food stamps, etc.  However, in most cases, they are out of options after my place.  Therefore, that is the leverage that I use to make sure I get paid, month after month. 

There's nothing worse than moving someone in and moving them right back out in 2 months.  Then you have to clean everything again, show it to more people (who half the time don't show or call for appointments).  Call references, use your gut instinct too, will they fit in this area??? @Marcia Maynard  is right, moving is an expense that can really through off someone's monthly budget. 

If you accept him, Id get everything signed, but not start the lease (and give keys) until the final week where all his $$$ is paid to you, tell him you'll hold it until you guys are square.

@Matt Smith   I think the most important thing you need to do here is evaluate what your criteria are, and why. Knowing why helps when making decisions so you understand how to evaluate borderline cases.  Some of the criteria used by people matter more in Class A and less in Class B,C or D. Some always matter.  As others have said, look at the property type, the best tenants you are likely to get, and go from there. But it is also important for many reasons to set firm, unyielding criteria. Why? Well two very good reasons. Bending the rules usually means "settling" for something less out of desperation. Bad move, it also means problems more times than not. The other important reason has to do with discrimination laws. You need to be able to show that you accepted/rejected tenants based on consistent factors. Otherwise you are opening yourself up to criticism and possibly losing a lawsuit. A few important things to consider: 

Does credit score really matter? Personally I think it only does when you get into the really low numbers. If they have no evictions and a few years of rentals they probably are typical in considering shelter the priority, even if they stretch their income a bit thin. 

Do evictions matter? If so do you allow an exception after x years? 

Do convictions matter? What kind get no exceptions? What kind get exceptions after x years? Personally violent crimes and sex offenders are generally lifetime no for me. Exceptions that I would make - sex offenders who were 18-19 and got charged with statutory rape with an over 16 yr. old ... after 5-6 yrs. without incidence.

Income ratio: Evaluate and set it and make zero exceptions, or expect to regret it. Unless of course you accept Section 8.

I suggest you require payment of deposit upon signing, first month rent before they get keys.  Again, no exceptions. Depending on state and local laws, find out if you might be able word the lease so that deposit is not refundable if they bail, but you do not need to do an eviction. Not all states allow that kind of thing but if they do, get it in your contract.

Always include all adults living at the property on the lease. Always require that all of them meet the requirements. Always make sure your lease says that they are all responsible, together and separately, for compliance with all terms of the lease. Otherwise if the "responsible one" moves, you are left with someone less than acceptable as a tenant.