Potential Tenants - Real doozies!

25 Replies

Ok, I have 2 applicants right now for one of my properties.  Neither is ideal but I haven't straight up decided to deny either one yet.  Rent is $650/mo.  Here they are:

1. 40-something year old mom and 18 year old son.  Mom works at McDonalds making $1000/mo (verified already).  Son works at a truck trailer plant as a mounter making $2000/mo (not verified yet) but has only been there for a month.  I've requested background/criminal/eviction checks on both but I am still waiting on the son's.  The mom's came back with just a speeding ticket and apparently $8000 in consumer debt that is in collections. 

2. 60-something year old couple and their 30-something year old son (this one's the doozy).  The daughter actually called me to set up the showing.  She said she was helping out her parents find a place to live and they weren't too tech savvy (she found the ad on craigslist).  The daughter didn't come but the parents and their son did.  The couple both have health issues and are both on disability.  The son works at a restaurant.  They didn't put on their application how much they get yet so I still have to verify that.  They told me during the showing that they were getting kicked out of the place they are now because the real estate company is selling the place.  Come to find out they are actually getting evicted!  Looking over the court docs and scanning through Facebook to get a feel for things, I have a feeling the daughter got them into the eviction mess.  They all live together right now and the daughter was the primary applicant on their current place.  She apparently has trouble handling money and is in a lot of debt. (Reminder-the daughter is not applying to live in MY place, only the parents and the son). 

My Thoughts on these:

1. The mom and son make plenty of money to satisfy 3x rent.  I am a little worried though because of the mom's collections and also the son has only been at his breadwinning job for 1 month.

2. Obviously the eviction scares me, but I almost want to call them and get their side of the story.  I'm not sure why they would let an eviction go through if they could have helped.  Of course, the rent was $900 where they are so maybe they simply couldn't help.  I like the idea of guaranteed income from the disability but I don't know what to do about this one.

What do you think? Thanks!

I'm new to the game but I will tell you how I would feel/think if I was in your shoes.

1. The monthly income is definitely there to cover the rent.  I would absolutely wait on those background checks to come in as well.  I would also try to vet the son a little more as one month on the job doesn't instill much confidence.  The collections is a bit concerning.  Did she just go through a rough spot in life or is this a serial problem for her?  It's possible she could be an out-of-control spender and that could have an affect on things.

2. I would call them and get their side of the story as well.  It seems there could be more to the story here so I would do the due diligence in finding out.

As you said, both don't seem ideal but #1 would sound a little better to me.  I'm sure there are folks on here though with way more experience than I that could talk more about the collections red flag and whether it's worth it or not.  I would definitely entertain some more offers before making a decision.

Just my two cents!

What kind of area is this vacant unit in?  If it is in somewhat of a desirable area I wouldn't even think twice about denying either of these applicants.

Red Flags

Applicant 1: Slow in getting you back background check, the collection amount for the mom is very high.  What are the collections for?  If they are for everyday bills that is a major red flag for me. 

Applicant 2: I can't stand when I am asked to coordinate with someone other than the people who will be renting the apartment.  Eventually you will have to communicate with those renting.  What do you do when you need information from them in the future?  Go through the daughter every time? The issue with the eviction would lead me to pass on them as well.

With all of that said, if you are not in a good area you may have to consider tenants like this.  Have you filled a unit in this building before?  Are these the caliber of people you need to deal with?

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570
My advice... Keep looking.
Originally posted by @Michael Noto :
...

Applicant 2: I can't stand when I am asked to coordinate with someone other than the people who will be renting the apartment.  Eventually you will have to communicate with those renting.  What do you do when you need information from them in the future?  Go through the daughter every time? The issue with the eviction would lead me to pass on them as well.....

 

The daughter wasn't involved any further than just calling to inquire about the unit and schedule the appointment.  She didn't even come to the showing.  I met with the couple and their son at the showing.

And they aren't really slow in getting me the background checks, I just requested them yesterday.  The debt it looks like it was a car loan.

The only thing with the first one is the mom, I would definitely deny.  But the son makes plenty to live there by himself, without the mom.  Its just that he has only been in his job for a month.

Originally posted by @Sarah Miller :

My Thoughts on these:

1. The mom and son make plenty of money to satisfy 3x rent.  I am a little worried though because of the mom's collections and also the son has only been at his breadwinning job for 1 month.

2. Obviously the eviction scares me, but I almost want to call them and get their side of the story.  I'm not sure why they would let an eviction go through if they could have helped.  Of course, the rent was $900 where they are so maybe they simply couldn't help.  I like the idea of guaranteed income from the disability but I don't know what to do about this one.

What do you think? Thanks!

IMO 2 is a pretty easy rejection.

1. How old are the mom's collections?  I would want to get a couple good landlord references to offset the credit issue.  Does the son have other work history?  If he has typically made $1500+ with good work history - the job is very useful in approving him.  If he has lower previous income and/or spotty work history - there is a good chance you are relying on the Mom for rent getting paid.

Unless you are in a really tough rental market, say no to both and step up your marketing to find better tenants. 

I almost posted that just based on the title... but reading the post confirmed my suspicion.  Be careful, though.  What is the mom's credit score?  Is it below your standard?  Send 1 a letter saying that they do not qualify because of credit history or score.  Send 2 a letter saying they do not qualify because your policy states that tenants must have a clear eviction history.  

Most importantly, have a policy and stick with it!  Easy suggestions are 3x rent in income (unless subsidized by a gov't program), 600+ credit score, and clean criminal history with no evictions.  

Originally posted by @Jesse T. :
Originally posted by @Sarah Miller:

...

... Does the son have other work history?  If he has typically made $1500+ with good work history - the job is very useful in approving him.  If he has lower previous income and/or spotty work history - there is a good chance you are relying on the Mom for rent getting paid.

Son is only 18, so probably just the first job after graduating high school. But maybe he dropped out early and has worked a bit - but I doubt it. 

I'd pass on both. Tenant #1 seems to be ok. But, an 18 year old is a child and can't be depended on and the mom does not make enough.  Just hold on, someone else will apply soon.

I would keep looking too. Just got rid of some problem tenants myself and someone recently said to me- "no tenant is FAR superior to a bad tenant." Truer words were never spoken. You'll get more, better applicants and it will pay off. Taking a chance on someone can be very, very expensive. Be patient. 

Corby Goade, Real Estate Agent
208-297-3010

I would not be in a  hurry to get the place rented although obviously that is your objective. However think of the long term consequence of selecting a bad tenant meaning someone that is going to give you problems with the rent being paid on time or other problems. 

Its not your fault if they are people who manage their life poorly although you can feel sorry for people at times remember you are renting as a way to generate income for your business and that is just how you have to manage your decisions. 

This post has been removed.

#1: Mom would be okay with an adult roommate or child earning the same as her.  However, I wouldn't trust an 18 year old boy to keep a steady job more than six months.  He may be responsible, he may not be.  You have no way of knowing.  If the mother earned more, it wouldn't be much of a problem because she could cover him during his unemployed spells.  At $1000/mo, the mom doesn't make enough to cover him.  I wouldn't worry about her collections for a car.

#2: No.  Just no.  Going through an eviction at this very moment?  No.  Don't even think about it.

#3: Not here yet?  Keep looking.  The next applicant has to be better than the first two.

If you are in a tough spot and simply must rent the unit ASAP, go with #1.  Just be aware that you will probably have to be an attentive landlord to collect on time (or a little late) regularly.  Personally, I'd absorb another vacant month and keep looking.

EDIT: Why is the mother in the first case looking to move?

Gut feels of applicants (although some will disagree) can be as telling as the application information. Did you meet #1 mom and son? What did you think of them? Mom is topped out at $1K/month if she's in her 40s; son appears to have a good start if the $2K is real. At 18, he probably has zero money and will need to live with mom awhile yet anyway. If your gut feel is positive, I'd be OK with #1 with some precautions. Maybe a M2M lease or at least a M2M grace period, higher deposit, perhaps autodraft out of a checking account, if either has one. A good tenant may show up later, but a perfect one never will. Risk can be mitigated, but the only way to eliminate it is to get out of the business. Good luck.

It sounds like you need an applicant scoring system. We use this EVERY. Day.

It's great, you just fill out the fields and it will give you a score. Anything above or below a certain score you can either approve or deny. Or we will ask for a double deposit if they fall into a certain category.

Hope it helps!

I would just keep having showings and taking applications.  $8,000 is a LOT of money to default on.  If she's okay defaulting on $8,000 then what's a month of rent to default on?  That's nothing!

And as for #2, you THINK the daughter won't be living in the unit.  Well, there's tenants who like to do the "round robin" approach.  You'll have a few of them, and one person will get the lease in their name and others will live there. Then that person gets evicted after a year so they apply for another apartment is one of the other people's names.  Then another year goes by and the group gets evicted again. Then they get the next place in person #3's name.  Then yet another year goes by and they get evicted. Then they go back to the first person -- hey, she hasn't been evicted in 3 years, she must be okay!  That's one of the games people play.  So beware!

What are the credit scores?  Or criminal records?

I would pass on both.  For sure, you will lose money on the second set.

As I know you will likely take one, get a double despit and keep them on a month-to-month lease.

If you want to make money, these are tenants to avoid.

Originally posted by @Sarah Miller :

Ok, I have 2 applicants right now for one of my properties.  Neither is ideal but I haven't straight up decided to deny either one yet.  Rent is $650/mo.  Here they are:

1. 40-something year old mom and 18 year old son.  Mom works at McDonalds making $1000/mo (verified already).  Son works at a truck trailer plant as a mounter making $2000/mo (not verified yet) but has only been there for a month.  I've requested background/criminal/eviction checks on both but I am still waiting on the son's.  The mom's came back with just a speeding ticket and apparently $8000 in consumer debt that is in collections. 

2. 60-something year old couple and their 30-something year old son (this one's the doozy).  The daughter actually called me to set up the showing.  She said she was helping out her parents find a place to live and they weren't too tech savvy (she found the ad on craigslist).  The daughter didn't come but the parents and their son did.  The couple both have health issues and are both on disability.  The son works at a restaurant.  They didn't put on their application how much they get yet so I still have to verify that.  They told me during the showing that they were getting kicked out of the place they are now because the real estate company is selling the place.  Come to find out they are actually getting evicted!  Looking over the court docs and scanning through Facebook to get a feel for things, I have a feeling the daughter got them into the eviction mess.  They all live together right now and the daughter was the primary applicant on their current place.  She apparently has trouble handling money and is in a lot of debt. (Reminder-the daughter is not applying to live in MY place, only the parents and the son). 

My Thoughts on these:

1. The mom and son make plenty of money to satisfy 3x rent.  I am a little worried though because of the mom's collections and also the son has only been at his breadwinning job for 1 month.

2. Obviously the eviction scares me, but I almost want to call them and get their side of the story.  I'm not sure why they would let an eviction go through if they could have helped.  Of course, the rent was $900 where they are so maybe they simply couldn't help.  I like the idea of guaranteed income from the disability but I don't know what to do about this one.

What do you think? Thanks!

Either can end with costly evitions. It sounds to me like none of them can really afford the place, and perhaps few others can? Lower your rent a bit to capture a broader part of the market is my recommendation.

I have to agree with @Tyson Luthy . Without a scoring system, you'll be faced with emotions every time you need a new resident. And you simply cannot have emotions play into your decision - this is a business you are running.

The other reason for having a definitive system in place is to prevent discrimination claims against you. If you had a scoring system in place, and your scoring system automatically denies anyone with evictions, you won't be faced with a discrimination claim on #2. Depending on the disability, someone could claim you denied because you did not want to pay for "reasonable" updates to help the resident live there.

If your scoring criteria automatically denied those currently under a collections case, you'd again have no potential issues whatsoever with case #1.

Once you establish your overall scoring criteria, then it's just a numbers game. Do the applicants have a high enough score to qualify? If they do, your system has to be set up to determine which of your qualified applicants has the highest score. And you need to figure out what you will do when you have equal scores, too.

Looking at the video Tyson made, it's a great start that you should tailor to your market and property type. Once that's done, you can take gut-wrenching decisions out of the process and sleep better at night.

The key to the system? Consistency. If you figure out a change to the system is needed, document the change and why it was made. 

One last thought - I listen to Dan Lane on The Rental Income Podcast. He asks every guest "If you had a rental that sat vacant for six months and you had an applicant with a spotty work history and horrible credit, would you take a chance on them or let it sit?" Nearly all of them say "No". It's harder to get rid of somebody than it is to stop them in the first place.

Originally posted by @Kevin Siedlecki :

Unless you are in a really tough rental market, say no to both and step up your marketing to find better tenants. 

I almost posted that just based on the title... but reading the post confirmed my suspicion.  Be careful, though.  What is the mom's credit score?  Is it below your standard?  Send 1 a letter saying that they do not qualify because of credit history or score.  Send 2 a letter saying they do not qualify because your policy states that tenants must have a clear eviction history.  

Most importantly, have a policy and stick with it!  Easy suggestions are 3x rent in income (unless subsidized by a gov't program), 600+ credit score, and clean criminal history with no evictions.  

 I agree with this.  Have criteria and stick to it 

I would pass on both. The issue with one is that if the son moves out and he probably will she can not afford the place especially if these collections garnish her wages.

The second one already lied and said no evictions. Even if not their fault???? They were not honest and that would be your next eviction.

I always go with my gut when it comes to tenants. You are questioning because neither are a fit and quick money in the front end means loss of lots of money on the back end.

Good Luck.

It would be a NO for both for me. Not even a close call.

If this is all the applicants you can find then either your marketing process is wrong or you need to start buying property in another area as these types of tenants will not give you long term success.

Sometimes an area just has a very low tenant pool to pick from due to demographics.

I agree with those who say "No to both 1 and 2". Just one other red flag I see with the two adults on disability. Why didn't they list how much income they make on their application? I"m sure it's a set amount that they should know. It's not like a paycheck that may vary from week to week.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.