No one with good enough credit

Kenneth Myers

West Charlton, NY · Member since 2017 · 6 posts · 1 vote

8y

I agree with Bob too, maybe ask for some extra security or rent upfront. I Just look for debt income ratio under 26% around this number we may asked for an extra months rent up front. After 6 months of on time payments they get the money back. I get rent 4 days early each month lol.

Maurice Witten

Auburn, GA · Member since 2018 · 8 posts · 5 votes

8y

Don’t over think it, ask for multiple month deposit. Verify income and trust judgement regarding their integrity.

Lawrence Ratliff

Investor · Otay Ranch-Chula Vista, CA · Member since 2013 · 32 posts · 41 votes

8y

I had the same experience on one property. I went with somebody with good rent payment history (my pm company verified) but only fair credit because of some large medical bills, good person bad situation. There’ve been my tenant almost 5 years and I hope they never leave. Point is depends why the credit is bad, and have they paid their rent responsibly in the past. Also I always try to be a good landlord and it seems to pay off. I rented another property to a single Mom with 4 kids, never paid late. I am sure the house will need quite a bit of work, but knowing those kids have an SFR recently renovated with a huge yard makes it all worth it. I am sure the right tenant will come along for you soon.

4 Reply

Steve Babiak

Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes

8y

Here is a chart showing of a tenant applicant based on credit score and based on income to rent ratio:

4 Reply

Jill F.

Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes

8y

@Steve Babiak I wonder if that data was from a property management company with a zero tolerance policy for late pays (like so many of them have)? I think most of the independent, smaller landlords operating in C/C- areas are probably a bit more willing to work with tenants having temporary problems to avoid evictions and skips and as a result may have lower eviction rates. I EXPECT that my tenants in C/C- properties will occasionally have issues that prevent them from paying full rent in a timely manner and I have polices and procedures in place that allow me to work with these tenants AND limit my losses. Property management companies have no such incentive; they usually PROFIT from evictions and turnover while the property owners suffer.

Interesting Chart, BTW!

Lesley Resnick

Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes

8y

It depends on the market segment. If you are renting 5k a month ocean front condo, then I would be concerned.

If this is a 1k rental in a b-c area, I would be more concerned with job history, evictions and criminal record. Good tenants can have bad credit. Divorce, loss of job, failed business, medical costs, etc, all result in poor credit. If you're concerned then ask for a higher security deposit. This will safe guard you against loss of use.

in many cases, they had good credit they would be more likely to purchase than rent.

Account Closed

Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes

8y

I have the same situation and just go month to month. I get as much as the market will bear up front - first, last, double security if I can. Then I offer zero grace period days on rent - its late on the second of the month. I don't do late fees, I place 5-day pay-or-quit on the door on the second of the month and start eviction as soon as possible if they default. I make exceptions to these at my own peril. If the place is nice, the rent is fair and you're a decent landlord, people will pay and people will stay. Last thing to worry about then is how hard they live in the property.

No one with a credit score of less than 600 has earned the privilege of a long-term lease, IMO. Then again, I don't even check credit. I check to see if they have been evicted. I check to see if they have any unpaid judgement. I verify their employment. I would offer a 12 month lease to a tenant who already rented from me, not to someone I know nothing about. Month to month is your best friend, 12 month is your enemy, IMO.

You want a 12 month lease from me? Prove to me you are worthy of it and then we'll talk.

David Gonzalez

Realtor · Camarillo, CA · Member since 2014 · 162 posts · 102 votes

8y

It may be how you are marketing the rental, the rental price is too high and/or the area is bad. I feel landlords focus too much on a credit score and not on the report says. My experience is that people with really low credit scores have big financial problems.

OP

Real Estate Investor · Dallas, TX · Member since 2013 · 388 posts · 174 votes

8y

Thanks to everyone for responding and advice.

@Account Closed Anyone know how much extra security deposit and/or (upfront months of rent) I can ask for legally?

John King

San Antonio, TX · Member since 2015 · 20 posts · 6 votes

8y

I'm in San Antonio, and I will approve someone with up to a 2x Rent Security Deposit. I'm not sure of any limit, at least I didn't find one in the Property Code, but if more than that is required, we move on.

Jonatan Barbera

Investor · San Antonio, TX · Member since 2013 · 213 posts · 182 votes

8y

Luke H. Honestly it really depends on them. People have low credit scores for many reasons but they always come through on their rents. If you’re really worried you can ask for a bigger deposit, a shorter lease to test them out. I don’t think that’s a terrible credit score but I would like to know why it is that way. Have you considered dropping the price $25-$50?

Account Closed

Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes

8y

Originally posted by @Luke H.:

Thanks to everyone for responding and advice.

@Account Closed, what are the pros/cons of month to month. I always assumed a year lease was the way to go so I don't have tenants moving on me all the time?

Right. Because everyone wants to move every three months.

Joshua Busbey

Jonesville, SC · Member since 2018 · 1 post · 0 votes

8y

Amazing info in the question and replies! Thank you everyone.

@Jill F. @Nathan Gesner @Thomas S.

OP

Real Estate Investor · Dallas, TX · Member since 2013 · 388 posts · 174 votes

8y

I found someone with good enough credit! Been at the same job for 6 years and no evictions, no judg, solid rental history...

Only issue I am seeing is that they are $350.00 short of the (3 times income) rule.

I wanted to get feedback on if I should do 1 year lease with a penalty for leaving early or stick to month to month in-case things go south with this 1 income earner.

@Joe Splitrock

@Lesley Resnick

@Derek Scott -How do I put them on bank draft?

@Jill F. @Nathan Gesner @Thomas S.

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

8y

Originally posted by @Luke H.:

I found someone with good enough credit! Been at the same job for 6 years and no evictions, no judg, solid rental history...

Only issue I am seeing is that they are $350.00 short of the (3 times income) rule.

I wanted to get feedback on if I should do 1 year lease with a penalty for leaving early or stick to month to month in-case things go south with this 1 income earner.

@Joe Splitrock

@Lesley Resnick

@Derek Scott -How do I put them on bank draft?

Sound like a good one. I wouldn't worry as much about 3X income unless he has huge car payments or other heavy monthly debt. I always do a one year lease to start. A lease doesn't stop you from evicting for lack of payment. Even if they are month to month, you still need to evict them if they don't pay.

2 Reply

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

8y

Making 3x the rent is not a hard-and-fast rule. At least, it shouldn't be. I've seen people that make 4x the monthly rent but they have a ton of credit card debt, car loans, high insurance, etc. Others only make 2x the rent but they have absolutely zero debt or expenses. 3x the rent is a "rule of thumb" and you should be able to deviate from it based on the whole picture.

If you have a one-year lease, you can terminate at any time for non-payment of rent. If you feel they are risky and you may have to get rid of them for some other reason (poor housekeeping, noise complaints, or other lease violations) then a month-to-month makes that a little easier. However, I always sign people up for a term because they'll usually leave with a 30-day notice when they know they've violated the lease. In eight years I've never had a tenant fight against a 30-day notice to vacate.

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Daniel Akerman

Real Estate Agent · Astoria, NY · Member since 2016 · 60 posts · 55 votes

8y

Originally posted by @Luke H.:

Thanks to everyone for responding and advice.

@Account Closed Anyone know how much extra security deposit and/or (upfront months of rent) I can ask for legally?

The only pro I see for a landlord in month-to-month is perhaps an easier eviction process. But that's highly dependent on your locality and you should consult with an attorney.

Regarding how much extra security deposit you can ask for legally, that's definitely a question for your attorney and will probably depend on local laws.

The fundamental problem here seems to be the income pool of the market you're in -- if people can't afford the rent, then you're either priced above the market, or you have a market that is very unstable due to the prevailing employment conditions of the people living there. If you're overpriced, then you need to get real and lower the rents. If the problem is the renter pool, then those problems won't go away whether you charge a higher deposit (which many people won't be able to pay anyway), use a lease or month-to-month, or do anything else.

BTW -- I think it's a big mistake to remove your signs. More leads are always better than fewer, even if they are unqualified, because you never know where your next renter will come from. The easy way to limit unqualified leads is to post the price on the sign. A person looking for a $600 rental isn't likely to call on one advertised for $2000.

OP

Real Estate Investor · Dallas, TX · Member since 2013 · 388 posts · 174 votes

8y

@Daniel Akerman, thanks for taking the time to post. I found a tenant and so far, so good. It seems that even when I put the price people will call and ask what the price is, and if the price can be lowered. I mean, I don't want someone that will haggle with me on the price.

Daniel Akerman

Real Estate Agent · Astoria, NY · Member since 2016 · 60 posts · 55 votes

8y

@Luke H. Glad to hear you got a tenant. Hope it all goes well. You can't hold it against people for asking about the price. 1) it's smart to confirm details -- wouldn't you do the same thing? 2) sometimes people are calling on multiple properties without the details in front of them. Totally understandable. And don't take it personally that people haggle -- OF COURSE THEY WILL! They are just looking out for their interest the same way you are looking out for yours. If you were in their shoes, you'd be haggling on the price too. It's all part of how this works. Understanding that everyone is out for their best interests -- not to get over on you -- is the best path to successful negotiations.

Steve Babiak

Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes

8y

Originally posted by @Luke H.:

@Daniel Akerman, thanks for taking the time to post. I found a tenant and so far, so good. It seems that even when I put the price people will call and ask what the price is, and if the price can be lowered. I mean, I don't want someone that will haggle with me on the price.

People replying to my online ads seem to always try to haggle on the price - it's not just the ones who call from the "for rent" signs.

I have never had one of my "for rent" signs taken - but I imagine if that did happen, it might not just be a prospective tenant that took it, it could be a landlord nearby who does not like competition. Or a cheap landlord who doesn't want to buy an entire sign, just the stick on numbers to change the phone number out ;)

OP

Real Estate Investor · Dallas, TX · Member since 2013 · 388 posts · 174 votes

8y

@Steve Babiak, It could be several factors and the 'for rent' street signs do bring many people.

The majority are not qualified, but are very excited about wanting to rent a house.

Could be competition, but doubt it as the areas I am in don't have rental houses around. Most of my latest tenants have come from online listings and having them use email, phone and regular mail is a plus for me.

Brandon L.

Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes

8y

@Luke H. I feel that the property always attracts the type of tenants you want, or don't want. What are the demographics of the area your house is in?

OP

Real Estate Investor · Dallas, TX · Member since 2013 · 388 posts · 174 votes

8y

@Brandon L., Good point. Demographics is that Houston is booming right now. :)

Brandon L.

Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes

8y

@Luke H. well I guess that answers my question. Have fun camping :)