Which tenant would you choose?

General Landlording & Rental Properties
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Which tenant would you choose?

Kelly Bellini
Sharpsburg, GA · Member since 2017 · 93 posts · 99 votes

My husband and I just finished up the renovation of our first investment property, which we'll be using as a rental.  Our dilemma is choosing between two couples we met today.  Please help us!!!  Keep in mind, this house is located in a rural/suburban small town in Georgia.  It's a 3bd/2ba, 1500 sq. ft. house, built in 2005, 1.5 acres of flat land.  House is worth 135,000.  Rent will be $1200.

Applicant 1:  28 year old male, works as foreman at sandblasting company, earns $6000/mo, doesn't have much credit, credit score is 530-ish.  23 year old female, stay at home mom to their 2 year old daughter, female will start nursing school soon, she says, she has no credit history.  Together, they currently pay their landlord $500/mo.  They are engaged.  They were very nice people (part of why making the decision sucks!).

Applicant 2:  21 year old male, insurance salesman, college-educated, earns $4000/mo, 3-4 open credit cards/student loans, all paid on time for the last 2 years, 1 cell phone bill ($500) that went to collections.  21 year old female, works full time as a tech at hospital while attending nursing school, earns $1800/mo, 3-4 open credit items, all paid on time for the last 2 years, 1 medical bill ($160) that went to collections.  They currently pay landlord $1100/mo.  They have a dog, and agreed to pay the extra security deposit.  They are not married, and they were also really great people.

I'm going to verify employment and landlord info tomorrow.  What would you guys do???  I didn't realize how much I would hate making decisions about who to rent to.

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y

You have put information in there that should not be considered because of Fair Housing. Age, Sex, Familial status

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  • Jim Adrian
    Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes
    8y

    I would write down your selection criteria requirements and still to them.   Here are some points of interest I have gather off BP over the years.

    On time for appointment
    BROUGHT NECESSARY ITEMS: Identification, application information, references, application fee, holding deposit...
    Filled out application completely and truthfully
    Able to verify all of the necessary information
    Able to pay full amount of rent and deposit
    Sufficient monthly income of 3 times the rental amount
    Verifiable income and employment
    Stable income or employment for a minimum of _____ months
    Financial obligation of no more than _____% of income
    Satisfactory credit history (no bankruptcy)
    Provided credit references
    At current address for a minimum of ______months
    Gave proper notice to current landlord
    Gave proper notice to previous landlord
    No prior evictions
    No problems with previous landlords
    Deposit fully returned (none withheld for damages)
    No complaints or police reports regarding disturbing the peace, etc.
    No significant violations of a previous rental agreement
    No pets or is willing to sign a pet agreement and meets additional pet criteria
    Non-smokers
    Has a Delinquency Rate less than 45% based on Credit Score Analysis performed by Tenant Background Search.
    Has a credit grade of B or credit score of 620 or higher per Tenant Background Search.
    1Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    8y

    @Michael Hayworth

    "That only matters if she's using a Realtor. Fair Housing Act does not apply to an individual landlord renting his/her own property without use of a Realtor. (Although locals laws may be more restrictive.)

    I would suggest checking a bit more into Fair Housing. While there are exemptions they have nothing to do with if you use a REALTOR or not. The basics are if you are renting out a room in your house or an apartment in a Multi-family dwelling that you also reside you MAY be exempt.

    If she is renting out a SFH that she has renovated, then I would make sure to follow all federal guidelines.

    2Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    Kelly Bellini what class area is this? If it’s C class you can’t really expect perfect tenants. If it’s higher then you may want to keep looking. I don’t think medical bills in collection is a big deal. However the small bills going to collection is a bit odd. Unless they just forgot, which could happen if they switch cell phone provider or something like that, those should be paid. Is an insurance salesman income consistent? Typically that’s commission based. Personally I’d go with applicant 1. I’ve had tenants with credit score in the 500s who have been fantastic. A low credit score doesn’t mean they’re bad. All you should care about is income level, and do they have past evictions or bankruptcy etc and if they’re a convicted criminal or not.
    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Mike Cumbie:

    @Michael Hayworth

    "That only matters if she's using a Realtor. Fair Housing Act does not apply to an individual landlord renting his/her own property without use of a Realtor. (Although locals laws may be more restrictive.)

    I would suggest checking a bit more into Fair Housing. While there are exemptions they have nothing to do with if you use a REALTOR or not. The basics are if you are renting out a room in your house or an apartment in a Multi-family dwelling that you also reside you MAY be exempt.

    If she is renting out a SFH that she has renovated, then I would make sure to follow all federal guidelines.

     The other thing people often overlook with the exemptions....that if the exemption is applicable they exempt you from criminal prosecution and civil liability from the government. They do not exempt you from civil liability from the potential tennant.

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  • Michael Hayworth
    Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
    8y
    Originally posted by @Mike Cumbie:

    @Michael Hayworth

    "That only matters if she's using a Realtor. Fair Housing Act does not apply to an individual landlord renting his/her own property without use of a Realtor. (Although locals laws may be more restrictive.)

    I would suggest checking a bit more into Fair Housing. While there are exemptions they have nothing to do with if you use a REALTOR or not. The basics are if you are renting out a room in your house or an apartment in a Multi-family dwelling that you also reside you MAY be exempt.

    If she is renting out a SFH that she has renovated, then I would make sure to follow all federal guidelines.

    That is incorrect. You are a realtor, so the law applies to you. I am not, and it does not when I'm renting my own single-family homes. However, it does when I am renting units in my apartment complex. 

    Actually knowing the law is a good start. Here is a decent summary. There's a citation to the complete law embedded in there.

    This is most applicable for landlords renting their own single-family houses when someone tells you that you have to accommodate their "service animal" under the Fair Housing Act. (Though you may have to accommodate it under other state or local laws.)

    0Reply
  • Carl Pickens
    Griffin, GA · Member since 2017 · 63 posts · 82 votes
    8y

    #2 hands down 

    0Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    8y

    @Michael Hayworth,

    Fair enough to your point: Single-family homes rented without the use of a real estate agent or advertising are exempt from the federal Fair Housing Act as long as the private landlord/owner doesn’t own more than three homes at the time

    So I will agree that you are correct. If you own 3 or less homes (in your personal name) you are able to discriminate for whatever reason you choose. 

    Now in practice I don't think I would own property and have anything on paper (or the internet with my own name) where I am showing discrimination or a willingness to, based on any of the Federally protected classes. Starting off using them in your rental criteria is a bad idea. Make rigid standards and stick to them especially if you plan to grow.

    Just my 2 cents.

    2Reply
  • Mike Ipsen
    Everett, WA · Member since 2018 · 32 posts · 8 votes
    8y

    #2 would be my choice for a couple of reasons.

    1. They are already paying nearly the same amount in rent. Going from $500 to $1200 would be painful for #1 and could make them not be able to pay.

    2. The collections were rather small and everything else was paid on time for 2 years. The amount of open credit lines can mean they do not manage money well. I was the same way at that age, but rent was always the first thing to get paid. Everything else can wait, you have to have a place to live. :-)

    0Reply
  • Jonathan Taylor SmithBusiness Member
    Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes
    8y

    @Michael Hayworth - I've not known Fair Housing Laws to apply only to Realtors, so I'll check into that further.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    @Kelly Bellini Applicant 1 makes $6000 and applicant 2 combined makes $5800, so similar income. A blue collar job like a foreman will always find work in any economy, so I wouldn't worry that it is a single income household. The fact that Applicant 1 is getting married and has a child lends more stability than Applicant 2. People with kids are less likely to move than single people. It is just easier to pick up and move when you don't have kids. 

    The main negative on applicant 1 is they are going from $500 to $1200 a month in rent. His income supports it, but it will be a big adjustment. Of course it is possible they were both paying around $500 per month when they were single, then moved in together. No doubt they are moving to have more space for their family.

    Negatives on applicant 2 are the student loans and the collections. Dog could be a negative. If you rent to them, I would ask for pet rent or make the deposit a non-refundable pet fee. They are not married and are younger, so there is less stability.

    Do you have any idea how much each applicant has for cash in the bank? When two applicants look equal, cash in bank can be a good tie breaker. Ability to save money is highly correlated to ability to pay rent on time.

    0Reply
  • Grant Rothenburger
    Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
    8y

    @Kelly Bellini Sorry if someone else said this already (I didn't read through ALL the comments). 

    I like applicant 1 better because his income is more stable. The salesman could have a bad couple of months and not have money for rent. I'm also assuming that a lot of his income is commission, which may not be the case.

    0Reply
  • Gregory J.
    W2 Engineer and part time REI · St. Louis, MO · Member since 2017 · 43 posts · 36 votes
    8y
    you might want to look for verification of more than a few months income if you are going off the $6k/month for the sandblaster. could be seasonal or OT/travel dependent and he may make that only a few months a year.
    0Reply
  • Oleg I.
    Atlanta, GA · Member since 2017 · 19 posts · 3 votes
    8y

    I would go with applicant number one. From personal experience (as a landlord) people with kids tend to move less. 

    0Reply
  • Albert Ng
    Rental Property Investor · San Jose, CA · Member since 2015 · 401 posts · 221 votes
    8y
    Couple # 2 sound better as they have 2 incomes. However, I would go with couple # 1 because #2 have dog, which can damage the property (of your house is in good shape)
    0Reply
  • Julie N.
    Real Estate Investor · Unionville, CT · Member since 2016 · 260 posts · 167 votes
    8y
    Yes they seems similar to me!
    0Reply
  • Kelly Bellini
    OP
    Sharpsburg, GA · Member since 2017 · 93 posts · 99 votes
    8y

    @Derrick E. so I just found out new info on #2: they don't currently pay $1100 in their apartment.  That is the TOTAL rent for their apartment, which they share with another couple, so they are actually only paying about half of that ($650 ish).  Ugh. Seriously?  I was favoring them because the rent would be relatively the same.  But, forget that.  So, what are your thoughts now?  

    0Reply
  • Kelly Bellini
    OP
    Sharpsburg, GA · Member since 2017 · 93 posts · 99 votes
    8y

    @Billy Daniel just found out that #2 is SHARING the $1100 rent with another couple.  So, they're actually only paying $650.  Looks like both couples are trying to do a big rent jump.  I'm thinking I just have to be patient and find the right tenant.  It's only been a couple days.  Your thoughts?

    0Reply
  • Kelly Bellini
    OP
    Sharpsburg, GA · Member since 2017 · 93 posts · 99 votes
    8y

    @Pavel K. - thank you for that.  I've trusted my gut on most everything in life; this should be no different.  You are right--I keep questioning, going back and forth--that says a lot!

    0Reply
  • Amy Beth
    Rental Property Investor · Edison, NJ · Member since 2016 · 753 posts · 565 votes
    8y
    I would probably keep looking unless this is how all applicants are in your area. The age of couple #2 worries me. If they were to split up I do not see how one could afford to keep up with the rent and other expenses on his or her own and being only 21 not sure about the longevity of their relationship and if they will be financially responsible. They may be super responsible and be married for 50 years but I would not want to be the test landlord to find out. Couple #1 is more promising than couple 2 but I also have some doubts about them. Since she is not working and health costs can be high the health care bill does not concern me so much though. I would handle that better than credit card debt. I would still give it a few more days though and see who else applies.
    0Reply
  • Kelly Bellini
    OP
    Sharpsburg, GA · Member since 2017 · 93 posts · 99 votes
    8y

    @Account Closed- I love it!  I gotta get rid of the emotional attachment...I just feel so bad turning them down!!!  But, yeah, I'll feel a lot worse if they screw me over.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    From my perspective they are identical and I would not select either. Both have high risk indicators.

    Be patient and you will find far better applicants, you will also get applicants that are a lot worse, this being a rural rental, do not get discouraged. Who you choose is the most important decision a landlord will ever make. Concentrate your screening on finding reasons to reject applicants. When you can not find a single reason to reject you have probably found your tenant.

    0Reply
  • Derrick E.
    Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
    8y
    Originally posted by @Kelly Bellini:

    @Derrick E. so I just found out new info on #2: they don't currently pay $1100 in their apartment.  That is the TOTAL rent for their apartment, which they share with another couple, so they are actually only paying about half of that ($650 ish).  Ugh. Seriously?  I was favoring them because the rent would be relatively the same.  But, forget that.  So, what are your thoughts now?  

    I would hope for new applicants. If not then I would go with my gut from the in person meeting with them.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    8y

    As I see it, the problem here isn't necessarily with the tenant applicants - we know that there will be some that are marginal and some that are bad apples. The real problem here is the landlord cannot reach a decision because the landlord has not firmly established what the acceptance and rejection criteria should be. So even the tenant applicants have no idea of whether they would qualify or not. @Jim Adrian has given you some ideas to use in assembling your acceptance and rejection criteria; identify those that seem like they fit the demographics of the population that lives near your rental, write down the ones you wish to use (you can even make modifications if you see something too lenient or too strict), and use that to guide the decision regarding applicants.

    3Reply
  • Tim B.
    Flipper/Rehabber · Pensacola, FL · Member since 2017 · 33 posts · 24 votes
    8y
    Originally posted by @Russell Brazil:

    You have put information in there that should not be considered because of Fair Housing. Age, Sex, Familial status

     I believe that for Employment, age means you can't discriminate if over 40 but in Renting age isn't a protected class.

    But I'm not an expert.

    0Reply
  • Jenny Jones
    Indianapolis, IN · Member since 2018 · 11 posts · 9 votes
    8y

     Couple  2 sounds like a better risk to me !  Thats quite a jump in rent on couple  1 ! I require they have a  year landlord(non related) referene, all adults and that all adults have a  year solid job reference , or disability award proof.  Get all vetting imfo for dog , and ask for renters insurance that lists the dog as there libility.  Require them to use quality flea products monthly in georgia. Ask to see proof of reciept of this.. Look at public pics of  this couple to see if looks like current living situation , house is taken care of.   You than will only have to require yearly rabies copies and yearly rental insurance copies..

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