Prospective Tenants: One has Poor Credit; the other has Good?

6 Replies

I am fairly new to real estate landlording. I have a SFR in an area that has low vacancy rates. A prospective couple with three kids is interested. They make 2.7x's the rent. The husband has very good credit of 706, no late payments and is the primary breadwinner; his wife is a SAHM, has poor credit of 594, mostly due to late payments (some 120 days late) of student loans, some as recently as April 2018. She had one "unpaid balance recorded as a loss" in 2014. She has always paid her revolving credit cards on time. They have been renting a house for the past 5 years and their current landlord said they have always been on time with their rent and she would rent to them again except they are moving out of town. The husband has consistently worked in his professional line of work for the past 12 years. I'm concerned about the spotty credit and late payments on the wife's part. Any suggestions would be helpful.

I'd be a little more worried about the 2.7x rent.  3-3.5x rent is the safer bet.  4 dependents on one salary is also a big red flag.  That seems to be a tightly wound  financial rubber band that could snap at any moment.

I wouldn’t worry too much about her credit as much as I would about his income. It seems as though they are probably barely making it and they don’t pay her student loans until they start getting phone calls about it. I know people who don’t pay their student loans regularly, but pay their other bills (including rent) on time, all the time. I think some people who graduated college and aren’t using their degree feel they shouldn’t have to pay their student loans.

Is the new rent more than they were paying at their last place? If it’s the same or less, then they might be ok.

The rent on my house is significantly more, calculated at 37% of their income, which is pretty high, although where I live this isn't out of the norm since real estate and rents are so high.  But the more I hear your advice, I'm thinking they may not be the best tenants.  I asked for last three bank statements and w-2.  Waiting to see what the results are.  

The 3 times monthly rent for income is one thing I will never budge on. Well, and no evictions in their past. And they have 3 children? Their expenses aren’t going down with kids, only up.

I wouldn't be concerned about the credit issues as long as they aren't housing related. I would be concerned about 2.7x's rent, our standard is 3x's and in a low vacancy area I certainly wouldn't stray from that. But that's my standards perhaps not yours.