Rental Property Investor · Bothell, WA · Member since 2018 · 76 posts · 37 votes
I need some advice on whether to accept or decline tenant. Out of state rental has been listed for little bit over 1month by renterwarehouse. So far gotten 4 applications all single mother with 2, 3, 4 kids. Most of them meets income qualification but all of them had terrible credit, collections. I'm not sure what to do at this point, really desperate to rent it out, but also afraid of bad tenant. None of them had any evictions. One of the applicants is nursing assistant with 6800 a month income, rent is 1300. Has anyone had good tenant experience with terrible credit and 9 collection records. Thanks.
Take the best one and put them on a M2M lease. If they are sincere and willing to step up they will have no issues being on M2M from day one. If they know they are likely to not make rent payments on time they will not agree to a M2M lease.
Chances are that if you accept a tenant with bad credit they will be making excuses and not paying rent on time.
Make sure you make it crystal clear that the first time they are even one day late you will be non renewing their lease.
If you cave and allow them to stay after a late payment don't come back here asking for advice on how to deal with a tenant that consistently pays late.
1. credit score for me is not a big issue, however NO evictions is crucial.
2. I think you should be more in control of the leasing process = more money in your pockets for the long run (you choose the tenant) and less time you have to spend on this
3. Get a local real estate agent (maybe someone that just begins his RE career and will appreciate the $$) and sign a rental listing agreement, normal commission is ONE month rent.
4. Make sure to provide the real estate agent - your lease agreement including all additions and provisions, instructions on how to screen the tenants (you set the terms according to the specific house in the specific neighborhood comparing to other rental in the area). and you let the RE agent list the rental in the MLS. (there are several ways you can do it yourself as well)
5. RE agent answer the calls , show the house , and collects applications. does some basic screening from his point of view , more insight you get from the agent per applicant is better for you
6. you get the applications, do your own due diligence with your own set of requirements (who knows you better then yourself??) and eventually you accept the tenant you want, at this time you can meet with him / video chat etc...
7. RE agent signs the lease between you and the selected tenant.
8. make sure tenants knows what forms of payment you accept.
Tip -
I usually dont mind lower rent when advertise = allot more calls I am getting from interested persons. RE agent does the showings and basic screening. after basic screening - when I am doing my screening from applicants , I take my time to try to CHOOSE as WISE as I can , meaning I am looking for long time relationship , with a tenant, a person, it is a relationship like nay other . if you choose smart - you will have a long time tenant , with no MIDDLE MAN.
Maintenance can be dealt from time to time, I believe that investor like you can get calls few times a year and address them provisionally with having some bids at any time, you will be amazed how much money from rentals can be made this way.
My recomendation is get a full service PM, if you are making this decision, Im not sure what you are paying a PM for, you should be able to find a decent PM in that market for 7-9% and never have to review an application, to me if you are doing the screening, what are you paying for?
@Leon Li I've always thought through this lens: " If I'm worried whether someone would be a good tenant or not, it means they won't be." Think of the potential costs associated with an eviction, remarket, etc.
@Leon Li what is your definition of terrible credit score? I have rented to many tenants with bad credit scores. Medical debt, divorce and bankruptcy are all things that can damage credit but they may still be good tenants. I like nursing as a profession because they will always have a job. If they have good rental references, no landlord collections or evictions and good income, they will probably be a good tenant.
In my experience when I rent to someone with high income and high credit score, those type of tenants don't stay very long and end up buying their own home. My tenants with lower credit scores are the ones that stay long term.
This is what I look for as a realtor who rents out properties and comes from a family who also had rentals as long as I can remember ask who is going to be paying the rent. It might not be them, it might be family, ask for two years of employment history (Income) and the last two years of renter history (Trustworthiness). From that information alone you can pretty much know if they can cover the rent as I haven't had a renter evicted because of not paying rent.
One thing I look for that is not related to whether or not if they can cover the rent is character. Try to meet them, Skype, or call, ask questions about their experience with other landlords, their interests/hobbies, and other casual conversation topics. Some of the worst renters I had complained about everything and had no respect for the property, while some of my best renters were a day or two late on the rent but were cooperative with upkeep of the property. Ultimately you will create your own standard based on risk tolerance. Maybe adjust the deposit to offset the risk?
A Nursing Assistant single mother with a $6800 a month income?? I'm in the wrong business.
You might want to check if that is child support, and, if possible, how reliable it is. If she has a court order for child support, and the ex(s?) are sitting in jail or working under the table somewhere to avoid collections, she doesn't have $6800 a month income. And if she does, why is she looking to rent in a C class neighborhood? Unless your area has excellent schools, she should be looking higher.
And a side note...4 kids? 3 words... Wear and tear. I raised 4 kids and I was a mean, strict mom. They wouldn't have dared color on the walls, flushed Ducky down the hole, or anything else. There was STILL a ton of wear and tear.
@Leon Li I think if you’re only getting those quality tenants applying then if you find one that is worth accepting, take 2 months security deposit. I inherited my first tenant and ended up with her abandoning the property 2 weeks ago. She left all her junk in the house. Luckily the previous owner collected 2 months security deposit and although it doesn’t cover everything, at least it cover some of the repairs and lost rent. Good luck!
I've rented to a lot of tenants with bad credit. Rarely had an issue. Have to lean more heavily on their other qualifying factors. The truth is most people with great credit, strong income, etc, aren't renters...or won't be for long. There's always a reason someone is renting. If someone can afford the place, and you think they will take care of it, then maybe you roll the dice. If it makes you feel better, then require a higher deposit, and make it very clear that whatever that state's tenant laws regarding evictions will be followed to the "T". No leniency.
How are they marketing the property? Craigslist, Apartments.com, hotpads.com, etc? Do you have good pictures? Does your ad sell the place well? For example, does the ad highlight the main features, schools, walk score (walkscore.com)? How is your curb appeal? Is it a multi family or SFR? In multi's you can ask for the other tenants to refer their friends/fam. Can anyone do an open house? The more people see it, the more that can apply and you have to choose from. Could you lower the price for a 6 month lease and then raise their rent?
Rent is right. If you're getting applications it means rent is right. Shoot you've already got 4 applications.
As for the credit/background check - 550+, 3X the rent in income, no evictions or collections from property management companies, utility or home associated vendors. Fair housing has made the "no felonies" policy a gray area, so be wary on that. My policy is no drug related, property related or violent felonies.
Most people are renting because they don't qualify to buy (more and more are choosing the rent though as a lifestyle). If the renter qualifies on 3/4 of areas, require a co-signer or double damage deposit or both. Month to month is silly because if you wan't to "non renew them" you are more than likely going to have to evict them. Lowering rent will bring in less qualified renters.
A month on the market though? Sheesh, that's substantial vacancy my man! I agree that you need "boots on the ground" management or at least someone to lease it out and pay them a commission. I would get a local PM company who is familiar with the area and can get that place rented!
Leon, Sometimes you will have a grey area on tenant selection depending where the property is located. You need to base your decision on overall picture. That being said best indicators are length of job history, length of rental stay previously, previous rental rate, recommendation from employer. Often credit can be put aside when tenants have other strong characteristics like a high paying job, and long rental history, with glowing recommendations from both employer and previous land lord. Some people are financially irresponsible and don't know how to save and spend money, often they put rent first. You can also ask to see a bank statement to show proof of funds. Some of my previous tenants will have 20k in their bank account but just stink at paying their bills on time. Always look at the overall picture not just one or two categories. Feel free to reach out if you need any other advice.
I need some advice on whether to accept or decline tenant. Out of state rental has been listed for little bit over 1month by renterwarehouse. So far gotten 4 applications all single mother with 2, 3, 4 kids. Most of them meets income qualification but all of them had terrible credit, collections. I'm not sure what to do at this point, really desperate to rent it out, but also afraid of bad tenant. None of them had any evictions. One of the applicants is nursing assistant with 6800 a month income, rent is 1300. Has anyone had good tenant experience with terrible credit and 9 collection records. Thanks.
From my outside observation,
You are trying to wear too many hats and not putting other professionals in place. You are trying to be an investor, landlord and property manager. You must put a experienced property manager in place who is familiar with the area and screening tenants. Managing a property from OOS is not something most successful investors are going to attempt to do.
Now, vetting a applicant is not apples to apples. Just become her income is 3x+ the rent doesn't mean she can manage her money. The 4 kids can not come into account unless they exceed the maximum amount persons allowed for the unit... BUT when you say horrible credit score are we talking below 550 score? If they don't pay bills its only so long before they don't pay you.
If you look at zillow and look at the other rentals on the market similar to yours within a 2 to 3 mile radius what are listed prices? If they are substantially lower than your rental property than you are too high. If they higher than yours or in the same ball park you're good. If there are no other rental properties in the area, you bought a house not in a rental market and should consider selling the home.
Do not break your standards because you have waited a month for a good tenant. Just like choosing a property you have to be patient when choosing a tenant.
Unfortunately, you will find a lot of people who do not have the best credit after the market meltdown in 2007-2008 but if the credit is decent and not a complete nightmare, I would ask for 6-12 months of rent in advance. People that make the money and know their credit needs work, usually do not have a problem with that.
I would ask for 6-12 months of rent in advance. People that make the money and know their credit needs work, usually do not have a problem with that.
That might be tricky for a couple reasons - I believe in some areas you are not allowed to actually collect rent that far in advance, and the funds might have to be put into escrow and disbursed monthly to you. It also might make it more difficult to evict this tenant if they've paid up for the entire lease. They might have other issues that make them undesirable aside from dings on their credit report.
I would agree with the others that the safest long-term solution would be to wait until you find a tenant that you feel comfortable with. An additional month or two of lost rent will be cheaper than a long distance eviction.
If the applicant is not meeting your requirements (have you defined your rental criteria?), ask for mitigation - double security deposit and/or prepaid last month(s) rent. Be ready to start eviction procedures as soon lawfully possible if rent is late.
@Leon Li I have a mix of renters. Former convict , disabled nurse and regular working people. Even have a mother with 4 kids. They all pay on time. Also IT HELPS not to be emotional about property. If theyno destroy it I just fix and rent. If you are worried about these things might want sell and do something else.
Thanks for the advice everyone. So far I decided to reject all the single mother applicants unfortunately. Its a red flag to me that they dont pay car loan, utilities and student loan. Also all of them were paying below 800 dollar for their current rent. Makes me think they wont able to afford 1275. One of them even said they wanted better neighborhood, I'm guessing moving from a war zone. Oddly I am getting 4 showings every every day now.
Just to clarify I do have a PM in place and some reason they let me decide if i want to accept even though they do not recommend accepting. So far I did get a qualified application with good credit, even though theres 6 people all in there 20s 2 of them in school. Sounds like a nightmare 6 people share 1 shower and 2 bathroom but I have to pick my poison.