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.
@Leon Li when I have an app with good income but poor credit I look heavily into rental history. Just because they dont have an eviction on record doesnt mean they have good rental history. Call as many of their past rentals you can and get as much info as possible. I've had tenants with bad credit but they always prioritized rent amd were wonderful tenants. However, I have also had the opposite happen.
A bad tenant can cost more money than a rental which stays vacant for a few months. I know some will say thats blasphemy but thats the record we have found.
Good luck.
Too all you experience landlords, correct me if I’m wrong (because I am not a landlord yet).
But people have mentioned lower rent = lower quality tenant. I would think pricing it just below market would bring in a stronger tenant?
I would rather have 40 applications and find the one that looks good, than choosing from 4 bad ones a month later.
@Leon Li
Look further into WHY their credit is so bad. We have two tenants with bad credit.
One is a single woman who got cancer and couldn’t work for a while. She’s paid back her debt, is back to work, and healthy. She has been great.
The other is a young couple with two kids. They don’t like debt and pay cash for most things, so they have low credit scores. They have also Ben great tenants.
Look closer at the credit report and take the highest income if their credit issue can be explained. If not, the reason they are the only applicants is because the lower priced rentals already turned them down.
If people don’t pay their cable bill, they won’t pay you. Their history is likely to be your future.
@Leon Li
One thing I have learned over the past 10 years of managing my properties: majority of tenants don’t have good credit. If they did they would be home owners.
Credit score is the one “requirement “ I’m not concrete on. No evictions, minimum income met, good job and good previous landlord references weigh more heavily to me. Also, lowering the price will get you more options.
Mostly, What i have is a few questions that may help you decide or enhance the overall structure
Lower Rent:
Can your business afford a rent decrease still keep cashflowing the property? Can you accept a higher turnover rate and repairs? Will you be able to average out the losses and gains or take a consistent hit?
M2M Lease:
@Thomas S. I think this a great idea when you are not sure or not very familiar with the area.
Aside: I would be careful for leasing in the Colder regions of the US. There are laws in place for some state that prevent evictions or delay them until after teh cold months have passed. Just be aware and consult your property manager.
Reposition:
Is there a way to repositon the property to enhance the overall gain of cashflow and still keep the tentant base? What is the average population to the area and what are the major employers within 10 miles? Could oyu improve the property and then attact a different tenant base? Is your property considered modern or meeting the needs of the local population?
Collections and Credit:
@Matt K. I agree that medical bills are something most of are behind or have to find ways to be creative with payment. Some companies, if you ask, will let you pay late but not report the information. The age of the collection or late report make a huge difference. My standard is after 4 years let the person have a chance if nothing new has been reported.
You could ask for a higher deposit for the property to allocated for the cost that would be incured for a leasing with a higher turnover.
Overall, Can you sleep at night with the decision that has been made with the property and your business for the short and long term?
Taking a month to month. They sound typical avg tenants. If you take those very high FICO chances they will move on to purchase or own a home as soon as lease is up.
Too all you experience landlords, correct me if I’m wrong (because I am not a landlord yet).
But people have mentioned lower rent = lower quality tenant. I would think pricing it just below market would bring in a stronger tenant?
I would rather have 40 applications and find the one that looks good, than choosing from 4 bad ones a month later.
I'd argue this is more location specific than anything else, you might get a few stragglers that will live in worse area for cheaper rent.... but the "good" applicants probably aren't looking in a bad area regardless of price.
@Leon Li I have a property near the Illinois/Wisconsin border. Does your PM company extend into Waukegan? I live in San Diego and have been looking for a good recommendation.
How far back is the credit issues and collections? When we look at tenants, I think there is a large difference between current or recent issues versus problems from a few years past.
Also, I know you are probably wanting to rent this so bad, but vacancy hurts but a bad tenant (who damages your property and doesn't pay rent) is much worse!!
@Leon Li putting a few of your comments together, it sounds like your PM has qualified now, 5 tenants and provides you warranties (9 months) and maybe more assurance of paid rent/renters? It sounds like you may be getting emotional about this deal. Although there are plenty of bad PMs in the world, as there are with any industry really, Renters Warehouse is a national PM company with systems in place that have made them successful. If they've approved 5 of your renters, is it possible the reason you have had a month of vacancy is your fault? You've hired a PM for their expertise, experience and systems. Step back, approve one that they've qualified and hope that they've taken the proper steps to qualify the tenant.
Anyone with bad credit, especially below 600 will be a problem tenant. They are even in collections, why is this such a hard decision to make???
You can get an FHA loan to buy a house with 500 credit score and 10% down. With 580 credit score you can get FHA with 3.5% down payment. Over 600 is ideal, but depending on the type of property and renter pool, there are ok people under 600 too.