How to migitage risk for tenant with bad history

Question

Hi all,

If you had an applicant with bad history ( eviction last year, and bad credit) and thinking of giving this person a chance, how would you set the terms? Rent? Special clause? Safety deposit amount? Any special condition that can help me evict quickly if it comes to that?

I'm in Texas by the way, not sure if this is important. I have never evicted anyone so I don't know the cost or the process.

Nathan Gesner · Answer

I would protect myself by not renting to them.

Are you in a bad market where it's hard to find good tenants? If so, maybe your standards should be lower. For 90% of the country, there's no reason to rent to someone with an eviction in the past 5+ years.

Raise your standards, put them in writing, and stick to them.

Jason D. · Answer

@Michel Ho My off topic question would be, why do you not want the best tenant you can get? What makes you want to help this person who, likely, will follow the same pattern as they have in the past?

My on topic answer would be to charge a higher deposit (check local laws for maximums that you can charge), or some sort of incentive, like 5% off rent paid early.

I would also not enter into a long term lease. Keep it month to month so you can get out more easily, if necessary.

Mike Dymski · Answer

Thomas S. must be on vacation...

Michel Ho · Answer

Just an update for everyone.

I was notifying him about his application being rejected. It was a difficult face-to-face conversation. We went back and forth for a while. During this process, i learned more about his situation and his history. He basically got into an accident and didn't make money for a while. He couldn't walk or work for over a year. Eventually he couldn't pay any of his credit card bill and was evicted.

He recovered not long ago and miraculously able to walk now. He is now employed for the past 2 months and expects a good paycheck. His demeanor and the way he handled the bad news made me change my mind about rejecting him. I really want to help him so we worked something out. I know i'm taking on quite a bit of risk here but i believe he is genuine and is trying to build his life back.

Once I told him he could officially stay at the property he was getting emotional and teary. Mind you that he's over 6 feet tall, over 300 lbs, and over 40 years old. I was secretly emotional as well seeing him like that. I'm happy to give him a chance at rebuilding his life and career. Hopefully, this road will not lead to an eviction but everyone is happy including my wife after hearing the story. She even said it's ok if we lose a little bit of money if it doesn't work out. She's too nice to be in business I feel like but i'm also proud and feel extremely lucky to be with her.

Anyways, the guy is staying at our place and we hope for the best.

Thank you BP community for your input. I just went with my gut in this case and hope for the best. I truly home this guy's luck will turn around.

Sincerely,

Michel Ho

John Underwood · Answer

You have to remember this is a business and take your emotions out of the equation. I know it is not always easy to and and guilty sometimes of trying to help someone too much and I usually get burned or have to deal with drama.

You did the right thing by not renting to them.

Anthony Wick · Answer

@Michel Ho

Man, I wish you the best, but I need to know if this is the first time you’ve ever rented to somebody. I can’t say strongly enough how bad of a process and decision making you have. Sorry, but this is no way to run a business. Please come back in 3-6 months and tell me I’m wrong. Sincerely hope it works out.

Kenneth Garrett · Answer

@Michel Ho

You can never protect yourself enough.  Everyone has a story.  I would not rent to someone with a recent eviction.  If you want to rent to them charge two months security deposit if your state allows that.  Be careful, you can do better with a more qualified tenant.

Good Luck.

Dennis M. · Answer

How do you mitigate it ? You simply don’t rent to idiots who don’t pay their bills

Michel Ho · Answer

Just a quick update for everyone.

Tenant was late on 2nd month rent. But he paid in full and with late fee. He notified me before the due date so I really appreciated that. I was a bit concerned instead of being extremely concerned. I'm glad i didn't have to start the eviction process.

Michel Ho · Answer

@Anthony Wick I'll definitely update you guys in a few months from now. This is probably my 6th tenant or so. I recently (6 months ago) acquired a 2nd property.

@Mike Dymski Who's Thomas S? I'm not sure what you're trying to say.

@Kris L. Thanks. I hope it will work out too.

@Frank Geiger Either he is super good at acting or his story is genuine. I have strong feelings that he is an honest man. Of course I could be wrong.

How to migitage risk for tenant with bad history

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