which renter should I choose?

23 Replies

I am new landlord and just bought my very first investment property and feel so excited to put the house on Zillow to rent asap.  My local market for a similar house goes from $1700-1850, so I set mine at $1700 hoping to get renters faster and attract more people to apply.  (Seasoned landlords, please comment on whether this strategy is the good or not?)

I did end up with a lot of showing and among those have a couple good potential renters.  My husband and I came down to the last 2 options:

- a couple who's own house is under repair and insurance pays for temporary housing.  Their insurance is willing to pay $2100/mo but only willing to sign 6-mon lease with month-to-month options.  The couple has 2 young lovely kids (super adorable) and a big dog.  They said they could put their cat away.  Our winter is bad, and I am worried if they move out in Jan, I would have trouble to rent out again...

- an elder couple who just sold their house and needs to move out asap.  On the showing, they brought me the IDs, their house selling contract, the husband's senior management job contract and their marriage license, saying that's because they have different last names.  They even brought a ruler and measured rooms to see if their furniture could fit on the showing day.  But they also told me if I pull their credit score, don't be surprised that they have bad scores, which were credit debt for fixing up their old house.  But as soon as their house closes, they will pay off those debts immediately.  I did check the credit score (<430+ with about 70K credit card debts), and their job (it is a highly paid long-term job) and they told me they want to at least rent the house for 3 years.

Both couples love the house a lot, and both want to move in asap.  As a new landlord, I don't have much experience about how to choose between these two tenants.  Can seasoned landlords give me some advice?  Thanks in advance!

@Yunzhi Huang that's tough. I probably wouldn't accept either one if it were me. At first they both look great but once you remove the emotion and look at numbers it doesn't look good to me. The first is only staying for 6 months and even though your getting more rent, is it worth it after you have to turn it over in the middle of winter, middle of the school year for families. Your applicant pool will probably look much worse that time of year. The elderly couple with a 430 credit score: if it is that bad then they are conditioned to pay bills late/never. They might pay off their bills will the sale money, they might pay rent with it, they might have over leveraged their house and are not getting at much as you think. When it comes to tenants paying bills, past performance is the best indicator of future results.

What are your 3rd and 4th choice applicants?

I have never seen a credit score lower than 450. They must have started with terrible credit. Maxing out their credit cards to remodel, and paying exorbitant credit card interest rates? rather than taking out an equity line of credit?

Buyers are liars, and renters are too. Saying they want to rent 3 years is meaningless. 

They’ve been over-remodeled over the last 10 years.  They tried to sell the houses in the last few years, although got buyers but couldn’t pass bank appraisal... twice... until this year they got enough expensive houses around and overall market was up...  luckily they sold the house at a price that enough to payoff all the debt and rent for 20 years.  Maybe flippers or brrrr could use this as an bad example. 

My 3rd and 4th choice are:

- a couple with good credit score >720, the husband has good job, 3 kids no pet, however they cannot move in until Sep.  On top of that , they ask for a fence immediately which will cost me 5-6K...a little bit hard to absorb this cost right now.

- a couple who’s at edge of foreclosure, high debt ratio (95%) on credit card, but are selling their house too to recover from their financial situation.  They offered me to install the fence for me (I buy the material) for $1000 rental credit for the first two months, while they are potentially paying both mortgage and rents.  Their house is in a good location and the current market value could pay all the debt they have and left a decent amount to pay years of rentals (this part is similar to the 

Lucky me.  Should I just keep showing until I get an ideal tenant? Good credit, good income, want to stay long and can move in immediately?

i'm still a newbie too but I believe you don't have to say yes to the fence. Only thing you need to fix right away are things that effect living conditions such as hvac. This may depend on your state too.

I also would not give renters a rent credit. If they offer to put a fence up and you agree to it, they can give you receipt and you write them a check for it instead.

I totally agree with you.  I heard some stories from a landlord friend about letting renters re-tile the bathroom.  It didn’t end well.  Contractors are expected to be bonded and insured for a reason. 

Never let the tenants do any construction work. Better to pay a handyman.

You also do not need to put up a fence. You rent as-is, take it or leave it. When people apply, they understand that's what they get, or they can withdraw their application.

Installing a fence at your expense is like giving them a rent discount.

5k for a fence? how big of a fence, and what kind of fence are we talking about? 

Would a chain link fence work? or do they want more privacy?

It looks like with how popular your place is, its just a matter of time before you get ideal tenants. If it was me, I'd wait a little longer and get someone I was really comfortable with. With the right tenants, your life will be so easy. With the wrong ones... Good luck lol. 

First of all, I always list my properties on the lower end of the rental price to get more interest. I think its worth it in the long run. So great call imo. 

I would also suggest listing the property on Facebook market place. You will get a lot of people just looking, but you will reach a lot of people who do not check out Zillow. Mostly younger couples.

Out of the options you have presented I would go with the first couple who is having their house fixed up. $2,100/month is pretty solid when you were asking $1,700/month. Seems like they have their stuff together seeing as how they are actual home owners. Yes it might be harder to find good tenants in Jan but you also have an extra 6 weeks in rent to allow yourself to be patient. $400 extra per month x 6 months.  That puts you in middle of Feb/beginning of March to get that place rented out before you technically start losing money. 

Maybe see if they would do an 8 month lease? Explain to them your only concern is trying to get it rented in Jan which is the worst time to try and get a place rented. If you can get them to do an 8 month lease their lease would run out in March. That puts you around May before you start losing money and also puts you at a much better time of year to get the place rented. 

I would also tell them to kick rocks on the fence. Obviously I'd be nicer about it but tell them sorry and NEVER let tenants do the work themselves. Especially don't let them paint.

I'd try my luck at FB market place and try to get some more interest. 

@Derrick E. Thanks for the facebook market tip.  I will try posting there.  If the insurance could agree to a 8-month lease, that would be quite ideal too.  I found being a landlord needs me to sharpen up my negotiation skills :D

@Yunzhi Huang 1 or 3

If your renting for 2100 as opposed to 1700 that’s 400 plus 6 months. Meaning 2400$$ that is more then enough to cover the turn over you will have once they leave

Number one ideally but there is one factor I will get to in a moment.

But it also seems you may be able to rent it out for more then 1700, maybe, just a theory but even if you rented it for 1850 they are still pay 250x6 extra which probably would be enough to cover cost of turning it over.

I like family number one if you like the extra work

The only factor is they move out in January 15th?

If you live in a snowy area it will be hard finding tenants in the middle of January

If you live in a place where winter weather is fine and people will move, then option number one no doubt.

Keep showing to property until you have a deposit with a Deposit to Hold agreement.  Don't stop accepting applications if someone agrees to rent but hasn't put any money down.  With the 3rd tenant asking for a fence, I typically let them know I will to install a fence (or any other upgrade that I'm not ready to do that will increase value) if and when the lease is renewed.  Most of the time they understand and agree and you have a better chance of them turning into a long term tenant.  $5k is a lot of fence though.   

I still disagree with tenant turnover in January.  Most prudent people don't plan to move in the dead of winter unless it is an emergency (people being evicted and will not show up on record for a few months).

Oral agreement.  Who knows, that fence might not be that important to them in 12 months.  What if they would rather have a deck for the same cost? It will be written into the lease renewal.  The idea is to make good tenants, long term tenants.  I don't like the idea of making changes to a property to appease an applicant.  However, I will improve a property if it improves value to the home and helps secures a good tenant from moving.

Are they the only candidates from your list? A credit score lower than 430 is really a big issue which may bring trouble for you in the future. If the tenants look nice doesn’t mean they will be good tenants. Check their background carefully and if they don’t meet your requirements, refuse them and wait for other candidates.

It seems that your place is so popular that it is only a matter of time before you get the ideal tenant. If it is me, I will wait a little longer to find someone I am really comfortable with. With the right tenants, your life will be so easy.

To be honest with you none of these are good solid candidates except the ones that can move in September - but no fence. Make it clear you will not install a fence for them and they can take the property as is. My experience is if they have that good of credit and are already requesting major renovations they are on their way to homeownership themselves(good for them I say).

It might help you to sit down and make a list of criteria you are looking for. I tend to base mine on the following:

no bankruptcy in the past 5 years
no foreclosures in the past 5 years
at least a 530 credit score but if they have shown a good payment history for at least a year then I am not hard and fast on this

no criminal record
no evictions
current on all payments
monthly income = three times the rent
no utilities collections in the past 5 years
no collections in the last year

debt to income ratio is less than 40%

You can add modify or do what you like with this list and for me it is a guideline to keep my emotions at bay. I am a super nice person but don't pay me late! So I pick people who pay on time.

I think this might give you the confidence to pick a good candidate - my first renter on my first house is still in that house. I waited for the right lady and am so glad I did.

@Yvonne H. thanks for such a criteria list.  I am currently using the zillow’s Application process and background check etc.  Some of the items are not included.  Do you have any suggestion on back ground check provider?