How big deposit, bad credit and poor income?

Question

If you have an applicant you denied and they are persistent, how big of a deposit would you ask for if they are weak financially and one of the 2 has bad credit?

Rob K. · Answer

Jeff S. Would you sell the house if the price was right (high)?

I've made a lot of money doing rent to owns with people with bad credit. You get a lot of money up front as a non refundable option fee and then rent them the house. You get a pile of cash now and if they get their act together and buy the house, you take the money and go buy something better. If they don't buy it, they just rent from you and you keep the up front money. If they move or you evict them, you keep the up front money.

Best time to do rent to owns is late January to mid March when people are getting their tax refunds.

Lynn McGeein · Answer

Jeff, Move on. Do not give them hope. If they are asking to pay a larger deposit to overlook not qualifying, that is a huge warning sign. Bigger deposits do not mean better tenants. Not even a full year's rent in advance is enough to risk one of my homes to someone who has bad credit and is weak financially, as tenants can destroy a house fairly quickly, and you're left to repair the damage. Not them. All you get is a judgment in court that you probably can't collect on, so if they don't meet your criteria, keep looking. Also, some areas limit the amount you can collect and keep as a deposit, so that wouldn't work anyway, if your property is in one of those states.

Steve Babiak · Answer

I hand it to them along with the blank application forms if they visit in person; I have also emailed it and the blank application forms in advance of them visiting. Many see the criteria, and they realize you aren't a hobbyist landlord (even though your "for rent" signs are from the big box stores) - and they won't qualify so they leave without going any further. Saves lots of screening time when the result would be eventual rejection.

Jeff S. · Answer

When do you present the criteria?

Steve Babiak · Answer

Sure. The three reports (credit, criminal, eviction) came back to me with the data. Criminal and eviction had nothing reported. Credit reports showed a number of addresses where they had resided in the past. So I look up the addresses in public records, and contacted the owners listed there. And that is how I uncovered that there were eviction issues; in my state of PA, the landlord tenant cases are not publicly searchable on the web (even though other court records are), so once the one owner told me of the cases, I was able to call the magistrate's office that handled the cases, give the clerk the names involved, and they gave me the case number for the eviction (which I used in the rejection letter as the reason for the denial). The foreclosure and bankruptcy showed up in search of court dockets (the service I use does not give those, so I always do that myself along with certain other searches and verifications).

Discovering a prior eviction is always the easiest way to automatically decline the applicant (my written criteria do say no prior evictions), and I like to send a rejection letter that leaves little reason for them to try to come back with anything.

Dave M. · Answer

Wow Steve, looks like you really dodged a bullet on that one. Would you mind elaborating on how you were able to dig deeper? And maybe describe what the screening report was that did not reveal enough apparently.

Steve Babiak · Answer

BTW - there is a counterpart to the "can't you find another better applicant" and that is: "Can't this applicant find another available rental?" My guess is maybe not!

Steve Babiak · Answer

Just say "NO" and louder as they persist!

I rejected a couple earlier this year that sounded a bit similar. She had the better credit (he actually was unscored, due to being so bad), but he made the income. Digging deeper, I uncovered an eviction and a total of nine landlord tenant cases (none of which came up in my screening services eviction report BTW), a prior bankruptcy, and a prior foreclosure on a house that was inherited (just cashed out to get loan).

Saying no is easy sometimes.

Scott W. · Answer

@ Lynn M. - i'll take bad credit anyday if someone will pay a year's rent up front. that's golden.

Jeff S. · Answer

Thanks, agreed. Next up are three 20 something females. Running credit now. There are lots of applicants but taking in order as supposed to.

How big deposit, bad credit and poor income?

How big deposit, bad credit and poor income?

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