Newbie needs help picking the right tenant

General Landlording & Rental Properties
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Newbie needs help picking the right tenant

Iaroslav Demydovych
Lancaster, PA · Member since 2017 · 32 posts · 6 votes

Finally after a week of having my property on a market i have 2 application and i can't see to pick one. Also, this is my first rental ever so wish me luck. So here is the scoop: the rent amount is $1275. 2.5 time the rent no criminal

applicant #1- older gentleman with his step daughter and 2 kids. gentleman has 3 different income.

income A - $400 from new paper delivery

income B - $1573 from disability

income C - $600 from pizza place

Credit score 634

Obviously he won't qualify by himself. His daughter works at best buy make $2000 per month which will not qualify her by herself either beside her score is 504 or something and 2 bills in collection ( red flag) . The girl just got out of a toxic relationship and moving in with the father. My worry is that the girl might split at any moment. together they make a lot over the 2.5 time the rent.

Applicant #2

Older lady in her early 40s no kids no husband. works as a nanny full time ($2800) and work part time as care giver to elderly ($975) and her score is 675. she seems like a better choice.

I would really really really appreciate any input!

Thank you

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Erik W.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y

I check 4 main areas: credit report, court records (criminal & evictions), income, and land lord references.

I don't look for a specific credit score.  I look at what the report says.  Student loans and Medical are not major red flags, unless they are small (<$1000) and not being paid at all.  As long as they are making some effort towards paying what is owed, typically that satisfies me.  Collections and judgments are major red flags.  If they won't pay their utility bill, you risk property damage if they let the utilities get turned off during cold weather.  Generally, even though I don't look at scores specifically, I've found anyone below 540 has too many negatives pulling them down and I require either a double security deposit or a rock solid co-signers (lives in state, sufficient income to pay all their expenses plus the rent, owns real estate so isn't going to run off tomorrow, rock solid credit).

Criminal: no violent felony convictions.  No "pattern" of trouble with the law.  3 or more misdemenaors (except traffic tickets) in 5 years or less is NO GO.  Felonies must be at least 3 years old after completion of the sentence and a clean record since.  Prefer no evictions but will take a person with 1 eviction provided they have paid off or are currently paying off any money owed to former land lord.  I must be able to verify the payment(s).  I have other criteria too many to list here.

Income: minimum 3x the rent from garnisheable sources.  Disability, social security, and pension income is not garnisheable, so even if you take them to court you cannot collect.  Job must have at least 90 days work history.  No "job hoppers" (i.e. new job every year).  No "McJobs" that they will leave the minute they don't like the boss lecturing them for showing up late every other day.  Prefer something that requires training or a license to get because it shows they value that job and won't let go of it easily.

LL references.  Must have good current and past land lord refernce, or I require a co-signer or double security deposit.  I verify current land lord by doing an in-home inspection where they currently live.  Whatever their current home looks, smells, and sounds like is what your house will look, smell, and sound like 2 weeks after they move in.  Priceless information!  I've avoided a hoarder and a person with 3 pit bulls this way.  Moving in from out of town?  Call a local real estate office and offer the first board, starving floor duty agent $50 payable via PayPal, Zelle, or Venmo upon return of pictures and a short checklist.  Only do the in-home inspection AFTER all other areas are approved to avoid wasting time and money.

I'm not too thrilled by either of your applicants.  Insufficient, unstable, somewhat non-garnisheable income.  Bad credit.  Any references?

Spring is almost here and Govt Money Gimme Season....err, I mean Tax Refund season is upon us.  Better applicants will be moving starting early February as the Tax refund anticipation loans start getting issued.  If it were me, I'd wait.  Better a vacancy than a marginal or bad tenant!

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  • Michael Veloso
    Pittsburgh, PA · Member since 2019 · 27 posts · 7 votes
    6y

    @Iaroslav Demydovych

    Without any additional background with evictions and similar type items, I would lean toward the single lady. 3 adult age children could turn that place into a frat house which would cause damage. I have kids and they can't help themselves sometimes to avoid causing damage to walls.

    0Reply
  • Iaroslav Demydovych
    OP
    Lancaster, PA · Member since 2017 · 32 posts · 6 votes
    6y

    Now we are really talking here. I had the house reappraise in December 2019 and since it’s duplex they did rental income study and the report says $1350 per month.

    Do you guys ever use appraisal report for base line on monthly rent?

    0Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Erik W.:

    @Account Closed.  it appears you've never head of the concept of Tax Credits.  Consider getting educated on the topic before "slapping anyone" upside the head.  Har, har, har.  Consider the laugh had.

    @John Collins, hey, it's a free country.  You do what makes sense for you.  I have a 1% eviction rate and under 3% vacancy over the past 7 years since adopting these criteria.  My worst turnover ever cost me $2,500 in repairs and lost rent, compared to some of the folks here who says turns cost them $5,000 - $10,000.  Works for me.

    LOL yes, those pesky tax credits!!! I understand the topic well (enough). I didn't really think you were out of your mind, I was just making sure. Taxes are a sore spot for me, not that we have to pay them, just the way we pay them and how too many people don't think about any of it as much as I think they ought to!!! Anywhos...first round is on me.

    And as far as your criteria and rate of success - bravo.

    1Reply
  • Ryan Evans
    Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
    6y

    I'm surprised nobody has mentioned this yet, but @Iaroslav Demydovych, be careful what you're posting about online. If you denied either of these tenants and they googled you and somehow found this post they could have a strong argument that you're violating fair housing laws and discriminating. You don't want to get sued over a simple oversight. Sure, it's extremely unlikely, but a good practice to follow. Brush up on fair housing laws because if you get caught up in a suit it'll make your life suck for a while. You've got to set criteria and then stick with them across the board. No exceptions, and keep the kids, age, race, etc. out of the equation entirely.

    Good luck finding the right tenant!

    3Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    6y

    @Iaroslav Demydovych,

    I looked at the ad, and your house is beautiful.    You did a nice job with the renovation.    

    One thing I did notice,  and granted I don't know your market, but you excluded a W/D.   You can find cheap ones on CL for like $300 for a pair, I'd recommend installing that.   When I was searching, a W/D in unit was a must!

    1Reply
  • Iaroslav Demydovych
    OP
    Lancaster, PA · Member since 2017 · 32 posts · 6 votes
    6y

    @Linda S. I do include w and D. I had it installed after I had pictures taken. I just put the description that W and D included.

    0Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    6y

    @Iaroslav Demydovych,

    Strongly recommend swing by and take a new pic, if i read the description vs. pics, i trust the pics!

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    6y
    Originally posted by @Iaroslav Demydovych:

    Now we are really talking here. I had the house reappraise in December 2019 and since it’s duplex they did rental income study and the report says $1350 per month.

    Do you guys ever use appraisal report for base line on monthly rent?

    Absolutely never, Iaroslav. If you go down the relentless rent-raising road out of a misguided need to get maximum value out of your asset, turnover is going to screw you hard. It's an SFR and your first investment. Nine times out of ten, your best and most effortless ROI on any SFR is going to come from minimal turnover and vacancies with a stable tenant who keeps the place reasonably clean and tells you promptly when stuff goes wrong, but doesn't demand immediate fixes.

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    6y
    Originally posted by @Iaroslav Demydovych:

    Finally after a week of having my property on a market i have 2 application and i can't see to pick one. Also, this is my first rental ever so wish me luck. So here is the scoop: the rent amount is $1275. 2.5 time the rent no criminal

    applicant #1- older gentleman with his step daughter and 2 kids. gentleman has 3 different income.

    income A - $400 from new paper delivery

    income B - $1573 from disability

    income C - $600 from pizza place

    Credit score 634

    Obviously he won't qualify by himself. His daughter works at best buy make $2000 per month which will not qualify her by herself either beside her score is 504 or something and 2 bills in collection ( red flag) . The girl just got out of a toxic relationship and moving in with the father. My worry is that the girl might split at any moment. together they make a lot over the 2.5 time the rent.

    Applicant #2

    Older lady in her early 40s no kids no husband. works as a nanny full time ($2800) and work part time as care giver to elderly ($975) and her score is 675. she seems like a better choice.

    I would really really really appreciate any input!

    Thank you

    Ethically - and LEGALLY - you are REQUIRED by law to accept the first qualified applicant. By doing otherwise, you risk fines and/or jail time.

    If you find that shocking or upsetting, consult a reputable real estate attorney and ask for their input.

    0Reply
  • Iaroslav Demydovych
    OP
    Lancaster, PA · Member since 2017 · 32 posts · 6 votes
    6y

    @David Dachtera of course, that’s a given I would have to deny the 1st for a valid reason which is not fitting into my minimum qualifications criteria/ bills in collection and low credit score. Only then I can work thru the second applicant and potentially accept it.

    0Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    6y
    As for figuring out the rental rate in your area..... there are "services" like rentometer etc...... but I fond the best way is to just pretend to be a tenant looking in that area.....go to all the websites that a renter would look.... FB, Zillow, Trulia etc etc .......and look....compare the units that are somewhat similar to yours...bedrooms, bath, location, condition etc A lot of the "services" just use some algorithm based on bedroom, bath and sq footage.... they don't account for condition and location So do your own "apples to apples" search
    0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    6y

    To be most helpful the real question is why you ever wondered between the two, had to question or wonder at all, #2 reads to be a very solid tenant, a no-brainer. 

    Look, first off I DON'T discriminate, ever. That said, disabled persons on disability income, is called fixed income. That is there stable reliable income. Having added pt income is not a regular or reliable income unless a person can show a history substantiating it as such. Allowing such a person into a unit that their income does not meet standards for is not only setting you up for failure but it's setting them up for failure and hardship, and you owe a responsibility of defending persons from entering into financial agreements which will place an undue burden upon them. 

    Next is shared leases, not to say they "don't" work because plenty do, for a time, but they have more issues as a single-tenant can't get into an argument with themself over things. Ok, some still do but we just call that entertainment. Also, shared leases are always a shorter-term as it is a situation of convenience and people's life changes and than so does that convenience. 

    #2 is the "no-brainer" selection. I suggest focusing on reading up on landlording, every day set 1hr aside and study like your financial future depends on it because guess what, it does. Welcome to the stress club. 

    0Reply
  • Jennifer Pauyo
    Real Estate Agent · Brooklyn, NY · Member since 2017 · 102 posts · 218 votes
    6y

    @Iaroslav Demydovych go with the 2nd applicant!

    0Reply
  • Ron Singh
    CA · Member since 2014 · 244 posts · 47 votes
    6y

    @Iaroslav Demydovych

    #2 seems stable

    0Reply
  • Fareed R.
    CA · Member since 2017 · 73 posts · 15 votes
    6y

    @Iaroslav Demydovych

    Curious why is the lady renting the whole house compared to #1 having 3 people living? Does she have others living with her? How many bedrooms is it?

    Have you ran a background check if not I use cozy.co

    0Reply
  • Iaroslav Demydovych
    OP
    Lancaster, PA · Member since 2017 · 32 posts · 6 votes
    6y

    @Fareed R. The lady mentioned that she needs a bigger place because her nephews and nieces come over a lot. And I called previous landlord and he confirmed that she was looking for a bigger place but at the moment her current landlord did not have anything bigger. I did run background check i used rent prep.com. I like them.

    0Reply
  • Kwame Darko
    Rental Property Investor · Member since 2019 · 69 posts · 38 votes
    6y

    When we look at income, is it based on net or gross income? 

    0Reply
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