Real Estate Investor · Tampa, FL · Member since 2016 · 54 posts · 15 votes
Hi, I'm newer at this. I have written minimum requirements for renting our houses that I share with prospective tenants which includes ">600 credit score. Pattern of financial responsibility".
This couple sent me an application. They meet the income requirements and credit score. However, when I look at their credit report, it scares me as a landlord.
He makes close to $60k/year before taxes. Has almost $30k in revolving debt and is very close to credit limits and sometimes goes over them. Has about $700 in collections. Just tried to open a bunch of new credit cards 5 months ago; those he did open are now close to credit limit.
She isn't making much money because she's studying for her bar exam in two months. She has $9000 in collections from college student apartments in 2018.
Although they meet the credit SCORE requirement, is it OK if I deny them because of these other details? Or am I overreacting? Rent for this home is $1990/month.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
The important thing is that the requirements are “minimum requirements” not “if you barely meet all the minimums you are automatically approved”. Owing $9000 in collections to a prior landlord to me is basically the same as an eviction. Definitely add a “no evictions” minimum requirement to your minimum quals if you haven’t already
Did an eviction come up on their background check? Even if it didn’t you can’t approve someone who has a history of not paying their landlord when you are in the business of being paid as a landlord. Sometimes the thinking can be that simple.
Rental Property Investor · Cleveland, MN · Member since 2017 · 518 posts · 354 votes
6y
I would deny them based on the collection accounts. I just tell people that if their wages start getting garnished it's going to be hard to pay rent. The credit cards are a big red flag. I rented to someone like that an it turned out bad. They are obviously living beyond their means, and I cannot imagine that's going to change anytime soon.
Rental Property Investor · Helena, MT · Member since 2017 · 282 posts · 117 votes
6y
How would you feel about not collecting $9000 worth of rent? Call that 6 - 12 months of non payment before they had to be taken to court/ collections? If they didn't pay your rent for 6 - 12 months, would that be a big or little deal to your business? Might even be realistic they "owe" their previous landlord > $9000.
Property Manager · Cleveland, OH · Member since 2019 · 446 posts · 566 votes
6y
1) Deny these applicants - on grounds of not displaying patterns of financial responsibility
2) Update your rental qualification criteria to include things like minimum income ratio, landlord references, no outstanding housing debt, etc etc etc - lots of resources on this site for best practices in tenant screening criteria, but also feel free to PM me if you want to discuss! Disclosing up front what your criteria is protects you.
3) Sleep better knowing you will have reduced ambiguity and the "should I, shouldn't I?" style of evaluating a rental application
Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
6y
@Deborah Repaskey
Income would be a huge red flag. If he makes $60k that would mean he is around $3600 after taxes so more than 50% of his paycheck is going to rent. I try to stick closer to 33% where possible. Ie income should be about 3x rent.
Rental Property Investor · Vancouver, WA · Member since 2014 · 68 posts · 37 votes
6y
@Deborah Repaskey you stated a pattern of financial responsibility.
Typically, in my experience, 700+ might offer less of this issue. To your point, collections do not meet this criteria.
I’m also a landlord, and a new one at that, so I’d solicit more opinions. Do you have an attorney? Avvo is a great place to find one and they answer questions like this one.
Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
6y
If "Pattern of Financial Responsibility" is actually in your written criteria that the tenants have seen, you're pretty free to make your determination on how you feel about their finances. And me personally, I'd be looking for a way to deny because youre going to have an attorney in the
Realtor · Washington, DC Metro · Member since 2014 · 39 posts · 14 votes
6y
@Deborah Repaskey As others have noted follow your gut. I think a denial would be prudent. You can provide a super brief response letter and include 1 to 3 bulleted items to provide the primary reasons for denial...something like “high utilization of revolving credit” and “Recent collection activity” and then include the name and address of the credit bureau whose information was used to establish your decision and note that they can BBC intact them for more information on their credit file.