Would You Approve This Tenant?

Question

Got email from PM stating they have an application on my 4/1 SFR in Memphis, TN.  They want to know my thoughts on whether or not I want to approve applicant (they’ve since denied 3 other applicants for poor credit and bad rental history).

Applicant makes 3x the monthly rent.  Works in healthcare as billing representative and has been working there for 3 years.  No verifiable rental history and presently living at home (and has been for a year).  Single individual, no pets.  Credit score below 575.

Rent is $950/month.

Would you approve this application?

I asked the PM and they said they normally would not approve it (but it looks like they’re reaching out to me to see if I want to make an exception).

Nathan Gesner · Answer

My guess? They want you to take responsibility. If the tenant turns bad, you can't blame the PM because you're the one that approved them in the first place.

Anna Sagatelova · Answer

If your LL denied 3 prior candidates based on credit, they should not approve a 4th applicant with same/similar credit situation. If there were other factors that led to the prior 3 being denied, this may be ok, otherwise you could be looking at a potential Fair Housing claim if those credit standards are not evenly applied to all applicants.

Ujwal Velagapudi · Answer

@Mark S. You can ask your PM the application they've gotten so you both are looking at the same data and evaluating on the same basis, but as Anna pointed out do keep in mind your fair housing laws for the state, and of course federally.

Anna Sagatelova · Answer

@Mark S. If you are asking whether this applicant meets my company's rental criteria, the answer would be no. However, your PM needs to clearly define what THEIR criteria is, and stick to it with consistency. What I or any other BiggerPockets member would do is irrelevant, especially once other applicants have already been evaluated and rejected on whatever criteria they had in place.

I'm sorry if this is less helpful than you were hoping for, but coming from a Fair Housing perspective this is really important to emphasize. Frankly, I'd be worried about that PM's compliance.

Ujwal Velagapudi · Answer

I generally like to aim for 4x rent for their salaries. That seems like a pretty large place for a single person to rent. The consistent salary and job history is comforting, but if this is their first time living away from the comfort of their home, and it's going to be in a large 4/1 SFR as a single person, I wouldn't do it. There will be a lot more expense to upkeep a home rather than an apartment, furniture, etc. I'm sure with all those rejected applications you and the PM both want to get someone in sooner than later, but I think its best not to change your criteria, especially in times like these. I've even let my units sit dormant for a few months just because I wanted to ensure I wasn't lowering my criteria.

Sean Tagge · Answer

Yes would rent with a double deposit due to them having no verifiable rental history. (I assume they already did a background check etc and passed that)

Mark S. · Answer

Thanks, @Nathan G.

I’m not sure why they would ask me either.  My guess is because I have been asking for weekly updates and maybe they’re feeling “pressure” and want me to be the one to give the green light?  Who knows?

Nathan Gesner · Answer

Yes, I would rent to them. However, they pose a higher risk due to the lack of verifiable rent history so I would require a double deposit. IF they're willing to shell out $3,000+ to move into a $1,000 rental then I'm willing to rent to them.

I'm curious to know why your PM would contact you for advice. That doesn't sound very professional to me. I process about 600 applications a year and none of my Landlords have that kind of experience. There's nothing a Landlord could add to my system that would make me seek out their advice.

Mark S. · Answer

@Anna Sagatelova

Thanks, Anna.  I know rental histories with pst applicants were also an issue.  Trying to find out more info.

With all that aside, would you approve or deny this applicant?

Mark S. · Answer

@Ujwal Velagapudi

Hey, thanks for responding.  I get what you’re saying.  It’s a smaller house (just over 1,100 sq ft).  My thought is why aren’t they getting an apartment?  Is it because no one else will rent to them?

Am I able to ask the PM for more details on the credit report?  Applicant’s age?  Is that “allowed?”

Would You Approve This Tenant?

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