Who Rents from You?

29 Replies

Hello BP!

One mistake I think many new landlords, myself included, make when starting out is that they don't think about WHO they want to rent to and WHAT unique value / amenity they have to offer those renters.

This got me thinking, what are the different types of renter profiles and how are they different? Are some more valuable than others? Also, how are their housing needs different?

For example, if we just compared across major U.S. cities, how do the types of renters in Boston, differ from those in San Francisco, Washington, Houston, Phoenix, or New York City? Is their any difference in their needs, both physically and mentally?

So consider this a survey of sorts and help those at BP by answering the following questions:

  1. What type of people do you rent to? Why?
  2. What do you differently than other landlords to attract this people?

Thanks in advance BP!

-Clinton

@Clinton Holmes  ,

I landlord in lower-income areas of the San Francisco Bay. 

What type of people do I rent to? Why?
Tenants tend to be lower-income, blue-collar service-industry workers, with bigger families (or multigenerational families), and typically 2 full-time income earners per household. They are looking for a safe, decent place that doesn't leak, looks nice, and is a reasonable rent for what is provided. Downstairs units are more desirable, as many have someone in the family who is not as spry as they used to be. To some extent, you must cater to the demographic that is in your market, so these are generally the people. 

What do you differently than other landlords to attract this people?
I usually buy vacant units that are beat up, then fix them up to better than about the 80/90th percentile of good-looking rental homes on the market in the area. I put flowers up in hanging pots. Make sure the lot and units are clean. Nice-looking, but low-maintenance landscaping. Detailed Craigslist ads, lots of signage at the property, return every phone call quickly. Many landlords in the area "slumlord," so this sets me apart from the crowd significantly, and people are willing to pay an extra 10-15% for that.

@Clinton Holmes ,

I landlord in the greater Phoenix area. SFRs 4/3 and 3/3. My ideal tenants are income earners that are 3x rent. No children or older children (less chance of damage to the walls and carpet).

I price my rentals a little below market rent. That brings in a lot of interest and applications. I can then have more choices of renters and it helps reduce the vacancy time. Trying to get an extra 10-15% a month gets wiped out with the 1 or possibly 2 months of extended vacancy. This is just my experience. Hope it helps.

@James Wise

Thanks for colleague connect. How do you know if they are going to be a pain or not?

@J. Martin

Thanks for taking the time to respond guys. Very helpful to see how other landlords think.

Originally posted by @Thai Foo :

@Clinton Holmes ,

I landlord in the greater Phoenix area. SFRs 4/3 and 3/3. My ideal tenants are income earners that are 3x rent. No children or older children (less chance of damage to the walls and carpet).

I price my rentals a little below market rent. That brings in a lot of interest and applications. I can then have more choices of renters and it helps reduce the vacancy time. Trying to get an extra 10-15% a month gets wiped out with the 1 or possibly 2 months of extended vacancy. This is just my experience. Hope it helps.

Just want to point out that "no children or older children" is a violation of federal fair housing laws.  I'm not a lawyer, so no legal advice, but if you really do not rent to families with children, I wouldn't actually say it in writing anywhere.  

We prefer minimum 3 x rent in verified income, clean credit and background checks, non-smoking, no cats, and we actually prefer a renter with a well-trained large dog.  They tend to appreciate someone offering a large fenced backyard and no extra pet rent, and they tend to stay a while as most places either charge a huge amount for a large dog or do not allow them at all.  I wish I could limit children, as they cause more damage than dogs in my experience, especially teenagers, but it's not allowed.   

@Lynn M.

Thanks for taking the time to respond. The large dog policy is an interesting advantage. Do you focus on acquiring properties that will be well suited to a large dog? Any problems managing insurance companies?

@Thai Foo @Lynn M.

I noticed you both said 3X rental income. Why would someone with 3X rental income rent, shouldn't they be in a position to buy at that point? Also, how do you typically verify income?

Thanks in advance for the help!

P.S. BPs any unique insight will surely get at least 1 vote from me! :)

@Lynn M. I'm aware it's a violation. I would not deny an applicant if they have children. I have renters with children. That's why I stated "ideal tenants". I should have been more clear, thanks for pointing that out.

Clinton, there are a number of reasons why people/families with 3x the rent do not own homes. Little savings, short sale or foreclosure in their name, too much debt to income, satisfied with renting...the list goes on.

Income verification, for W-2 employees I require copies of the last 2 paychecks or last 4 paychecks if they get paid weekly. Check out Eric Drenkhahn's articles on tenant screening. In my opinion he has great content.

http://www.biggerpockets.com/renewsblog/author/ericdrenckhahn/

1. If you're asking in terms of race, more African Americans; it's just where my rentals are. I live in the same county and have raised my children there (one recently got out of the Navy, one graduated from our medical college and is making at least twice what I do in my medical job) and it still grinds my teeth when, frankly, white applicants comment how poor our schools in my county are and "want" to rent in the next white bread county over but DON'T want to pay the higher amount of rent they'd need to do so. Since half of these applicants don't even have children (or their kids are grown) my gut feeling is that racism is alive and well in this day and age.

Most of my tenants are two income wage earners, often working in the medical field since we have a large number of medical facilities in the area. I avoid what I call "possum women" (women with a large number of children from a wide variety of fathers) as they usually have at lease some evictions on their record (any history of an eviction is an automatic screen out) and, as others have stated, I require an income at least 3 times the rent. I also have a fair number of military tenants since we have a large military base nearby.

2. I do a credit and criminal check which, for some reason, many of the small time local landlords don't seem to do around here (perhaps because so many screening agencies require the home visits for us). I do offer a $99 special for the first month move in to qualified applicants (those that pass the screening criteria) and that is appealing to those trying to come up with the security deposit and the rent plus the application costs and moving costs and (if it's one of my rentals where I allow pets) the $250 pet fee. My pet fee is also refundable at the end of the lease IF there is no pet damage.


Gail

When we were organizing our company, lo those many years ago, we spent time thinking about this and specifically decided we wanted to cater to working families.  There is a need, opportunities are plentiful, it is profitable and by and large we've had great tenants. 

A tip of the hat to @James Wise - screening tenants who are a pain is a must... how does one know?  It's usually pretty obvious in the selection process.  If one comes to an open house and starts acting like they would be doing you a favor by selecting your house, it's time to choose another tenant.

@Clinton Holmes  

Similar to @Deborah B. we set out with intent of serving specific demographics: in our case, students and young professionals.

At the moment, our units are ~60% student, 35% young professionals and 5% young families.

The most important thing you can do is screen your tenants:  We provide all prospective tenants with an application form which includes a guide explaining our application and tenant screening process and what information must be provided before an application is considered ready for processing.   We also charge a nominal ($20.00) application fee which helps defray some of the cost of conducting background checks, but primarily serves as a first filter.

Originally posted by @Clinton Holmes :

@James Wise

Thanks for colleague connect. How do you know if they are going to be a pain or not?

My gut is the 1st line of defense.

After that it's things like their ability to follow directions, are they complaining about certain things at the showing etc. As Deborah mentioned do they act like they are doing me a favor by being here to see my home.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633
Originally posted by @Clinton Holmes :

@Lynn M.

Thanks for taking the time to respond. The large dog policy is an interesting advantage. Do you focus on acquiring properties that will be well suited to a large dog? Any problems managing insurance companies?

@Thai Foo @Lynn M.

I noticed you both said 3X rental income. Why would someone with 3X rental income rent, shouldn't they be in a position to buy at that point? Also, how do you typically verify income?

Thanks in advance for the help!

P.S. BPs any unique insight will surely get at least 1 vote from me! :)

 We rented when we moved across the country for work, so we know how hard it was to find a decent rental that took a large dog without excessive fees (actually paid them as we could not find one).  We do focus on dog-friendly homes -- single family detached, 3 bdrm, 2+ bath, large fenced yard, claw-friendly flooring (no wood, no vinyl, no Berber), perfect for a larger dog, and it has worked well for us.  As far as insurance, the only time it was an issue (and didn't create one as the dog was very well trained when we actually met him, so we didn't push it) was when my property manager signed a 2-year lease with a couple that owned a rottweiler as they put mixed breed on the application and the manager never met the dog.  We found out during our first personal inspection 6 months later.   They now meet each dog to insure breed compliance with our insurance, follows their basic commands, does not pee inside their office when excited at a new environment, and is not aggressive, at least towards them.  Best I can do with a manager for my out-of-state ones.  I convinced them to advertise "well-trained family dog considered, breed restrictions, no puppies", as I always do on my own, and it seems to be working.  When I managed my own, I would bring my dog as well and introduce them to see if their dog was dog aggressive, telling them it was because I always bring my dog with me, inspections or repairs, so I need to avoid issues.  If you can rule out aggression or fear in meeting people or other dogs, and the dog is trained enough that it follows basic commands for you, personally, not just the owner, then it's a good match for our rental.

3 x rental:   The last one was because they lost money on their last home and don't want to buy just yet.   I've also had those that want fixed expense, no repair surprises.  I have one that is only in the area for 3-5 years so would rather rent (just signed for 4th year), and then there are those that want a few years to get to know the area before they buy (I was one of those when we moved across the country, although we only rented 18 months.)          

"We strive to provide safe, clean, affordable, comfortable and quiet housing for responsible renters in the neighborhoods of West Vancouver." The operative word here is responsible and they must demonstrate to us that they share our values for keeping our properties safe, clean, affordable, comfortable, and quiet.

We do not rent to smokers. We do not allow pets, however we will make reasonable accommodations for those with qualified disabilities. Our ideal tenant will be kind and cooperative, take care of the property, pay rent on time, follow the terms of the rental agreement, be a good neighbor and not bring any drama to the property.

Appreciate the responses everyone, this has been a huge help. Couple follow up questions:

@Thai Foo Thanks for sharing the link on tenant screening; it was a big help.

@Deborah B. How have working families been as renters over the years? What is it about your properties that draws working families in better than others in the neighborhood?

@Roy N. What made you decide to focus on students and young professionals? How has that been working for you? Also, like the question I asked Deborah, what do you do differently to draw more students and young professionals to your properties?

@Lynn M. Thanks for sharing your knowledge on large dogs. The area I invest and live in is very fond of their pooches and I might start trying to differentiate myself by allowing pets.

@Marcia Maynard Great mission statement. I think I will come up with one for my rentals.

P.S. keep the insights coming! I'll upvote anyone who answers the questions as I think this has been a huge help for me and everyone else who has participated.

If someone is offering you higher rent or pushing to move in as soon as possible, step back, take a deep breath...something is too good to be true.

One of the applicants asked if I had any issues with installing security doors. :)

Definitely do a credit and criminal check. I have used the following TransUnion site for tenant screening in the past:

https://fadv.mysmartmove.com/home.html

It used to be called Lexis Nexis but now name has changed.

Most states let you search on criminal history on individuals through state websites.

Social media could be another source.

Above all, keep fair housing rules in mind.

@Clinton Holmes  - as stated before, we buy in blue collar neighborhoods and screen tenants hard.  It has worked very well... over 12 years with dozens of tenants we've had only a few evictions, a few more invited to leave and did so quietly.  Our average occupancy runs between 95 and 97%.

We screen out people who don't work, have evictions, make excuses, tell terrible but unverifiable landlord stories, have a history of not paying their bills; especially utilities,  don't keep appointments, show up dirty, act inappropriately... the list goes on.  Hint - I don't care what your income is, if you [email protected]#$ about my clean and well maintained house... you should go find a different one.

The quality of your asset is going to effect how you screen your tenants as well.

I have some units that are pristine & I can post an ad online and have 10 people who want it the very next day.

Other lower end units not as high of a demand so can't be as picky. But the main point remains. Tenant needs to understand how the relationship will go. 

Never rent to the tenants that think you work for them.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633
Originally posted by @James Wise :

Never rent to the tenants that think you work for them.

Exactly. This is one reason we no longer participate in the Section 8 program. The entitlement attitude was ridiculous.

We have 2 SFRs in a low/no income area of a small city, and the pool of decent tenants is limited. No applicants have ever made 3x the rent. The houses are 4/2 and 3/2, so we always get families. No pets allowed. We have great tenants now, with jobs, and they are cooperative and pleasant.

In our FL condos, our tenants are mostly younger couples with one small child, or young professionals. All are working. The condos are higher end, and we screen for evictions, criminal background, judgments. The condo associations have approval processes too, and will do the same background checks that we do, and tenants are allowed one full grown pet under 20 pounds. They need to fill out a pet application with the association, along with vet paperwork, a photo, and license for the pet, then meet with the association for an interview. That keeps out those who would try to sneak in a Rottweiler and say it's a mixed breed ;)

Any tenant that points out flaws or makes complaints when seeing the unit is an automatic pass. If they complain at a viewing, they will likely be a nightmare as a tenant.

Originally posted by @Clinton Holmes :

...

@Thai Foo @Lynn M.

I noticed you both said 3X rental income. Why would someone with 3X rental income rent, shouldn't they be in a position to buy at that point? ...

Not necessarily. Some people with 3x rent as income have a hard time coming up with the move in money for a rental - but move in money is usually much less than the down payment needed to buy a house; hence, such a renter is not going to be a buyer.

Now let's assume a renter that has enough money for a down payment. And gas 3x rent as income. This still might not be a buyer due to poor credit score; to get that bank loan decent credit scores will be needed.

Not even getting into reserve funds and maintaining a house.

As far as allowing pets, if you do then get a photo of any pet that you have approved for your files / records , just in case there is something that changes.

thanks for giving some food for thought. Aside from the set criteria our ideal tenant is a non-smoking working single or couples for the one bedroom apartments. Since they are historic I prefer people who comment positively on that item or admire the unit because of its historic nature.

Tips they are going to be a pain lots of will you fix this on the visit , like noticing small plaster defects or asking about our list of improvements. Lots of contact is a bad sign to me. This is a needy tenant and I don't care for that. For me if they are aggressive about renting right now there should be a viable reason I can understand.

For students we prefer girls and serious majors but usually get guys. Sophmores or Juniors are better. Seniors can be an issue, we prefer students who party less but they all seem to drink alot. I don't like to rent to restaurant/pub workers who are not also serious students. They come home late and disturb the neighbors.

Originally posted by @Clinton Holmes:

Appreciate the responses everyone, this has been a huge help. Couple follow up questions:

@Roy N. What made you decide to focus on students and young professionals? How has that been working for you? Also, like the question I asked Deborah, what do you do differently to draw more students and young professionals to your properties?

 Clinton:

We have two universities here and, when school is in, students are ~12-15% of the population.   Once you realise that student properties live hard, yet you resist the temptation to use the cheapest of materials {which is the status quo for student housing here}, then you will have a different product.   While we purchase older properties (50 - 120yrs) as that is the inventory of the areas, all of our properties undergo a energy efficiency retrofit ... not merely installing electric baseboards and offloading the task of heating a 100 year old house with no insulation to the tenants.

We also inspect our student properties quarterly {students never report issues}, fix any issues and damages as we find them, then bill the tenants immediately for anything for which they are responsible.

If you use quality, durable - but not necessarily fancy - materials; have everything spelled out in your lease & house rules; and inspect your properties regularly, student properties can be very rewarding.

The focus on the young professionals was based upon the part of the city in which we were looking ... we then renovated those units to be energy efficient, yet retaining some of their Second Empire and Victorian allure.

Originally posted by @Colleen F.:

For students we prefer girls and serious majors but usually get guys. Sophmores or Juniors are better. Seniors can be an issue, we prefer students who party less but they all seem to drink alot. I don't like to rent to restaurant/pub workers who are not also serious students. They come home late and disturb the neighbors.

 Colleen:

Our recently acquired International Student {rooming} house has been party free for 10 months now.   The international students are typically serious (they are paying double the tuition to attend university) and cause us no problems.

The tenants in our other student apartments sound remarkably like yours :-)

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