Tenant Screening Dilemma: HUD-VASH vs. Terrible Credit

16 Replies

Good morning! I'm screening for my first SF rental, struggling with a decision, and would appreciate some feedback.

The candidate I like best is a single mom with 4 well-behaved children. She seems to have a pretty good head on her shoulders and gives me the impression that she'll take good care of my house and be an asset to the neighborhood. She's also a disabled vet and will be using the HUD-VASH program, which covers 70% of the rent and will be paid directly to me from HUD.

However, her credit is a complete disaster. She was very upfront and explained all of it as being related to an ugly divorce. She showed me her last 12 months of rent receipts (1 month was late) and bank statements (which show income that meets my minimum criteria). The other zinger is that she is being evicted, with a plausible explanation: the AC went out several months ago, the landlord didn't fix it, and when the Houston heat kicked in, she took it upon herself to get it fixed and chose not to pay rent to cover the cost. She's now evicted as of August 1.

What are your thoughts about renting to a person like this? Would bad credit and an eviction trump guaranteed rent payment and a good fit for the house/neighborhood?  

Sharon Powell, Real Estate Agent in TX (#695962)
830-581-1020

HUD-VASH is like section 8, which isn't a bad program. The eviction is a completely different story. I would want to call up the previous landlord and hear that story directly from their mouth and not you potential tenants mouth. Tenants will say anything to cover up past truths. If that was truly the case, then she doesn't sound like a pushover tenant, so you better be ready to fix every little thing or she may deduct it from your rent. Other than that she may make for a good tenant.

At the end of the day you just need to figure out what your tolerance for risk is. Some people have a minimum credit score and 0 evictions only policy. Other make exceptions to their rules depending on the story and sometimes it comes back to bite them. So its completely up to you how much risk your willing to take on.

Colin Smith, Real Estate Agent in CO (#ER.100052152)
719-232-6709

We have used Section 8 tenants and it has been good so far. But we have 2 adult ladies. 

Personally, I would be skeptical about a single mom with 4 kids. Plus her other actions are questionable also. Would definitely want more guarantees on rent. Perhaps, at least 2 months rent.

I would consider a rental Guarentee for this client. You can opt to have tenant pay for this service or pay it yourself and include it in the rent- as you do mtg payments, taxes, extra. For the cost of 1 months rent, you can get a guarantee for 6 months to give you time to evict and re-let. I use this for all tenants to protect my NOI, but some use it just for credit challenged tenants. Happy to give info about this service.

based on info you said she provided, (income/salary, bad credit this program will most likely work well for you. And it works great especially for us small investors who rely heavily on a consistent NOI. My wife Becky educates landlords and gets them going. It is very easy and has been a game changer for me.

How many red flags do you need? i had a similar situation with a with couple and child on disability.They had the cash for the first month and security had great stories of why they had to leave there last place The bottom line that was last full payment I ever got Luckily I was able to offer some cash for keys 

I had a similar thing happen so I found the rent Guarentee program & I collected my rent  and found a new tenant w/o taking the financial hit

I used to rely on a saying in my past business. It was "If it isn't written down it did not happen."   Rely on what is written down, not on something someone says. 

Everything written down sounds bad, unless of course you want to run a social services program. 

@Sharon Powell

I actually run the HUD-VASH program for Humboldt County, not all that far away from you, and are lumped in the same region as the VA in SF, so I've probably worked with whomever is working with your vet before. Hopefully I can offer some helpful advice.

As great as HUD-VASH is, it is absolutely not a cure for all problem tenants. I find that the vets I work with that have evictions on their record often struggle to make future rentals work, even with support. While HUDVASH tenants have a substantially better success rate than your average Section 8 tenant due to the VA support system that comes with the program, it doesn't mean that the behaviors that brought about those evictions always go away.

I'd look at the following:

- What % of market rent would you be getting with the tenant on the program?

- If there is a discount, is it one you'd be ok with in order to help one of our nation's veterans?

- What caused the move from Houston to SF? Most people don't move across the country when they get evicted. 

- Have you met her social worker? If there's a future issue, a good relationship with the social worker is important, they want to work with you to solve problems, so its always helpful to meet before there are any. 

- What does the previous landlord say about the eviction? While some evictions are actually mostly on the landlord, I'm always skeptical of the ones where rent is withheld for repairs, as it usually indicates a poor relationship and use of legal resources to solve the problem before someone gets evicted. I'm not saying it didn't happen as she states, but I am just saying its more likely to have not. 

- I'm guessing you're renting a 3BR unit if its for a family of 5. If this isn't the veteran for you, there's always the possibility of calling the social worker and explaining that you don't feel comfortable with this tenant due to the eviction, etc. but would love to still rent to someone in the program. If the social worker has half a pulse, they'll find someone else. While there are relatively few families in the program (most vets receiving services are actually older single males), SF is a big enough program where they should have another family with a 3BR voucher at the moment. 

- If you do feel comfortable with the tenant, or are still on the fence, get a maximum deposit to help buffer yourself from risk. There are multiple programs in SF that help with deposits, including a veteran specific one, so the tenant should be able to afford a hefty deposit to get in the door. At 2x the rent in CA (don't know if that's also the same for SF) that can be a big number when you're dealing with SF rents, so should give you some piece of mind. 

- One last thought, assuming you're happy with your experience with the program, definitely continue to develop a relationship with your local social worker/program. If you keep them appraised of upcoming vacancies and what your criteria are, they'll do their best to find you vets as quickly as you have space for them. Especially in areas like SF where the HUD formula for allowable rents tends to lag the market, the less time social workers like myself have to spend looking for available units and hand selling clients to landlords, the more face time the housed veterans get and the more veterans get/stay housed. It can be a really good and profitable relationship.

Don't do it if you can find better tenants or collect first, last and full security to cover some of the costs in the event you have to evict her.

I just got off the phone with the property manager who evicted my candidate. She confirmed everything regarding the eviction, was very complimentary about the tenant's cleanliness and care of the property, and went so far as to say that she would definitely accept her back at a different property. 

Would that information change any of your minds? 

Sharon Powell, Real Estate Agent in TX (#695962)
830-581-1020

@Sharon Powell , as a mom myself, I would be so tempted to cut this woman a break. A single mom of 4 kids, she is going through tough times. I want to help a veteran.

BUT...

How difficult do you think it will be to evict a single-mom-of-4-kids disabled-veteran if it comes to that? 

Of course the current landlord is singing her praises - if this tenant doesn't get a new place to live, she might stay in the old place. I have heard many stories of current landlords giving glowing (false) reviews for the sole purpose of getting rid of their problem tenant. It isn't right, but it does happen.

I would recommend that you keep looking until you find someone without the recent eviction, with good credit and the requisite income. You want your rent payment every month, not reasons why you aren't getting the rent every month. 

It sounds like you are looking for a reason to rent to this woman. What you really should be looking for is someone you have no reason NOT to rent to. Ultimately it is your property, but if you want a drama-free renter, go with another candidate.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

I would give her a chance, as bad things happen to good people, even those with great credit scores as I have learned the hard way,  BUT cover myself with the rental Guarentee. Have her pay for Guarentee, only one months rent or pay it yourself and include cost in rent to reimburse yourself, as you do with other expenses.( you will probably be able to use as tax deduction, if you pay).  You have covered yourself but instead of just for 2 months, , as in first and last month rent collection. you will get 6 months of guaranteed income in case of default And you have given her a chance to recover from a situation that we all might be a victim to one day.  It feels good to help someone who truly needs a hand up and at the same time CYA or income should we say!

I truly appreciate all the feedback, and I love the diversity of experience and opinions. 

I am a "retired military spouse" myself and it's ingrained in me to look out for my miltary family. I truly want to help people whenever possible while making sound business decisions, and this has been a tough one.  

@John Taylor I'm not familiar with Guarantee but I'll look it up...maybe it will provide the opportunity to help and have some peace of mind too.  

Sharon Powell, Real Estate Agent in TX (#695962)
830-581-1020

If the property manager would gladly take her back then why did they evict her? Are you sure it was actually the property manager and not one of her friends? 

I would say too many red flags especially for your first rental.

In Texas if the house has AC when they rent it and the landlord does not fix it within a "reasonable" amount of time, the tenant can have it fixed and deduct the price from the rent so I doubt she was evicted for doing that.

best wishes to u,, I wanted to give u ithe company to check it out, but this site will not allow it, or let me tell you about it,  it has served me well.

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