Is low credit score acceptable?

[Hannah Liu]

My property’s been sitting vacant for a month now, so I’m really hoping to find a tenant soon. My property manager just sent over a potential renter, but his credit score is 580—below our 620+ requirement. The low score is due to a recent lawsuit he lost. He also doesn’t have any rental history because he used to own a home with his ex-wife.

On the plus side, his income looks solid, and the PM suggested we could ask for a double deposit to offset the risk. Does that sound reasonable? If not, what other due diligence should I be doing here? Appreciate your advice.

[Jason Hsun]

@Hannah Liu I completely understand the urgency of filling a unit with whatever tenant that comes along, but if I can pass on some hard lessons learned from one landlord investor to another, it's better to wait for someone who meets your minimum criteria.  

I have been through no less than three PM's before I finally decided to self-manage.  I've had many problematic tenants that were hastily placed by my PMs who just didn't care and what happened?  Evictions, harassing other tenants in the building, damage, unpaid rent.  You end up in the red through the life of their tenancy.  

While not all tenants with bad credit will end of up this way, nor will all great tenants be guaranteed to stay great - but you're just taking a chance when you prioritize non-vacancy over quality.  Yes, you get that first rent check dopamine hit, and maybe the second and third months get paid, but then things begin to slip and signs of your prior hesitancy over a 580 credit score start to materialize.  

While days on market depends on a lot of factors like price, unit type/condition and location, some of my units remained vacant for a few months only because I decided to wait until the right (not to be confused with 'perfect') tenant came along and so far it's proved beneficial.  

I've been there and trust me it's not worth it.