What Are the Risks & Rewards of Renting to Illegal Immigrants?

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Ready for a pragmatic look at the pros and cons of leasing to illegal immigrants? Dollars and cents, risks and benefits, not rhetoric or opinion-mongering?

Now that there are only a third of us still in the room, let’s talk about a few practical realities. There are 11-11.5 million undocumented immigrants in the United States, and they aren’t homeowners. Let’s face it, it’s hard enough to qualify for a mortgage even when your documents are in order!

So they rent, which raises all manner of questions. Who’s renting to these illegal immigrants? What kinds of tenants are they? Are landlords even allowed to knowingly sign leases with them? What risks do they pose, and why would landlords lease to them?

Because of the undocumented nature of these renters, some of the evidence is, necessarily, anecdotal. But where government statistics are scarce, we’ll apply single-step logic, anecdotal evidence and common sense. What we won’t apply is politics, so check them at the door and read on.

First of all, is it even legal to rent to illegal immigrants?

That, dear readers, depends entirely on where your property is.

State laws range from emphatically pro-immigrant to aggressively anti-immigrant. Consider California and New York, where it’s not legal to even ask a rental applicant about their residency status.

On the opposite end of the legal spectrum, it’s a felony in Oklahoma for landlords and property managers to provide housing to illegal immigrants. The law is pretty explicit: “It shall be unlawful for any person to conceal, harbor, or shelter from detection any alien in any place within the State of Oklahoma, including any building.”

Double check your state’s laws because a wrong move in either direction could land you in court depending on your state’s leanings.

owner-occupied-financing

Fair Housing laws get tricky when immigrants are involved.

The Department of Housing and Urban Development (HUD) does not have a sense of humor or leniency when it comes to Fair Housing laws.

Quite the opposite: They’ve been aggressively pursuing Fair Housing lawsuits in recent years, trying to make examples of landlords around the country.

As a refresher, landlords and property managers cannot discriminate on the basis of race, national origin, or ethnicity (among other factors less relevant to immigration). But it turns out that “discrimination” is not so easy to define. For example, earlier this year HUD issued a ruling that landlords cannot have a blanket policy barring all applicants with a criminal record. The logic? That it violates Fair Housing laws based on race.

Related: The 5 Areas Where People Violate the Fair Housing Act The Most (And How to Avoid Them!)

Gray areas in HUD’s interpretation of the laws abound. If you only post rental ads in English on a community board frequented by white Americans, but the city has a large Hispanic population, is that discrimination? If you require all rental applicants to pass an identity verification, is that discrimination?

But here are a few rules that are crystal clear, black and white: If you require certain documentation of one rental applicant, you must require it of all applicants. If you run certain background checks on one applicant, you must run the same checks on all applicants. There is no room for different requests, documents, or screening actions.

Have a comprehensive tenant screening procedure, and stick to it for every applicant. No exceptions.

What are the challenges in screening & leasing to illegal immigrants?

Captain Obvious here: Undocumented immigrants are not documented on paper.

That means no credit report, no criminal background, no eviction history — at least theoretically. Sometimes there is a paper trail, using a false identity and Social Security Number.

So how can you know as a landlord or property manager if the applicant will make a good tenant or not? In many ways, it’s like leasing to a recent graduate, with no credit history or track record. One option is requiring a co-signer if you have an applicant who seems promising based on income, employment and housing history, but has little or no credit.

The language barrier can pose another challenge. Many illegal immigrants have limited or no English, which means you’ll need a translator if you don’t speak their native language.

And what of the lease agreement? In some states (e.g. California), landlords are legally required to provide a copy of the lease in whatever language was used to negotiate lease terms. Do you know where to get a California lease in Lithuanian? I don’t. That means hiring a translator to draft a copy of your lease in your tenant’s language.

Lastly, there are plenty of anecdotal accounts of illegal immigrants packing many occupants into one rental unit. It makes intuitive sense, for several reasons. First, it is more difficult for illegal immigrants to find housing, with no papers and no background on paper. Second, illegal immigrants earn less income than legal residents, given the fewer job options available with no papers.

More occupants mean more wear and tear on the property — and higher repair and replacement costs for landlords.

botched-eviction

What are the challenges in evicting & collecting if illegal immigrant tenants don’t perform?

Here’s a conundrum: If you leased to an illegal immigrant in a state where it is a crime to do so, what happens if you need to evict that tenant? How readily would you file in court for eviction?

Or, in states where it’s not a crime to lease to illegal immigrants, how do you collect unpaid rent or damages from someone who doesn’t exist on paper?

Brian Pendergraft, lead attorney and landlord-tenant specialist at The Pendergraft Firm, explains further: “If I get a judgment against an American citizen for unpaid rent, then I can find where they work and garnish their paycheck, find where they bank and garnish their account, and use every tool in the toolbox to go after their assets. And it is hard enough to collect a judgment from an American citizen.”

But illegal immigrants? “The problem with renting to illegal immigrants is that if they do not pay rent, chances are they are ‘judgment proof.’”

What are the benefits to renting to illegal immigrants?

With all these challenges, why would any landlord take the risk on illegal immigrants?

It turns out there are some compelling reasons.

First, illegal immigrants don’t want to rock the boat. The last place they want to end up is a courtroom, which means they’re more likely to pay the rent. And because there tend to be more occupants in the rental unit, there are more income earners to cover rent payments if one occupant loses their job.

If the tenants did default on the rent, they aren’t likely to stick around for the eviction process. The last thing they want is appearances on court dockets, sheriffs showing up at the door, etc. This means they’re likely to “skip” and simply move out without forcing you to go through the entire expensive, time-consuming eviction process.

Related: 7 Advanced Tenant Screening Tips (So You’re Not Fooled by Wolves in Sheep’s Clothing)

They’re also far less likely to sue you, for the same reasons. There’s nothing worse for landlords’ returns than a lawsuit.

And you know those tenants who are constantly calling you to complain and demand property upgrades and improvements? Illegal immigrants aren’t exactly keen to have a bunch of contractors and strangers tromping through the property all the time. Anecdotal evidence is that illegal immigrant tenants minimize their contact with the landlord and will even make minor repairs themselves when something breaks.

Finally, some landlords report that illegal immigrants will stay in the property longer than typical tenants because of the difficulty posed by finding new housing without papers. Longer tenancies mean lower turnover rates — great news, because turnovers are deadly to landlords’ returns.

Should you rent to illegal immigrants? Maybe. Understand your state’s laws, explore your market’s demographics, decide what your priorities are as a landlord. There are risks that come with renting to undocumented immigrants, but there can also be benefits, especially for hands-off landlords looking to create rental income that’s more passive.

Have you ever rented to illegal immigrants? Why or why not?

Share your experience with other landlords, so they can benefit!

About Author

Brian Davis

Brian is a real estate investor and landlord with 15 rental properties, who writes fascinating articles for SparkRental.com. His rental management is almost completely automated by now, allowing him to travel the world frequently (if not always in style).

55 Comments

  1. Katie Rogers

    Your entire post is spot-on. Your anecdotes are accurate. However, they usually are not using a false name. They generally use their own name, and they will have an ID from their home country. They may even have a passport because a significant portion of illegal immigrants are originally legal visitors who overstayed their visas.

    They do have invalid Social Security numbers. The vast majority of these numbers are not associated with any person, so risk of identity theft is minimal. Most of them got this number from their first American employer because that employer needs a nine-digit number for his fillable W-2 form if he plans to expense the salary. Otherwise, the employer ends up paying the income tax for the employee in the form of higher profit.

    The illegal immigrant with an invalid SSN on his W-2 still files a tax return, but the IRS issues the illegal immigrant a tax account number called an ITIN. This does not mean that everyone with an ITIN is an illegal alien. Anyone who does not have an SSN but needs to file a tax return gets an ITIN. For example, it could be a Chinese investor who needs to report the gain on a sale of US real estate. Just this week Canada gave me their version of an ITIN so that I could report gain on a piece of Canadian property I just sold.

    The IRS does not hand over its list of people with ITINs to Immigration because it would be illegal to do so because of the large number of people on that list who have ITINs but are NOT illegal aliens.

  2. Bill Neves

    Thanks for the article Brian.

    BUT…. no credit report, no criminal background, no eviction history?? … Obvious huge risk. Not only potential lost rent but potential massive repairs.

    I would not entertain these folks. Totally legal according to my attorney.

    I have had people fog a mirror to fill a vacancy a FEW times in the past to “help somebody out”. Regretted it 100% of the time. Will NEVER do it again.

    If someone does that, good luck.

      • You comment is false, not all immigrants have bedbugs.

        However, the bed bug issues I have had were always with lower income illegal immigrant tenants. I think the fact the illegal immigrants are generally lower income, and may have habits that are risky in terms of bedbugs, makes bedbugsa more common problem than with other groups of tenants.

        If a person picks up furniture in the street, it is high risk. If they are afraid of reporting a bedbug issue, or any other issue, for fear of having their lease terminated, they are high risk. If they are from an area where bedbugs are more common, they may not even be bothered with a bedbug infestation, therefore high risk. If they pack additional people into a rental, it becomes cluttered, which is another high risk factor to getting rid of bedbugs. Shopping at smaller ethnic stores that may not have robust pest control solutions is also a higher risk.

        It is important to treat all tenants the same. If you skip screening criteria for one group, i.e. credit score, you must skip the screening for all. A criminal background check is only as good as the data available. You need other indicators for tenants that only have a limited background to minimize risk.

        That is why you need to use all information available (credit score, verifiable income, criminal checks, rental history), and use the information the same for everyone. If you are doing it right, your rental criteria will be written, handed out to all applicants, and 100 people will make the same decision on all applicants.

        • Katie Rogers

          “…100 people will make the same decision on all applicants.” Except they won’t make the same decision. Study after study of evaluation has found you are lucky if you get 80% consensus, and that is with not only written criteria, but with also training and practice on test cases.

        • I have not seen any of these studies. One thing for sure, without written criteria you will not get any sort of consistency. If it is written correctly, there will be no differences.

          I screen for a large HOA, and I can guarantee you we have 100% accuracy when the HOA screens the tenants. It is a very objective criteria, with credit scores spelled out and number of criminal convictions. And how long the criminal events are looked at.

    • Brian Davis

      In my experience, no credit and no records on the background check is better than bad credit and criminal records popping up. Granted, I’d always prefer someone with a spotless credit report and established credit history, but in some neighborhoods that’s just not realistic.
      I’m not aware of any correlation between bed bugs and illegal immigrants? I’m not one to shy away from saying politically incorrect things if they’re true, but I’ve never heard that accusation made before.

  3. Mike McKinzie

    I always have and always will, rent to any qualified applicant, regardless of their residency status. That is because I live in California and I HAVE TO. But in my experience, there is no relationship between residency and being a bad tenant. As a matter of fact, illegal’s tend to be even better, they do not want to draw attention to themselves. I own property in the Central Valley of California where there are over a million illegals working on the farms and ranches. Of course they pay their rent and I pay the property taxes, so in a sense, they are paying for the school district, which gets a lot of its funds from Property Taxes. While my political beliefs, my social beliefs, my religious beliefs and my business beliefs may differ, I still bring it all down to “do unto others as you would have them do unto you.”

    • Brian Davis

      That’s been my experience as well Mike. The illegal immigrants I’ve encountered over the years want to minimize attention from the landlord, so they pay on time and even fix minor issues around the property to avoid anyone coming through. In certain neighborhoods, I’m willing to risk the extra wear and tear from extra occupants, in exchange for quiet tenants who just want to be left alone.

  4. Eric D.

    Anyone I cannot run a background check on, I do not rent to. In a single family, You are far batter off renting to a sex offender, than someone you cannot run a background check on.

    A sex offender is unlikely to have kids, unlikely to have parties and generally stay by themselves.

      • Eric D.

        I reject anyone without a credit score, unless they have someone with them with a very high score. Credit score tells me more about a tenant than any other criteria.

        I let someone else take the risk of a tenant without a credit score. I will stick to the known risks. I may have to take a slightly lower rent to attract the best, but it is well worth it. I have properties mostly in class A areas, so it makes sense.

        • Katie Rogers

          Once upon a time, I was one of those great tenants whose credit report said “insufficient data.” It took me 6 weeks to find an apartment. Good thing I had my RV for which I paid cash because I couldn’t get a loan or do anything to build up a credit score at that time. I couldn’t even get a gas card. So I just kept paying cash. I was only able to get a credit card when my mother put me on one of her bank accounts as a signatory. Now my credit score is 809.

        • That is great, you found an apartment. It’s too bad this article, and yourself, advises a landlord to skip tenant screening. That is the number one recipe for disaster.

          You MUST treat all prospects the same. If you allow one tenant in without screening, you have to allow all in.

        • Katie Rogers

          In no way did I advise no screening. However, there was a time when credit reports did not exist. How do you think landlords screened then? Actually, someone on BP wrote a post arguing that credit reports are not even the best way to screen tenants. Property managers have tons of stories about terrible tenants who passed credit score screenings.

        • Michaela G.

          Actually, credit score can be totally misleading.

          SOmeone can have a crappy score, because they only have 1 credit card for $ 500 and they owe $ 490 on that. Anything more than 30% utilization will tank your score.

          Someone may have had a charge off 6 years ago and has had perfect credit since then. But they came into a chunk of money and felt that the right thing would be to pay off that charge off, so that they have an even slate. Well, that now changed their good score (because credit score sees an old charge off as not so bad, because it would have fallen off the report 1 year later) to show that the last activity (pay off) is recent and then sees this as a recent charge off and completely tanks their score.

        • Credit score is the most objective criteria of all. While there can be mistakes in the score, there are as many mistakes that help a persons score than hurt. And most mistakes are inconsequential.

          Income will tell you a persons ability to pay the rent, credit score will tell you a person’s desire to pay rent. It is also a great personal responsibility indicator.

          A credit score criteria can be interpreted the same, by all people. It is the best fair housing tool that there is.

        • Katie Rogers

          Right, it is so “fair” that someone like me was in utter despair if I would be able to put a roof over my children’s heads, all because my credit score said “insufficient data,” and so many landlords were unwilling to take their eyes off that and actually look a me, a real person.

        • Do not take it personal. That is what the law mandates. A landlord needs an objective criteria to avoid running afoul of Fair Housing Laws..

          Landlords generally create a criteria based on risk, so some landlord will get a larger security deposit to protect themselves in the case of someone with your credit history.

          Sex offenders, felons, domestic abusers all have similar issues with their criminal past.

  5. Michaela G.

    Being an undocumented immigrant, as well as a landlord, I can say that many undocumented make great tenants. As has been said, the last thing we want is being the defendant in an eviction case or having anything negative against us.

    Many risk everything to offer a better life to their children. The potential (pretty much gone for at least the next 4 years) for immigration reform at some point in the future means that a felony would eliminate any chances to ever become legal, because a criminal background check is mandatory for a potential application.

    I work in a low-income neighborhood and I’m used to dealing with people that aren’t perfect. If I wanted perfect, then I’d never find a tenant here. So, I learned to take each person/applicant on their own merits, instead of making blanket statements.

    • Congratulations. You have done something here in the USA that is virtually impossible for someone from the USA to do in any other country. Probably even your own country.

      All people can make great tenants. There is no set line that guarantees good vs. bad. It also depends on risk level. If you have low income properties, you have less risk. They do not have to be perfect, just (mostly) code compliant.

      What you need to have, is a written criteria, so that 100 people can take the information in hand, and make the same decision whether to accept or decline the applicant. Failure to do that is to open yourself up to fair housing discrimination.

      When you exclude a credit score from the criteria, you eliminate a major piece of the puzzle to selecting a great tenant. I used to be a Section 8 landlord. I have taken in some of the worst of the worst. They had boyfriends that were murderers , drug dealer kids, and even robbers.

      To me, it’a all about creating a low-risk environment for a landlord to make money. I am not about providing affordable housing, even though my properties rents are below the Section 8 rent limits. It’s about maximizing my time and money opportunities.

      • Katie Rogers

        “…a written criteria, so that 100 people can take the information in hand, and make the same decision…” Aye, there’s the rub. Evaluation is a whole science in itself. Studies show that even with written criteria, training and practice cases, people still come to different decisions. If you can get 80% agreement among evaluators, you are doing very well.

        • Then the criteria is not clear.

          If you say a 625 minimum credit score, and the applicant does not have a credit score or has a lower one than 625, how can that be interpreted any differently, between any number of people?

          Is our education system that bad we cannot tell which number is higher?

        • Katie Rogers

          Evaluation is a type of multivariate analysis with interactions between variables. What if your applicant’s score is 624, but surpasses in all other respects? Is your evaluation procedure nothing but a stupid sieve that even a computer program could accomplish?

          For example. in my case, my credit report said “insufficient data,” and no job, but there I was in June in my beautiful, high end Roadtrek paid for with cash, plenty of savings to pay several months in advance to soothe a landlord’s worries, letters of recommendation AND a job that started in August. It still took me 6 weeks to find a place. My children and I ended up homeless for quite a while, but at least we had a the right kind of car to live in.

        • “What if your applicant’s score is 624, but surpasses in all other respects?”

          The applicant does not get in. That is the way you are supposed to have it.

          I may have had other tenants look at my criteria that self-screened and walked away, without even applying because of the 625 minimum. It would not be fair to them. Consistency is the key.

          If you have an “Insufficient data” and no one else applying with you, you would be declined. If you have any other items on your criminal report, or derogatory items on your credit report, I would decline you even if you were with someone. You would be extremely high risk.

          The average renter credit score is ~658. I prefer close to at least average.

  6. Jim Piper

    I recently rented to an illegal immigrant. He was willing to put up a double deposit. Further, he had several years of employment in a good position with a local firm. The way I looked at it is that the double deposit (2 months), if I have to evict, gives 30 days for a court date, and 30 days to get him out after I have a judgement for possession. He’s also collectible at his job. However if he defaults on rent, the chances are he either lost his job, or got deported. I find that with most people I have to take a risk. I think the risk here is fairly well defined.

  7. I find it interesting that you say it is illegal to rent to an illegal alien in Oklahoma, yet it is actually a violation of federal law. Please look up 1907. Title 8, U.S.C. 1324(a).

    “Harboring — Subsection 1324(a)(1)(A)(iii) makes it an offense for any person who — knowing or in reckless disregard of the fact that an alien has come to, entered, or remains in the United States in violation of law, conceals harbors, or shields from detection, or attempts to conceal, harbor, or shield from detection, such alien in any place, including any building or any means of transportation.”

    The odds of anyone getting prosecuted is Nil. The biggest reason to rent to, or not rent to, is the ability to screen a tenant properly, and make an informed decision as to the risk you are taking. And use the same risk criteria for everyone.

      • Oh Geez, the intro to the article said this was an open, non-political discussion. That includes Political Correctness. Why can’t articles be written and enjoyed for the content, and commented on without always being picked to pieces for things that don’t affect the content?

        • Michaela G.

          Why? Because saying/writing ‘illegal alien’ is just like writing ‘n…..r’ , when you write about African-Americans. Do you use that term? So, once someone has been made aware of the fact that a term is offensive, then at least we know that that person wants to offend, if they keep using it and there’s no misunderstanding.

        • Both, Illegal (not allowed by law), and Alien (from another country) are regularly defined terms. This is the problem with society today. Intended content is overshadowed by “that hurts my feelings” or “you should have said it this way”.

        • Maybe the term illegal immigrant is more appropriate? I think the key word is being in the country illegally, not whether they are an alien or immigrant.

          I think our government uses the alien term throughout its regulations. I also think the definition is appropriate for this context.

          According to dictionary, the term alien means “a resident born in or belonging to another country who has not acquired citizenship by naturalization (distinguished from citizen ).”.

        • Michaela G.

          It’s the offended that decides what’s offensive and undocumented immigrants are offended by the term. You can say that ‘oriental’ is a great word for Asians, because they come from Orient – but it’s considered offensive and thus no longer used. The n-word originated from Latin word ‘niger’, which means black, so, you can say that it fits and therefore you can say it. But once something has tipped the point of being primarily used as slander, then the offended are usually the ones to decide to retire a word in order to keep respect to a certain level in society. That’s what happened with ‘illegal alien’ and ‘illegals’. Most AMerican news organizations and journalists have agreed to retire the offensive terms.

          Being in this country without proper documentation is a civil infraction, which is a non-criminal offense against a statue or rule , on similar footing as jay=walking or slow speeding or forgetting your license at home. It is not some major crime, as certain people want to make you believe. Do you call a speeder and ‘illegal driver’? A jaywalker an ‘illegal pedestrian’? No.

        • Katie Rogers

          Michaela is absolutely right that illegal aliens/immigrants are not criminals in the sense that some would like them to be. She is also correct that the difference becomes evident when you contemplate referring to a jaywalker as an illegal pedestrian. So it looks like the problem is not in the word “alien,” but in the word “illegal.”

          As someone who has spent significant time living among Japanese and Chinese people, they do not object to the term “oriental” and use the word to describe themselves (along with the word “Asian.” ) I have no idea how other groups from Asia, such as Indians, Koreans, Thai, Cambodians, etc. view the term.

      • You are absolutely correct. Unless a job is a more skilled one where a tenant needs “good numbers” (a term my former tenant used), many businesses hire anyone with a SSN, valid or not. If they are subcontractors with a company name, you do not even need an SSN.

        I have hired many of what I suspect are illegal immigrants in the past myself. It seems that some entrepreneurial individuals get together with a bunch of tools and can do a lot of work. I know they can beat insurance estimates and payouts by about 50% or more. That leaves more money in my pocket and is 100% legal.

        If an individual is in a union, charging $30 per hour plus benefits or more, the company must charge $60+ per hour to have that employee. I can hire painters, sheet-rockers, roofers, etc. for less than half that price. Americans might want to do the work, but not for less money.

        I pay the people with a check, and send a 1099 if it’s more than $600 to the address they provide. The 1099 often comes back undelivered. If I pay cash, I have them sign a receipt.

        • I cannot rent to them and be consistent with a rental policy. I know there and many great people that are here with out documentation. I used to rent to many of them.

          It is not my job to flush out people that are here illegally or not. It is my job to be consistent and fair to everyone.

  8. Tyler Chartrand

    A good landlord will rent to good TENANTS. There are good and bad tenants that are legal and so the case is the same with illegal. Here in Phoenix you would be foolish to overlook Mexicans as potential residents. Just make sure they are not criminals like you would do with a citizen

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