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REAL ESTATE Anyone Accepting Riskier Tenants?

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PEERless

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Jan 23, 2008
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I've been paying the mortgage on a vacant condo in a depressed market since November. I finally got my first application, and it's a nightmare... bad credit, no savings, high debt-to-income, moving to town with no job... Oh, and that's after dropping the advertised rent by 25%! I know beggars can't be choosers, and I need a tenant, but this seems like too much.

I am bleeding cash... I'm scared that it might be another three months before the next application comes in. Help? Encouragement? Insults?
 

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kurtyordy

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Aug 28, 2007
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IMHO, rent can always be dropped, standards never should be.

You would be better off renting for 50% off to a good tenant than to rent to a bad one who will pay 0
 

bflbob

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Peerless:

Unfortunately, you're caught between a rock and a hard spot.

Your client base is tourist-related, and there are none, which makes this very difficult for you.

My only other advice is to deal with the travel agents. Offer them extra $'s for getting people in.

Rent the place for less, if need be, but not to someone who'll trash it and require eviction.

Otherwise, you're better off running an ad that says...

  • Every 3rd (or 4th) month free with on-time payments
  • Security deposit required
  • Credit check required
 

White8

Contributor
Dec 6, 2007
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First off, are you adversing on craigslist? I've had better luck there than anywhere else over the last few years.

Second, I agree with kurtyordy and bflbob on standards. Carpet= 3 months gross rent, cabinets= 6 months gross rent....
 

rcardin

Contributor
Oct 30, 2007
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Arlington, TX
Have you tried offering it as a lease to own? Larger deposit/ down payment and same if not more rental income. Also offer it for sale by owner. Chances are the tenant will never go through with a lease option and you keep the deposit/option payment.

There is more than one way to get a tenant
 
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PEERless

Bronze Contributor
Jan 23, 2008
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rent can always be dropped, standards never should be.
Great sound byte!

Your client base is tourist-related
Not really. I rent to workers, not vacationers. There are plenty of workers in town, but there are lots of vacancies. They have their pick!

are you adversing on craigslist?
Yes, and ALL I get is Nigerian scammers like this one.

Have you tried offering it as a lease to own?
Yeah. Infortunately, half of the same building is for sale. It's hard to compete with that too. I have offered it.

So, what I'm hearing is let the bad tenants pass, even if they seem to be the only ones. Just hold tight for the one that won't trash it...?
 

AroundTheWorld

Be in the Moment
Speedway Pass
Jul 24, 2007
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Yup... I agree with that as well. The last thing you want is tenants that will trash your place. One bad tenant can wipe out your 'profit' for YEARS on one SFR.
 

GettingThere

New Contributor
Dec 3, 2007
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Central Florida
One more vote for keeping overly risky tenants out of your property. Basically, given the profile specs you provided, there is zero indication that they'll pay you anyway...then, good luck getting that type of tenant out and getting your property back in good rental condition quickly!

I know it's tough, as I've been in a similar situation, but try not to let your mental desperation make the call on this...use the information as objectively as possible.

Would you loan them money that you expected to get back? If not, what's the difference in allowing them to live in your property for rent? Loaning your asset for a fee...if they don't pay, they just gained $$ on your dime, in essence.

Good luck with your decision...keep us posted.

-John
 
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PEERless

Bronze Contributor
Jan 23, 2008
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I turned them down like this:

Dear Applicant:

I regret to inform you that I cannot accept your application at this time for the following reasons:

1. It was not accompanied by the $20 application fee to cover the cost of a credit check.
2. The debt-to-income ratio of you and/or your coapplicant is too high.
3. You and/or your coapplicant have not demonstrated secure employment throughout the term of the lease.

If all of the above can be remedied, please apply again soon.
 

TaxGuy

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Apr 28, 2008
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Goodyear, AZ
Great sound byte!

Yes, and ALL I get is Nigerian scammers like this one.
It beats getting a registered sex offender apply in a room-sharing(renting a room in MY house) situation :nonod:

As for our most recent ad, we've only gotten 3 calls, 2 no-shows and 1 rejection. It looks like we're priced pretty competitively as there are other roomshares in the $500-550/mo range, but they're apartments or condos, not a house, our disadvantage is that the room is small(9 x 10), but then again, so are the currently rented room(12 x 10) and our bedroom(12.5 x 12.5).

One problem is definitely the time of year, last year we had a similar pool of applicants- deadbeats, divorcees(not necessarily bad) and contract employees new to the area and unlike when we got our current roommate in the Summer, it's a renters market and instead of qualifying a candidate they're qualifying us.

This may be a more difficult route, but have you considered just renting rooms as apposed to finding a taker for the entire unit, maybe get 2 "room mates"?
See above.

So far the 3 roommates we've had:

1- traveling software engineer, great guy, paid rent on time, still keep in touch was on a month to month and moved on after getting a new job in Utah.

2- student in between community college and university, good guy, was only late once in 5 months(due to a trip to Israel) and got along with well, moved out for school.

3(current)- data analyst, pays rent early, keeps to himself, but still get along with well, in month 4 of 6, but will probably do another 6 months before he moves out.

All 3 were great and we were sad to see the first two go and will be equally sad when our current roommate leaves, in fact the only bad experience we had was:

4- my older brother... lived in our basement, rent came straight out of his check, but always left a mess, undermined my fiance and I(sometimes in front of the other roommates), still needs to pickup most of his stuff and caused too much drama.

So in other words :iagree: with doing roommates if you can and don't rent to family :p
 

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PEERless

Bronze Contributor
Jan 23, 2008
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It beats getting a registered sex offender
Is that a legal reason to deny an application? It doesn't really interfere with the ability to pay.

Currently the law forbids landlords from evicting or refusing to rent to registered sex offenders, and from disclosing to current or prospective tenants that a registered sex offender lives in the apartment.

Remember that "sex-offenders" on the Megan's Law database may be child molesters or forcible rapists. They may also be 18-year-olds convicted of statutory rape for consensual sex with a minor.

In any of those cases, though, the fact that the person in on the list (and not in custody) indicates that they have paid their debt to society and have been deemed safe for integration into the community.

...Which says nothing about the comfort of prospective roommates. It's a delicate issue.
 

hakrjak

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Sep 15, 2007
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I rent to higher risk candidates all the time, but they've got to atleast have a job with income to support the rent, otherwise why bother? Make sure you get a good deposit though, atleast 1 to 1.5 times the rent + $250 per pet.

Can you move into the condo, or have you already bought something else you're living in that would be even more difficult to rent out?

Can you sell it? Even at cost just to get you out of it so you'll stop hemmoraging money?

Rent-to-own it? Lease-option it? I think an RTO might work, if you can find the right buyer. Just get enough coming in from it each month so that it will erase the liability of the payment, so you can focus your efforts elsewhere.

One other option is to sell it on a wrap around mortgage to someone who doesn't have the good credit required to buy their own place. This is a form of owner financing which can be a win-win for you and the buyer, enabling them to purchase the condo while you are out from under the payment. If they ever stop making payments, you void your agreement, take the condo back and sell it again or rent it out... Hopefully a few years from now when the market has improved :)

Cheers,

- Hakrjak
 
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PEERless

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Jan 23, 2008
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Can you move into the condo, or have you already bought something else you're living in that would be even more difficult to rent out?
I live elsewhere for free, so there's no need to give that up to move in.
Can you sell it? Even at cost just to get you out of it so you'll stop hemorrhaging money?
I'm thinking of putting it on the market, but it's funny. Most homeowners pay their mortgages and don't call it a hemorrhage. It's all in how you look at it.

Thinking about hiring a pro. property manager.
 

TaxGuy

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Apr 28, 2008
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Goodyear, AZ
Remember that "sex-offenders" on the Megan's Law database may be child molesters or forcible rapists. They may also be 18-year-olds convicted of statutory rape for consensual sex with a minor.
True and it could also be a consenting, of-age couple that has sex in a public area. In his case he was 17 and the victim was 5, IMO there's no explanation for that, especially if he's registered for it and did not disclose it in the interview, only after I made the mistake of paying $99 for an Intellius full-search did I find out when I could've just done the sex offender registry lookup for free(btw thanks to bilge for recommending e-Tenant which is only $19.95 for checks ;)).

Since then I've learned to charge an application fee to cover the background check.

As far as the legal aspect, I know craigslist states that listings can only discriminate against sex in the case of a room shared situation(i.e. we only accept male candidates b/c there is a shared bathroom), but that's only in the ad, as far as accepting someone to live with us we can be more critical than a typical landlord who is renting out the whole property or even a unit in a multi-unit property.
 
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PEERless

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Jan 23, 2008
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especially if he's registered for it and did not disclose it in the interview
He's not required to disclose it prior to move-in. I'm not saying there's an excuse, but he's already done his jail time, so he deserves to be treated fairly.

accepting someone to live with us we can be more critical than a typical landlord
This may be true, but I'd check it with a lawyer. I think you're operating as a landlord and, therefore, bound by tenant law. Be careful. Discrimination is the one thing that scares me more than injury liability.
 

TaxGuy

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Apr 28, 2008
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Goodyear, AZ
I checked with the village code and it states that any housing with up to 2 non-related housemates does not have to register as a boarding house and thus can be run without a landlord license.

And yea I feel ya on that, my first reaction was "thank God I didn't let him live with us, but I hope he doesn't come back and sue for descrimination!"
 

hakrjak

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Read Millionaire Fastlane
Sep 15, 2007
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I live elsewhere for free, so there's no need to give that up to move in.

I'm thinking of putting it on the market, but it's funny. Most homeowners pay their mortgages and don't call it a hemorrhage. It's all in how you look at it.

Thinking about hiring a pro. property manager.
You said bleeding, I just took it up a notch ;)

So you've got a sugar uh, person paying the bills huh? :) Well that sounds good then, what are you complaining about? Why not move some office equipment in there, and use it as the corporate offices for whatever company you are about to start up. Would be a better use than just leaving it empty and paying the mortgage on it.

Or...

a professional property manager will have access to a lot more rental leads than you will. I've written on this at length before, so everybody knows how I feel about them -- You'll pay 10%, but they'll save you a lot more money over the long run. Before I had professional property management in place, my houses used to sit vacant for 2-3 months at a time... Since, I've had almost no vacancies.

Cheers, :hurray:

- Hakrjak
 

rentingintl

PARKED
Jan 16, 2009
21
0
10
I'm actually in the same situation as you. Since about Nov, I too have been having no luck to find new tenants for one of my properties and indeed it's frustrating. Not even craigslist.org that normally brings a lot of traffic has been helping.

But don't give up. It's better to keep your place empty than having more problems chasing bad tenants and having your property damaged, which will just increase your costs in the long run.

I also had to invest some money in a local paper ad, which I don't normally do, but that usually brings good results. So maybe you should give that a try too. Good luck! Claudia
 
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PEERless

Bronze Contributor
Jan 23, 2008
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any housing with up to 2 non-related housemates does not have to register as a boarding house and thus can be run without a landlord license.
Perfect. I rescind my warning to you, but the rest of us need to take heed. A convicted sex-offender has rights.

So you've got a sugar uh, person paying the bills huh?...a professional property manager will have access to a lot more rental leads than you will.
No, I'm a caretaker, so my housing, electricity, gas, cable, satellite, and internet are all free. So basically, my investment property is my only housing bill. That's why it's analogous to paying the mortgage on my own home.

I am considering a pro management service, but the fees around here are 12.5-15%... still better than no income...

I also had to invest some money in a local paper ad...maybe you should give that a try too.
Here's what I'm doing:

  • Newspaper ad: $120/month
  • Radio ad: Free
  • Fliers on bulletin boards: Free
  • Craigslist ad: Free
  • Facebook marketplace: Free
  • Facebook CPC: $100/month
  • Google Adwords: $100/month
  • My own webpage: $10/year
Which makes me wonder what the hell else can a property manager do for me? I feel like I have a pretty extensive marketing campaign in place!

My policy allows for only 30 days of vacancy, unless repairs are being done.
WOW! That's just one more thing to keep me up at night...
 

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biophase

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Jul 25, 2007
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Is Facebook CPC and Google Adwords doing anything for you? I just can't imagine it being worth $200/mo. I can't believe that you are spending $320/mo on advertising instead of getting a PM???

And with regard to your reject post, why didn't get the $20 from them before you ran the credit check? That would have saved you time when you found out they couldn't cough up the money.
 

kurtyordy

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Aug 28, 2007
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Which makes me wonder what the hell else can a property manager do for me? I feel like I have a pretty extensive marketing campaign in place!
.
A PM has an established network for referrals, also there are tenants that will only deal with a 'pro'. What can it hurt you to try, you only pay them if they fill it.
 
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PEERless

Bronze Contributor
Jan 23, 2008
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Is Facebook CPC and Google Adwords doing anything for you?
...why didn't get the $20 from them before you ran the credit check?
I get a lot of clickthroughs, but no "conversions" (as in, tenants). And I didn't run the credit check. I could tell from their declared bank balances ($0.00) that I didn't need to go to the trouble. LOL.
A PM has an established network for referrals
Yeah, I'll try that now. Thanks, guys.
 

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