Tenant Screening- Convicted Felons?

Question

Good evening! I have been a bigger pockets member for awhile, and my wife and I recently purchased our first investment property. It has 7 units and we are in the process of filling two of the units. I have a twofold question for our landlord crowd out there. Please don't be shy with responses!

1. We have used the Mysmartmove website to do our applications, and we appreciate this, but it seems necessary do do some additional supplemental information gathering as well. For example, length of employment, and other info that we would love to have on file. We appreciate that this website pulls the credit report, and it lets the tenant fill it all out online. We are capable of searching criminal background, and I feel like if we we could pull credit history somewhere that we would be fairly self sufficient without the mysmartmove site. Does anyone have other recommendations for ways that they do this?

2.  What has been your experience with renting to convicted felons? One part of me  wants to give people a chance, but the other part of me can only imagine the worst, and foresee other tenants moving out after finding out their neighbor previously served time for stealing an airplane while assaulting people with explosives and stolen guns. (you get the idea) I want to be fair, but also want to make sure I protect our other tenants. Any advise or stories?

Stephen White · Answer

@Michael Tucker this is a good question - I've seen a lot of success with local reentry services that often operate as a non-profit. In my local area there is an organization called Peaceprints of WNY and I'm very impressed with their work. The recidivism rate is extremely low when someone is receiving good guidance.

So to answer your question, the criteria I'd consider for reentering citizens is -

1. the nature of the past offense

2. time since the offense and subsequent offenses (hopefully none)

3. are they working with an advocacy group like Peaceprints that helps them through their transformation

4. a solid source of income (be aware that some states consider housing assistance as a source of income)

I commend you on being open to the idea of considering former offenders. I personally know several landlords who have found success in this niche, from a business point of view.

Now, I hope I'm not out of line, but I'll offer my personal point of view for the sake of healthy debate with @James Wise. I'll start by saying I completely understand your position James and you're not wrong necessarily. I wouldn't recommend that every landlord go out and rent to former felons, but it's not based on the risks or what you might think. I'd say that it depends more on the individual landlord and their objective.

If you're a landlord or an investor who is only looking at growing your number of doors and scaling your business with the least amount of friction possible, you might not have the stomach to tolerate the idea of increased risk or effort. However, if you want to use your time/energy as an opportunity to change someone's life or make a considerable impact in your community by taking on what others might turn away, there is plenty of reward beyond business benefits.

I realize this is not going to be a popular perspective in a forum full of people trying to make their pockets bigger (pun intended) but I'd consider how many successful people you know who are miserable. I was certainly one of these people and have a sizable therapy bill to prove it. The lesson I learned was that I needed a bigger purpose beyond just making more money. My bigger purpose is not specifically renting to former felons, but this is only because I have a purpose that's more personal to me. And when it comes to my bigger purpose, I'll put in the extra effort where others may not because I can, and I want to. Selfishly, what I get in return on something I feel aligned with far outweighs anything I can measure in cashflow or margin.

Again, I realize not everybody has this perspective or hears the call of a bigger purpose, and I begrudgingly accept the title of Hippy or Tree-hugger if you see fit. But everyone's path leads them in different directions and I appreciate the Michael Tuckers of the world who might be trying to make a difference beyond himself and willing to give the effort needed to offset that additional risk. After all, if not him then who? Who steps up to give someone a second chance that might genuinely deserve it? Who takes the extra steps to ensure a successful reentry that contributes to the community instead of disrupting it? Who is willing to look beyond the business benefits and accept a job that includes more than collecting as much rent as possible?

Hattie Dizmond · Answer

@Blake Elder

I have done prison ministry in the past.  So, I have a real heart for offenders.  They do need a 2nd chance.  However, you do have an obligation to your existing tenants.  My rule of thumb...absolutely no violent or predatory sexual convictions.  (I specify it in that manner, because I don't want to exclude someone who was 21 and got a statutory charge because his girlfriend was 15 and her dad was mad.  But, sexual crimes have the highest rate of recidivism other than drug offenses.)  No aggravated assault convictions.  No crimes against children.  No drug convictions, other than simple possession.  No convictions where a weapon was used in the commission of a crime.  No convictions involving cruelty to animals.

That pretty much eliminates anything that would present a danger to your other tenants.  I would then take a slightly softer stance, if the conviction is at least 5-years in the past with NO issues since.

My 2 cents.

Michael Tucker · Answer

@James Wise you're right but that doesn't mean you can't make profits with a purpose either. Some investors would argue that models that aren't profit driven,  even when doing quasi-philanthropic work aren't sustainable. I don't think you necessarily disagree with that sentiment though,  but leading with the heart/emotions is a recipe for disaster. That's why I reach out to smart folks like y'all!

Marcia Maynard · Answer

We've rented to convicted felons on more than one occasion. They did not reoffend. One stayed 7 years and another has just passed the 5 year mark. Those with legal history, such as a felony, often don't have many options available to them and are more likely to stay a long time. I do feel I am contributing something to our community by allowing second chances, but I do so with eyes open and extra security deposit to cover my risk. It really depends on the crime, restitution made, and how the person has acted since. I would rent to Martha Stewart if she met our minimum criteria to rent, she's a felon, but she probably would not be at home in our humble dwellings. :-)

I uploaded two of our documents to the Bigger Pockets file place to share.... go to Resources - File Place - Other Documents.  There you will find "Rental Criteria" and "Tenant Screening Questions". Of course, one needs to make their own decision as to what criteria to use and how to go about vetting prospective tenants, taking into consideration type of property and market niche.

James Wise · Answer

Charity &/or helping people to satiate a personal desire should never be confused with making a business decision on how to efficiently run a rental property portfolio.

Michael Tucker · Answer

@Stephen White appreciate the response and kind words and my business is intended to make money but also help people while doing so where I can. I was approached about this concept from a classmate of mine wo was formerly incarcerated and have given it some serious consideration especially since its fallen within my investing principles/core convictions. But before I make any moves I wanted to be able to make an informed/protected move given the increased perceived risk.

My classmate actually wants to start something similar to the non-profit you mentioned, but I'd rather start a little smaller.

James Wise · Answer

I think most major philanthropists would argue that in order to do the most philanthropy you need to 1st make enough money to make a difference. You do that by running your business as a business. This creates more money for you to have at your disposal to use for any philanthropic desires.

James Wise · Answer

There is no benefit to your business to give felons a 2nd chance. They are a higher risk than the general population of being a problem for you. On top of that even if they are reformed and stuff like that they are still going to be harder to employ then the general public. Your job is to collect as much rent is possible. Don't take on a higher risk tenant with a lower probability of retaining employment.

Stephen White · Answer

Landlords should be aware that new "Ban the Box" laws are being adopted in many states. Of course the biggest impact will be on the employment side of applications, but most states mention rental/lease applications as well.

This means that in these states (soon to be every state in my opinion) you can no longer include the "where you ever convicted of a felony" question on the application. The idea is to NOT disqualify a person before seeing the criminal records.

So the idea of tossing out those applications that have the box checked before you run the background check, while logical, should be used carefully.

My own opinion, from seeing about 1000 background checks per day, is that felony convictions should be considered case by case, after seeing the records on the background check. If for no other reason than to limit future legal liability - but also because I've seen great tenants with prior criminal records. Putting a time limit of 5 years is a great strategy as well. For @Robert Blake  , this would ensure any pending or existing legal action (including civil records) would be available for viewing on a background check.

Hattie Dizmond · Answer

@Steve Babiak

Good catch!  Let me be a little more clear...5-years post conviction and discharge of any sentence.

Now, if I had a smallish MFR of mostly 1 bedrooms, then I would consider renting to someone recently released, provided they can produce recommendations from their prison case workers and documentation that they were free of any major cases, while incarcerated.

Tenant Screening- Convicted Felons?

Most Popular Reply