How to Weed Out Bad Tenants in Up and Coming Area

Question

My husband and I are currently rehabbing a duplex in an up and coming neighborhood of Columbus, OH. The plan is to househack for a year or two (live in one side, rent out the other).

We've finished renovating our side and are planning on having the other side ready to rent by mid-February or so. It is our first rental property (aside from our primary home-turned-vacation rental, but that's a different ballgame). We want to make sure we are attracting the right people, as the area has a mixture of artists, young professionals, drug dealers and low income families who have lived there for years. Ideally, we'll rent it to a few young professionals or artists, but don't know how picky we can be just yet. Does anyone have any recommendations on how we can "weed out" the people we don't want living there from the get-go, aside from just charging more? I was thinking a certain income requirement, extra high security deposit, etc (?) but I also don't want to turn away people who we might want as tenants either.

The other question is this: how early do we want to start advertising the house? Or does it vary by market? It's still pretty much in shambles, so I'm not sure if it's worth showing to tenants before it's in better shape or not. We also only have an estimated completion date that could change if something big comes up during renovation.

Thoughts and suggestions are appreciated!

Jon Holdman · Answer

Check out our Ultimate Screening Guide thread.

Set your rent in line with or just a little below the market for your unit and its area. High rents mean fewer applicants and that means you have few choices. Only crummy applicants will be willing to pay high rents and high (vs. other units in the area) deposits. Good applicants have their choice of places and will choose a well-priced one.

Create a set of criteria. Those criteria are how you weed out bad applicants. First applicant that meets those criteria gets the unit, in my book. Be aware of both Federal fair housing laws and any local ones. They do send out testers and the penalties for discrimination are severe. That's why I take and process applications in order and the first acceptable candidate gets it.

Full deposit and one full months rent in cash or money order to move in. Sign the lease, accept the money and hand over the keys all at once.

Don't bother showing it until its done or very, very close. Folks just can't see past the construction. Put up a sign (the only way I advertise) when you start getting close, take calls, and get info. I only do showings once a week and tell everyone exactly the same time. Easier for you, perhaps, being right next door.

Account Closed · Answer

If you wanted a roommate, how would you describe them? Use that as your ad starting point. Also, being owner occupied, you man have more lee-way in who you rent to, so check with your local laws - maybe contact a Realtor.

And do a background check - employers, income, current landlord, etc.

I don't think it can hurt to put an ad up before its done. True, most won't be able to visualize the finished result, but you will get a feel for who the ad is attracting. And you're planning on being done in another month, so that's not really far off. Just tell them that.

Or, if you already know someone who would be a good fit, tell and ask them.

Good luck!

CK Hwang · Answer

Catherine W. , personally, I would just wait till the house is completed before even trying to show it. One thing you'll realize is that most consumers have a remarkable lack of imagination. I remembered one house that I tried renting out, it was hard getting a bite at our asking rent despite telling prospective tenants that we were going to change the appliances. After we put in new appliances, the applications came flooding in.

The effectiveness of using rent varies tremendously by the sector of the market your rental is positioned in. Most of the houses I have rented out are positioned at the top of the rental market. Any higher rent than that and people start looking at buying their own place. As such, I tend to list my rent a little bit lower than market to attract a larger pool of tenants to choose from, then use a tighter screening process to filter out the prospective tenants. If I used the other approach and raised prices, I would only have 1 or maybe 2 applicants of which there would be a very narrow pool to choose from. And just because they make money doesn't mean they necessarily spend it well and would have anything left by the time rent rolls around.

I've found calling past landlords and talking to their employers to verify their employment information as the best way to really get a sense of their financial well being. If they own their own business etc, often just a quick look at their website is enough to know if their business is on a sound footing or a fly by night operation.

Catherine W. · Answer

Thanks so much all for the advice. I'm taking notes over here.

Michael Noto · Answer

@Jon Holdman's advice about the rent is good stuff.

When pre-screening on the phone when they respond to your ad ask these questions:

1. Have you ever been evicted?

2. Have you ever committed a felony?

3. Is the combined rent of your household 3x the monthly rent

**Also be sure to outline your application process as well. You don't want to make make it too complicated, but small hoops are OK**

Helps get rid of most of the riff raff which it sounds like you don't want to deal with.

Michele Fischer · Answer

Catherine,

Charging above market or having high move in costs could backfire, you may want to focus more on a screening criteria that rewards non discriminatory attributes. I can share my rental criteria if that would be helpful, just send me a PM with your e-mail address. I cater to low income, so you could look at my and make it tighter to weed out the fringe folks I cater to.

If you think an artist is an ideal tenant, think about how you can verify income. We had an artist apply, my husband really liked him, but I could not get past the nagging feeling that he could just as easily be a drug dealer. We ended up declining him.

And I would wait to advertise it until it is close to move in ready. People don't have much imagination to imagine it nice during rehab. If you want people to give current landlords proper notice, add a few weeks or a month to that time frame.

Catherine W. · Answer

Thanks Marcia - that was so helpful. That's a fantastic idea about being up front about partnering with law enforcement to reduce crime in the area. I'm definitely going to look into it. And the no smoking policy is another great suggestion. We planned on having that as a rule, but I like that you expand it to the entire premises, not just inside the house.

Marcia Maynard · Answer

Also, give some good thought to your market and make sure the unit you offer is a good match for their needs. Since you have been living at the duplex, you are in an ideal position to understand the vibe of the neighborhood, the pluses and the minuses. If the area is gentrifying, get involved on the community level too to keep the area on the rise.

We partner with law enforcement and took the classes that the city police and county sheriff offered on reducing crime and improving the safety of neighborhoods. In our advertising we are up front that we partner with law enforcement, and that is a big turnoff to those with a criminal mind.

We own and manage our own properties. We start with written rental criteria, do thorough tenant screening, have a strong rental agreement in place, and respond to matters swiftly, fairly, and firmly. Rule breakers don't feel comfortable renting from us and either don't apply or move on.

We also have a strict "no smoking" policy, which doesn't allow smoking anywhere on the premises, and that alone weeds out many undesirable people and helps preserve the property. Smokers are not a protected class.

If you care about maintaining good landlord-tenant relationships and maintaing your property, you are likely to attract the type of tenant you desire. Open and honest communication from the start is key. Good luck!

Catherine W. · Answer

Thanks for the advice Jon and Bill. Very helpful.

Totally agree - anything can happen even if people seem like they'd be good tenants. I guess what I'm saying is that since we're going to be right next door, it would be nice to have tenants on a similar wavelength as we are and can appreciate the work we've put into the house. But... that may be wishful thinking. The bottom line is we just need someone who will take care of the house and pay on time.

How to Weed Out Bad Tenants in Up and Coming Area

How to Weed Out Bad Tenants in Up and Coming Area

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