Would you rent to these people?

Question

Hi,

I got one of my properties in Baltimore ready to rent ($1,300/month). It is a newish market for me, so I am not that familiar with the tenant base there yet. The property is in the Belair-Edison neighborhood and my Property Manager (who I like and trust) told me that sometimes, in these neighborhoods, most tenants do not meet all the standard background check qualifications. So I am reaching out to the BP community that may have some experience in this are to get some advice.

I got different applications, but I liked a couple (market tenants), even though their background check results didn't meet all my qualification. They are an older couple that have been living in the same property for over 10 years. Their current landlord gave great references. Their are moving because their landlord mentioned to them that she may sell the house. They seemed very kind and easy to talk to them.

Now, the background check results:

Credit Score: 470 & 525 (bad credit due to bankruptcy in 2008 due to medical procedure)

W-2 Income (combined): $4,800 with long job history (10+ years)

Debt:

- $55,000 with $7,000 past due (all debt is in education loans, $7,000 past due because they were trying to get loan forgiveness and they didn't end up qualifying)

- No credit card / auto debt

Criminal history: one of them has no criminal history, the other has 1 first degree assault (not prosecuted) and a second degree assault from 2012.

So, couple of questions:

1. Would you rent to someone that doesn't meet all your minimum rental qualifications, but have great references and tenant history? If I do so, I will request, security deposit, plus first and last month rent.

2. Is this the typical tenant I can find for this area/neighborhood?

Thank you!

Thomas S. · Answer

This couple does not meet the majority of my screening qualifications. Excuses do not pay the rent. Don't waste your time finding out why or trying to make them fit, pass and keep taking applications. Good tenants are a dime a dozen. Don't gamble.

High debt, horrendous credit, past due, assault.....how much worse can a applicant get.

Your PM is an idiot.

High debt, horrendous credit, past due, assault.....how much worse can a applicant get.

Your PM is an idiot.

Account Closed · Answer

First last security solves problems if income is real, from real place. And make rent higher and add in water. You pay for it because they never will.

David Fernandez · Answer

Hi @Jeff Bridges, thank you for your detailed response.

We own other properties in the city and we are very happy with them, the tenants, and the returns, so we like to invest in Baltimore City. Now we are buying in Belair-Edison neighborhood (one purchase to test the area so far) after talking with other investors and doing our due diligence; however, we are starting to receive the first applications after we finished our first rehab there and we are trying to figure out what tenant pool we have.

We are open to voucher tenants, it happens that we've only received applications from market tenants so far.

Jeff Bridges · Answer

baltimore is a tough market for finding high quality tenants. Its also tough to find a good PM in this city because its much more hands on for the same fee as other PMs earn for less work. Online rent collection will not work here. Your neighborhood appears less bad than the primary part of downtown, but it your likely to be stuck renting to an applicant pool of less than stellar individuals. See some of the data I uncovered below for a better understanding of your market. You might have to open up your pool of applicants to voucher holders and see if you can find a better qualified (read: less indebted) applicant. the downside will be that their score and income will be lower, but guaranteed by voucher.

I don't have more advice for you except, be sure to learn more about your new neighborhood before buying more units and keep it vacant indefinitely before renting it out to bad tenants. You might need to accept a lower quality tenant in a pool filled with lower qualified tenants or reconsider your market. I'm personally not a fan of buy and hold in baltimore city for many of these reasons and more. do you have any vacant houses on your block?

Article quote:

"In 2015, more than 66 percent of households in Belair-Edison, Washington  Village/Pigtown and Madison/East End spent more than 30 percent of  their income on rent costs. These same three communities had the highest  rates of housing choice voucher utilization, more than two times the  citywide average. With median sales prices of homes below the citywide  average, the fact that renters are housing burdened is a function of the  higher demand for moderately-priced rental units in Baltimore." link

crime map for your area bordered in green:

Mark N. · Answer

There is no way I would rent to a couple like that.

They are a Bankruptcy waiting to happen.

Steven Knudsen · Answer

The biggest worry here is if the medical situation was acute and now gone, or is it chronic and may hit them again. I have had great experiences with medical bankruptcy if it is one and done.

David Fernandez · Answer

Hi @Thomas S.,

They don't meet most of my qualifications either. I have rentals in other cities and in other areas of Baltimore where I have no trouble finding stellar tenants; however, I would qualify this area as a C neighborhood with a good reputation for rentals within the city.

Not only my PM, but other local investors warned me than finding a market tenant with a 650+ credit score here may not be possible. Just trying to figure out what the norm is here. Obviously, if when we run the background check on our other two applicants checks all the musts, there's no discussion here.

David Fernandez · Answer

Thank for your input @Dan Harrison. I said older, because but they are in their late 50s. Obviously, age is not a factor to be considered, I guess I wrote my post as I was thinking about them.

As you mention, they told me the assault was a misunderstanding, and it seems to be true. It wasn't prosecuted and it is an isolated incident in their criminal history (other than that, it's totally clean).

And yes, we got proof of residence and payments. Almost 10 years living in the same place and they were late only one time. However, as you mentioned, my main concern is the high debt in student loans and having some past due since their check can be garnished.

Dan Harrison · Answer

David, when you say "older", what does that mean? Personally, I think one of them had an issue 7 years ago and was charged with assault. Very well could have been a misunderstanding, which is likely since it is now 2017 and no issues since then. The school loans are concerning, given the government can garnish a check whenever they want and however they want. Regarding the prior residence, did you get proof of timely and accurate payment? If not, I would absolutely get it to confirm they are paying on time and in full. Given the landlord said he may sell the home, I really wouldn't count on them moving until there is a "for sale" sign in the front.

Would you rent to these people?

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