Suggestions on Tenants

[Andrew Merritt]

Hey All, I purchased my first investment property recently (a duplex in the Charleston, SC area) and I'm trying to rent it out.  I bought it for $175k cash and will get delayed financing on it settled in November (30 years/4.7%).  I'm asking $1,100/side, which is admittedly optimistic, but I've got some decent interest in it.  I will likely be signing the first tenant's lease tomorrow.  I had another tenant interested but she backed out b/c the rent and deposit were too high.  I really wanted her in there b/c she's a cop, so I offered her a discount down to $1025 and no application fee ($25 waived).  She says she can only afford about $975/month.  

The other thing is that she wouldn't be moving in until November first.  I said I could take a holding fee of $500, but that's still too much.

I haven't run her background check yet as she hasn't sent me in all of her info, but I'm wondering if it might be worth it to drop the price down to $975 and waive the holding fee for a young police officer who will in all likelihood be a good asset to have in the duplex.  The house isn't in the best area, but it's nice enough.  There are some rougher houses near by.  

Thanks for your input!

[Cortney Jones]

@Andrew Merritt - certainly understand your thought process, but one thing you need to be careful of is making concessions to fit your "need."  This almost always results in regret.  

First off, if you're confident that rental rates are in the $1100/mo range for what you're offering and you feel good that it's competitive then there should be no concessions at all.  If you're not confident then I would reconsider the rental rate.  One month of vacancy can eat up your annual cash flow and it's not worth it.  Be competitive in rental rates for what you're offering. 

Also, there is this little thing called "fair housing" to consider.  If you adjust rental rates for various tenants, you can think in your head that it's due to the career of one of the tenants, but with a disgruntled tenant later on down the road it could be due to race, religion, sex, etc. and you can be caught in a federal violation. 

Have a system that rates each candidate the same, whatever you come up with.  We use a 1-5 scale for various key things that are important to us: rental history, income, debt to income ratio, referrals, clean car (it shows how they'll take care of your property), criminal check and credit check.   If you apply the system to EVERYONE equally it will help you stay out of trouble.