does the lower the tenant's income directly mean bad tenants?

Question

Howdy all,

I'm thinking about purchasing another rental, but this would be in very very very blue collar area. Crime is not bad by any means. My other properties are in an area that require a somewhat higher income in order to qualify, but with this potential property a person with much lower means can qualify.  Has anyone found that when renting out houses, income makes much of a difference in the type of renter you get (section 8 aside). Have you found that great renters and evictions are pretty equal across the board?  I do screen heavily, but fear that with less expensive properties it will be difficult to find "quality" applicants that can pass screening unless I greatly lower standards.

John Underwood · Answer

@Keith Allen I have some great tenants that don't make a lot of money and they still pay their bills.

If someone doesn't have a great background check (most don't) then I get a bigger deposit so I'm not out too much money in case things go south. I typically charge 1.5x a months rent for the deposit.

James Free · Answer

My first SFRs are middle class or better. The tenants never call, and the property is returned about like it was when they moved in.

Then I bought a duplex in a blue collar area. It is my bad deal. Great on paper, but only because the only way anyone in the area could afford rent was with welfare programs. I've been through a few people, finally shelled out for expensive management, and still have regular issues. Not only do they do damage and make messes, but they make service calls for things like "I can't figure out the thermostat" or "I have too much trash for the trash can this week."

Contrast with my SFR tenants who once said "We broke the screen door, but don't worry, we replaced it!"

"You should have screened better" is lousy advice when no one who truly passes screening would rent in your area.

Lesson learned.

Dennis M. · Answer

As a person who works 55 hours a week plus doing real estate on weekends I’m sickened by the fact so many losers and deadbeats collect my hard earned tax money and do nothing but get buzzed up  and hold the couch down. That’s why I like the idea of renting to them though ! It allows me to get some of that tax money back and I gleefully  (inadvertently)  charge back Uncle Sam for babysitting

Thomas S. · Answer

Lower income does not necessarily mean bad tenants. What it does mean is that you are screening applicants from a much lower quality tenant pool. You must maintain high enough screening standards to be able to select the best from the worst.

Income is directly related to social standards in most cases. If you are a hard working middle income or higher individual you will find the social standards of most lower income to be considerably different. This will be a certainty with those on welfare. They do not view the world as we do and for the most part as their landlord you will be a glorified baby sitter. Do not expect them to meet your standards. They are usually much higher maintenance and require ongoing hands on management in most cases.

Bjorik Mutize · Answer

@Keith Allen not a direct write off for them but usually correlated to risk for their financial ability. That’s why it’s nice to pool a few different factors in it to create a good tenant story.

Robert Biggerstaff · Answer

All of my properties are pretty much C- and the properties. The majority of my tenants Tend to be higher maintenance and expect more for less service babe it’s kind of that entitlement mentality.

Dennis M. · Answer

I have many good tenants that technically have no income ! They get disability checks or from some other form of assistance income . Always pay and pay on time too! In fact I’d say they are an advantage in my little niche because they are looked down in and few landlords will accept them so they stick it out with me and always pay because they realize they are “ damaged goods”

Robert Steele · Answer

@Keith Allen I meant that lower income rentals tend to have higher cap rates and cash flow on paper. But not usually in reality.

I don't have any lower income rentals anymore. I had a Section 8 property for 13 years and never had a problem until the very end when HUD decided the tenants were making enough money that HUD would stop paying the rent. They didn't and I had to offer cash for keys to get them to leave. Hardly a horror story though.

does the lower the tenant's income directly mean bad tenants?

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