Does anyone specialize in renting to the "less desirable tenant?

Question

Good day BP.  I'm curious if anyone specializes or has had success renting to folks with not great criminal histories or bad credit histories, etc?  It sure seems there are LOTS of folks with less than great reputations/experience in their life, but they all have to live somewhere.  I'm just curious if anyone has experience capitalizing on this, has tried to capitalize, etc...

Nathan Gesner · Answer

If you want to learn from a low-class master, follow @James Wise. I say that with all respect.

JD Martin · Answer

Plenty of these "specialty" landlords in my area. Most of them are not going to be on BP, as just the idea of having an interest in furthering your body of knowledge and improving operations is somewhat antithesis of their main goal in life, which is turn dollars for as little work as possible.

That's not to say that low-end landlords are all slumlords. You can rent to the less desirable and still have a halfway decent place. It's just a tough road because most LLs who are interested in keeping their units halfway decent get tired of dealing with the same class of tenant that causes a lot of destruction and unpaid rents.

The better low-end LLs in my area tend to have mobile home parks or live on-site in an apartment complex, where they can keep things in reasonable check. Not too many armchair LLs in this class where I am that aren't using a PM company, and there aren't many PM companies that want to deal in this class.

Wendy Lavana · Answer

I'm in South Florida and I don't see how you can make money in class A and B rentals here, unless you bought in ages ago and are banking on appreciation. I'm a class C & D landlord and its a tough game mentally, emotionally and physically. I've been very hands on on my properties and I can't always find good help to get rid of the kind of stuff, grime and chaos my tenants have left behind, these are the same tenants posting their eviction story on facebook, crying about their "evil," landlord, as if thou expecting people to pay rent is somehow inflicting harm on society. I've improved my situation a bit by making the properties better, but its been a process.  I'm not a slum lord by any means, I keep my properties as well as I possibly can, but that's the conundrum. Being a kind landlord and having to rent to bad tenants is a mismatch, maybe its because I'm female, but every now and then I still get disheartened. These days I'm a fair landlord, but never overtly generous or too kind and I don't care who you are and how my children, cats, dogs or turtles you have, If your rent is not in on the 3rd, I EVICT and I work on doing it as fast as possible. Good intentions on my part go wasted. The money in class C & D is  good  but you're going to work for it. Not all my tenants are bad but managing properties in class C & D has shown me a side humanity I would have much rather have been oblivious about. That being said, I have a couple of A & B rentals and while they are much easier to manage, they to come with their own set of frustrations.

Thomas S. · Answer

Every owner of a C/D class property specialises to some degree in these types of tenants. Hands on management, vacancies and none payment of rent is a common part of the business.

Greater profits come with more work.

James Wise · Answer

If you are going to buy one or two I would buy something higher class. The additional hassle just isn't worth it on a small scale. If you are going to scale up & run a big ole' machine that's another story. You can make a ton of money in the hood, I do it every day. But again on a small scale choose something that you can set & forget. These are active investments that take time, money, resources, experience & sometimes your soul lol. Huge turnover in the management business. Many folks just can't hack it.

Rich S. · Answer

Thanks all for the replies.  So is it safe to say the only way they make some sense is large returns and probably not one SFH at a time, as it won't involve enough profit for the hassle?  I'm also guessing that being in proximity to keep constant tabs is very important as well.  Crazy that someone torched a car over $20!

Dennis M. · Answer

@Thomas S.

Agreed and I’m a C and D landlord myself so I know

Sylvia B. · Answer

On the news yesterday was a report about a shooting in a less desirable area of Springfield, MO. Two guys argued about a cell phone. One guy wouldn't tell the other where his phone was, so he shot him.

Dan K. · Answer

My 2 Cents having investments in an A+ area but the actual properties are not A -- which means I still have amazing choice of tenants, but I don't have six-figure income tenants for the most part. So take it all with aa grain of salt.

Through cleaning up the property, making it clear that the property and premises are taken care of and regularly looked after, you can bump up the tenant class a bit and get rid of tenants that don't want oversight.

Of course you aren't going to create an A property in a D neighborhood, but you could be the one of the nicer properties in that neighborhood by just taking care of it, replacing some carpeting, etc.

In my opinion, one of the greatest signs that a landlord or property manager just doesn't care is when there are massive stacks of circulars, free newspapers, or phone books in the entryway. These items are all trash, and once the landlord leaves those items in the common areas it gives the green light to tenants that they can just start leaving garbage around and not caring.

James Wise · Answer

Great post. This pretty much sums up the life.

Does anyone specialize in renting to the "less desirable tenant?

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