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Updated over 4 years ago on . Most recent reply

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Ladè Baruwa
  • Rental Property Investor
  • New York City
122
Votes |
90
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Landlords.....what headaches come with having C- and D tenants?

Ladè Baruwa
  • Rental Property Investor
  • New York City
Posted

What are some headaches that a landlord could run into when renting to tenants in a C- and D class neighborhood? 

Also, what are some solutions for those headaches?

Most Popular Reply

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Nzinga Young
  • Investor
  • Brooklyn, NY
95
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Nzinga Young
  • Investor
  • Brooklyn, NY
Replied

I’ll break down my solutions to @Philip Williams great list of issues.

1. To get rent paid on time, I use Cozy and let them know rent will be paid through direct deposit when they’re viewing the house. Anyone with plans of not paying won’t want their rent automatically deducted from their account. They also won’t like that their Cozy payments impact their credit score. I also have a Sec 8 tenant so getting the rent is never a problem.

2. If you have a nice home, people won’t want to leave it. Do the work renovating the space before and you’ll have a “one in a million” property with grateful tenants and super low turnover. Also, do the math to see if it’s worth raising the rent every year and risking the tenants leaving. I have good ones and don’t plan on raising their rent for the first 4 years they’re with me.

3. Don’t ever bend your standards in the screening process. I haven’t ever had to, but I’d rather give up a month of rent to look longer than lower my standards. I ask for 3 months pay stubs, last three bank statements, copy of photo ID, and contact info for their employer and past two landlords. I do a background check but not a credit check. Poor credit is assumed. I don’t even run it since that would bring it down even lower. If they tell me it’s very low and they don’t have much in reserves but they do have a good income, I’ll have them pay first, last, and security upfront. The last month gets paid in monthly installments and added to their rent payments.

4. Like I said, credit isn’t a big deal to me. Just use the last months rent installment payments to protect yourself.

5. No reserves is always an issue. It surprises me every time tbh but it’s the nature of the environment. You can use the strategy above and make sure your reserves are strong. If they have low credit and no reserves, I’d only rent to them if there are two or more working adults in the home. Or if they have Sec 8.

6. C and D doesn’t mean the neighborhood is dangerous. Check the crime report. My rental is in a town right next door to Newark, NJ (very high crime rate) but my area is extremely safe. With that being said, I still have video cameras and motion sensor lights on every door. It’s more to make my tenants feel safe than anything.

7. I choose not to increase rent but I definitely could. And my house has gone up in value about $25k a year since I bought it. You can’t buy in just any lower grade neighborhood. I looked for one within 30 mins of Manhattan with lots of access to public transportation. Mine was one of 3 houses being renovated on the street, and there are three schools within walking distance. Make sure the home you get is near something noteworthy and you should be okay.

There’s a lot of money to be made in lower grade neighborhoods. I also think it’s important for *US* to own in communities of color, which are often (but not always) C and D areas. Good luck to you!

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