2020 Quality of Tenants. Where did the qualified applicants go?

Question

Chicago, sub $1,000 rents. C to C- class area. Clean and rehabbed units

Are you seeing a drop in the quality of tenants drop this year in Chicago for the above-referenced market?  Where did the good and qualified tenants go?

I'm getting plenty of people with bankruptcies, collections, criminal records, shady information, "cash on hand" applicants, and a few scammers.  I'm flexible, but this year seems tougher.

I'm starting to wonder if the good tenants decided to stay put in light of the pandemic.

John Warren · Answer

@Frank S. I rented out four units during the pandemic and had one of the best years I have ever had to be honest. I got more for my one bedrooms and got better tenants than I have in the past.

Henry Lazerow · Answer

The rental market is very hot in Chicago right now. I rented all my units up first 2 weeks after rehab and each apartment had atleast 1 person with 700+ credit in Rogers Park. Your problem likely lies with C class and not the broad market. I consider C class $1200 or so range average. If its sub $1000 your probably in D class undesirable areas.

Quincy Lockett · Answer

@Frank S.

YES! I get hundreds of applicants for each available unit and only about 2 out of every 400 are qualified. The numbers were much better in years past.

It’s become apparent that I have to either sell or rent to subsidized renters. I’d rather leave the units empty than lease to an unqualified tenant. Good Luck.

Frank S. · Answer

Finally, we found great tenants, with reliable jobs and credit scores over 700.  This was hard work.  I  am not raising rents this year and I hope all other tenants stay put.

Bob Collett · Answer

In Cleveland and inner ring suburbs, we are getting plenty of inquiries, but with more no-shows than usual.  We are also seeing more credit issues and more criminal hits on background checks.

I had to chuckle when the Ohio Division of Real Estate recently sent out a reminder to Brokers advising them to check the criminal background of would-be new real estate agents.  Since new agent applicants must disclose any criminal convictions... the Division stated "please remember that DUI, OVI, driving with a suspended license, driving with fraudulent plates are not routing traffic violations". I get this from prospective tenants all the time that "I have no criminal convictions", and then they come back with two dozen traffic violations, contempt, disorderly conduct, etc.

I agree that the best candidates here are staying put unless they have to move.   In the Cleveland market when folks "have to move" the reason is often not a good one... "I had a bad landlord", "or the eviction was not my fault"

Background checks and both employer and prior landlord checks are now more important than ever... Be sure that you have well thought out, written tenant requirements.

Bob Collett

Remax Trinity Property Management

Sarah Lewis · Answer

What do you guys consider B and C areas in Chicago?

I have buildings in West Ridge, Edgewater, Portage Park. Portage Park has inherited tenants-so I will see what I can get for a nicely rehabbed unit.

My tenants in West Ridge are excellent. Great credit, tidy apartments, never late on rent.

Corby Goade · Answer

This is the risk you run when you invest in C areas. My market really doesn't have any neighborhoods that I'd consider C level, basically all B and A properties. Our "average" tenant has a 700+ credit score and makes at least 3x the rent, often much, much more. Our metro vacancy rate is sub 3%.

There's a trade off for these higher cash flow areas, and that can be higher vacancy, lower quality tenants, higher rates of eviction and higher maintenance costs. I haven't had a vacancy more than about 10 days in 15 years and when I do, highly qualified tenants come running.

John Warren · Answer

@Frank S. leasing is a funny thing for sure. Last year I felt like tenant demand and quality was way down, but then this year it has been the opposite. I feel there is a constant ebb and flow that a lot of newer investors don't understand until they have leased through multiple cycles.

Frank S. · Answer

Good for you! I'm glad to hear is not a widespread thing.

Frank S. · Answer

Yeah, I guess is a D.

2020 Quality of Tenants. Where did the qualified applicants go?

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