Where do bad tenants live?

Question

Everyone in the REI community always seem to have extremely high standards for the tenants they choose - good credit, no criminal history, on time rent, absolutely 0 evictions, etc. I've never met someone that didn't have these standards.

And I 100% get it. This is a business, not a charity. The goal is to make money while providing housing, and bad tenants are more expensive and more headache.

But that makes me curious....where does everyone else go?

And on top of that, how the hell do sex offenders and convicted murderers find housing?? I mean, even the lowest-standard landlords still have rules against those two, so where can they live when they get out of prison?

To be clear... I have the same high standards for when I finish my live-in flip, so I'm not trying to do anything different here. Just curious!

Joe Splitrock · Answer

One other comment to keep this all in perspective... People love to pick on "slum lords" or criticize landlords with low screening standards. Keep in mind they are providing housing to people that you and I rejected. Many of these people were born into bad situations in life and never had much of a chance to succeed. Some struggle with addiction or mental illness, some are victims of abuse or have life long medical problems.

Calling them bad isn't even a fair characterization. They are just less qualified applicants.

Scott Mac · Answer

Post of the day!

Isaac Pepper · Answer

@Sam Fickel

From what I've seen, the type of landlord who will just throw anyone with a heartbeat and a payment into a residence does not use or even know about BP.

Joe Splitrock · Answer

@Sam Fickel keep in mind there are the standards people tell you they use and the standards they actually use. Many landlords are willing to look past their standards if they "have a good feeling" about the tenant. I also know plenty of landlords who don't run credit, don't call to verify employment, don't run criminal check and don't call previous landlord references. You may wonder how they survive. The answer is that the majority of tenants are pretty good, so they just get lucky.

As far as renting to people with criminal background or severe financial issues, there is a whole segment of landlords that deal in sub-prime tenants. Do a search on a sex offender map and you can see where these properties are located. They properties are run-down and tenants are paying 30% or more above market rent. This is a risk premium. It is very often a cash business. These "bad" tenants know it will be hard to find another place, so they often put up with bad living conditions, never complain and pay rent on time. People with 800 credit score will call to complain if the neighbors dog is barking, haha.

As far as how bad tenants find a place to live, they keep applying until someone accepts them. They will apply at any property that doesn't have an application fee. That is why I always tell landlords you must charge an application fee and run credit/background check. That alone scares off 99% of the worst applicants, so they never even apply. Badly qualified applicants don't want to waste their money, so they "self screen".

Randall Sears · Answer

I have several properties [out of state] that are in a somewhat checkered part of town. One of my houses had a tenant who was there for 13 years. He and his wife treated the house as their own. They never complained, always paid their rent on time and never caused me any trouble. After they had been in for a couple of years, I did a google search on his name. He came up as being on a sex offender list. It suddenly made sense. He was limited to where he could legally live. My house is next to a race track and is surrounded by strip bars and liquor stores. There aren't any schools nearby. I don't know what his offense was, but I was sad when he bought his own house and left. BTW, we only keep these houses because we get rent from the tenants and income from racetrack parking. In this part of town you have to compromise on your high standards.

Drew Sygit · Answer

Most BPers are renting out Class A and B properties, so their high screening standards can be successful.

Once you get into Class C properties, you have to lower your standards significantly. Not a lot of BPers play in that market segment.

Regarding where do the denied tenants go? Google low-income housing and you'll find many apartment complexes and halfway houses, etc.

Scott Mac · Answer

[1] Not everyone has high standards when renting and will just make gut feeling calls on if the applicant is ok or not.

[2] A story to illustrate another way, one particular way.

A female (let's call her Mrs. X) with several children in her care, some her own, some her relatives, rents a large unit with as many bedrooms as possible.

Section-8 welfare pays the monthly rent, or a large part of it.

Mrs. X, being an entrepreneurial type, lets it be known that (tough guys with tough pasts and probably tough futures) can bunk down (for lack of a better term) in the rooms--for a weekly fee (in cash).

All bedrooms will be filled with weekly paying (guests, as she calls them) unauthorized subletors, or she may stay there concurrently with the children sleeping wherever they can find an unused horizontal space--except in the subleted rooms.

The main living area may be subleted to 2 or three more individuals if she moves out.

The bedrooms typically contain just a dirty mattress on the floor, and may have lot of new looking (grown man's) clothes on the floor and fast food debris.

Mrs. X would like to find new boyfriend to move in with because she can then rent the whole square footage and possibly pocket as much (or more) than section-8 pays the owner for the unit.

The rooms may or may not come with stove privileges (at an extra cost).

The subletors must (keep their heads down) at the rental and not be a problem (while there) and pay on time.

Failure to do these two things results in being thrown out, and having their slight belongings thrown out.

Then they are homeless and must couch surf with friends until they can come up with another deposit of X weeks rent for another similar weekly room situation.

The renters cash income may come from a job, or other (extra-legal) means.

You will find situations like this in tough neighborhoods, and if Section-8 finds out about it--Mrs-X will be off of Section-8 for some set period of time, and have to fend for herself housing wise.

Jennifer Ruelens · Answer

There are plenty of people who don't take an active role in their investments and rent to anyone who has cash and shows up.  I see bad tenants taking advantage of friends, family and other big-hearted people.  The bottom line is that qualified tenants have options and unqualified tenants are stuck with the landlords who don't screen.  This is why in rental housing forums you see people stating their housing need and then "NO realtors or property manager."  Because they know they have less chance of a DIY landlord being careful.  I tell my clients if we are all pulling from the same pool of tenants, and I am using a filter to make sure I only pull out qualified ones, there is a higher concentration of unqualified tenants left for you.

Adam Martin · Answer

I suspect more of us are housing them than we realize when friends and family sneak in unnoticed.  I had a potential applicant last time that asked this exact question when I let her know she didn’t qualify with the prescreening for recent meth convictions.  She told me it wasn’t fair and I was discriminating against a medical condition since it was an addiction.  She then hung up when I reminded her that last I checked you don’t get addicted to cooking it.  These tenants are obviously living somewhere when they apply and there is a good chance the landlord is happy to see them go but it won’t be with me.

Philip Williams · Answer

They live with private landlords, I was amazed the number of posts in my local rental groups from tenants saying private landlords only. Then multiple prospective tenants commenting things like following me too etc. There is a large group who for whatever reason wouldn't qualify if someone looked into there background. This group is savvy enough to understand that almost every property management company does at least some degree of screening. The result they have figured out that in there minds private landlords are golden.

Where do bad tenants live?

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