All Forum Posts by: Tony H.

@John Morgan @Michele Fischer

I sent a rejection email to Tenant#1 earlier today.

As for Tenant #2. I did a search online about their bankruptcy and it seems it was 2 car loans, and money owed to state taxes. I saw IRS too but it says the amount settled was zero. Maybe I missed something.

The husband has been at his current job a little over 2 years. I called his employer today to verify and apparently he just got a raise earlier this month. The raise was not considered in my calculation. He didnt tell me about, and he gave me last month’s paystub.

The wife has her own business. From what I can find out, it seems its been around for 2-3 years.. very low revenue though. 

The Dad is in his 80s and his benefit income will play a big role in paying the rent. I’d say at least 30% of the rent needs to be paid by him.

Their bankruptcy payment plan is about $800 a month with 23 more payments to go. 

Other than that, they have small credit card balances (less than $15k).

they have lived on their current apartment in the last 5 years. The bankruptcy filing happened when they live there. So Im curious to hear back what their current landlord have to say about it. Whether or not he was paid rent just like normal even with the bankruptcy.

Quote from @John Morgan:

I'd take #2. They'll be with you for years. Nobody else will take them with that bankruptcy on their record plus they have the dad's social security and VA. #1 will only stay a year or two. Turnovers within a few years kill profits.

@John Morgan

Whats your take about bankruptcy status? Most says complete no.. 

i was trying to justify their situation. What led them to bankruptcy etc. i thought i can compromises on them. i never had anyone with bankruptcy status apply, so im not entirely sure.

I thought about giving Tenant#2 a chance with a couple caveats:

1. dad submit proper application, and be on the lease. (I briefly mentioned this to them that it is a possibility i would ask this)
2. increased deposit. Im currently asking $3000, but maybe increase to $4000? 
it’s been 3 years since their bankruptcy payment plan. If they are now more diligent /careful with their money, $4000 shouldn't be a problem.

Again this was just my thought, but everyone else seems to say flat out no. So Im going to go with what everyone says.. 

I am taking everyone's advice. I will be sending rejection emails today to these two tenants and keep looking.

I used to have a duplex in a bad neighborhood. I looked back on the quality of applicants I received back then, and they were way more qualified than these two.

I thought if I jumped into single family home rentals in a much better neighborhood, I would not have to deal with these kind of applicants. I was wrong, but also surprised.  These people make way LESS than the applicants who rented my duplex 3-4 years ago.

Quote from @Valerie Kerste:

@Tony H.

I wouldn't pick either one. Keep searching. How long has it been since you posted your ad? Better to wait for a strong tenant than deal with the expense, hassle, and stress of a poor one. I keep a very clear tenant criteria in my mind and I post it in my add as well. I background and credit check everyone. 🤗 The one time I veered from my processes and better judgment, I paid dearly. All the other times that I stuck to my processes and standard, have been very positive and successful.

Hi, thanks for the insight.
one thing I forgot to mention was that:

Tenant #1 did inform me about the maxed credit card and lower credit score (around 590) prior to applying. They asked me if they should still move forward with the application. 
they told me they have been making payments on time. So i told them to go ahead and apply.

to my surprise their credit card debt is so massive.. and they didnt pay everything on time. Some are 90 days late. 

i asked them about this, and they said those 90days late cards are being handled by 3rd party who try to negotiate settlement for them and its still in process.


for Tenant #2, they did told me about the bankruptcy. They didnt tell me why. And we were talking about their payment plan, and the wife have their own business, etc. for some reason I was under the impression, the husband and wife income alone would qualify, and the dad’s income is just additional to the household.- so i told them to apply.

turned out the wife’s business is kind of random stuffs! She gave me her tax return and I thought it was a joke.

i told them with this income, the dad will have to fork out quite large to pay the rent. 

anyhow, if I reject these two, will they try claim back their application fees since they told me in advance and i told them to apply?

 To my defense they didn't tell me in that much detail. And I couldnt just take their word for it. The only way I can know is for them to apply.

Quote from @Kevin Sobilo:

@Tony H., when you are qualifying an applicants rent are you using gross or net income?

The typical method is to look for GROSS income 3x rent. Using gross income in this way is similar to how mortgages are underwritten. You're example illustrates that.

I also don't look at their debt as you describe. I look at it relative to income! I want the rent plus monthly debt payments to be no more than 45% of their gross monthly income.

Also, make sure you calculate their gross monthly income correctly. Most people are paid biweekly but there are MORE than 2 pay periods per month. So, if using their biweekly paycheck multiply by 26 and divide by 12.

I use Gross. And yes I do multiply like you said…

Tenant#1 is over 50% (rent+debt) relative to income

Tenant #2 is actually about 30%. Which is good. The only res flag is their bankruptcy status they filed 3 years ago.

thats why I want to ask everyone, is there an exception to bankruptcy situation that I should look into?
if they went bankrupt because of being irresponsible,, including not paying rent. Then if course, I will pass on then.

but if they still paid rent, and their bankruptcy os because of something else, like child support, car loans, then might be something to be consider?

thank you

Quote from @Wendy Man:

Would agree with the others.  I would lower the asking price and pass on both.  

If you are to take either though, maybe consider a higher security deposit if allowed by local laws.  And if you are taking the second tenant consider running check on the dad also and make sure he signs on the lease, and checking that he is actually moving in with them and not just on the application to help them qualify.  Luck.

Yes, if I were to pick Tenant #2, I was planning to include the dad in the lease. I told them that already and they are okay.

Again, i am asking everyone’s opinion on bankruptcy.. are there a certain bankruptcy situation that is still considered ok? Or just a complete no?

for example, I have read that some people have to file bankruptcy to reorganize debt. This sounds ok to me, because they actually “starting over”. And with court order, they cant open additional debt.

so in a way, isn’t it safe enough for landlord?

Quote from @Ray Johnson:

@Tony H. You seem to think one is better than the other. I will point out that the one with the maxed-out credit cards will get increasingly worse as interest rates continue to climb those minimum monthly amounts on those maxed out cards will increase cutting into their monthly available cash, and leading to someone not getting paid.

If you're willing to take such a low quality tenant, have you looked into Section 8, at least you'll know you'll get a portion of the expected rent assisted, and a lesser burden on the renter.

I have looked into Section 8, they never showed up. 

Good point on the climbing interest rates. 
do you know anything about the risk with tenant who filed bankruptcy 3 years ago?

 They told me they are on payment plan for 5 years.. 2 years left to go.

I dont know they went bankrupt though.. 

i have read some positive points about this situation. Since they are under court order, they are actually not allowed to get into more debt, or open new loan.

Which in turn, they are on a fix payment plan with no chance of getting into higher debt. 

Isn't this good in a way?

Quote from @DJ Dawson:

take your time w this one, no tenant is ALWAYS better than a bad tenant, where are you marketing your rental? I suggest turbo tenant they will put your listing on all the sites, get a professional photographer to get the place to shine and watch the tenants start to roll in

I am putting in on zillow, avail, turbotenant.. 

most inquiries dont even make the cut in the pre-screening questions.

the two that decided to apply knew they are short as well, but not that much short honestly… 
i know for a fact that credit score get affected a lot by credit % utilization. Thats why I am paying attention more on the timely payments rather than how mich credit they use.

I am posting this because I am trying to get the better of the two options.

Yes, both are below my requirements. My gut tells me Tenant#1 is the better option for some reason. 

But again, I am freaked out by the amount of debt showing in their credit report.. their income will never pay those back. - this is none of my business, but it does cross my mind if they will ever file bankruptcy soon - which then I will get drawn in.

I’ll consider of holding off. Thanks guys!

Quote from @Nicole Masters:

What area is this in? And what are you asking for rent? I would consider possibly holding out for better tenants, how long have you had it posted for?

Its in south natomas.. asking $2700.. posted for about almost 2 weeks now