. ($50M portfolio) & I can tell you without a doubt it's a terrible idea to put a tenant in the property that cannot pay 1st months rent & an equivalent security deposit.The fact that many people you are talking to cannot afford this is actually a good thing.

@Patrick Murphy, A REIT is not eligible for 1031 treatment because when you buy a REIT you are buying a security and not the underlying real asset. 

Good Article.  Increase in Real Estate investors going after a shrinking REO market.  I'll stick with notes, thank you.https://thinkrealty.com/distressed-sales-share-dro...

So say your rent is 1000 and you would normally charge 1250 for a security deposit.

The poor performers all got the pink slip a few years ago.

They're actually easier to qualify for because they look at the asset's performance.

Here’s the bottom line:No financial risk to partner = no motivation = can pack up his tool bag and leave.No contract can secure yourself and your investment when it comes to this type of partnership - there are too many what ifs and what to do on that if.Best case: Hire him as contractor, pay his invoice, move to the next deal.

With that being said, I do charge an application fee and here's a list of some of the reasons why:1)  I incur a cost to run a credit check so the application fee just offsets this cost (I don't make money off the application fee, I just charge according to what it actually costs me so I'm not out any money).2)  It helps weed out the tire kickers who may turn in an application but aren't serious about renting the property or those that might turn in an application hoping you won't find out something that would disqualify them (I give all applicants my criteria stapled to the application so they know exactly what I'm looking for, and not looking for).3)  It's another screening tool (if the applicant can't afford the application fee, how are they going to afford the rent + security deposit?)

They had securities carrying guns question even if you live there.

However, since we each answer phones, book our calendars, and perform the work, it is really an all or nothing type position.