Dallas-Fort Worth Real Estate Investor Club

Yikes...I've had some horrific tenants this summer who cost me a bundle...anyhow we've all heard the horror stories of landlording.  The experience certainly had me re-examine my screening process and where things have gone wrong (or right) in the past.

The best tenants I've ever had were savers looking to buy a first home.  They were keenly aware of their credit score.  This thought crossed my mind: could a landlord offer a discount for a high FICO score?  something sizable enough to really motivate the type of tenant who will really perform?  What would be the best way to advertise this, assuming there are no discrimination issues; real of inferred?

Thanks for any input on this topic.  I'm considering holding out for better tenants if it means a longer vacancy.

 

I check employment, rental history, criminal and credit. The credit report is more to VERIFY info on my application. Besides, *most* renters have credit issues or are not long term prospects if they do. I call their previous landlords/apartments, current and previous employers and each one of their personal references and make sure to verify they are not walking on an existing lease.  I call every single phone number on my application. I always ask why they are moving. I ask questions without leading and listen. I like to get them talking about themselves (asking questions and feigning interest works very well - people love to talk about themselves). The more they say the more likely they will reveal inconsistencies in their story if they are being dishonest or hiding something. I also have floor mats and watch to see if they wipe their feet before coming in. Not a tell all, but it is telling.

I can't speak from experience using an agent, but I don't recommend using an agent. A lease fee is a pittance to a good agent and the incentive to do a good job for you on the chance they might get to make 500 to 800 bucks 6 months (heavens forbid) to two years from now is not much of a motivator. It might be extra work to screen the tenants yourself, but I don't think its worth paying 75 to 100 percent first month's rent, especially if you have a mortgage. I learned that renters are very fickle and it does not pay to meet people when they want to meet. Schedule them all for the same day and you'll be luck if 1/4 show up. And if multiple people show up, it creates a sense of competition. I schedule once or twice a week. Sometimes more if I am going by the property to do a repair or just check up on it anyways. I've had people give me grief about not wanting to meet on Sunday (church I suppose), and if I could meet them on a "business" day. Well, I work a day job on "business" days and I bet if the hot water heater broke on Sunday they wouldn't be cool if I called Sabbath and said they would have to wait. Needless to say, I was not disappointed when these potentially high need tenants did not schedule a showing.

You can save a lot of time by telling them your acceptance criteria upfront. They usually won't admit they don't cut the mustard, but they also won't call back to schedule an appointment. Developing good phone screening really maximizes time efficiency.

I actually enjoy the process of showing and leasing. I like to know what is going on. I think I am the best judge of who should live in my property.

Hi Michael,

Many places only require 2.5 - 3.5x the rent in gross monthly income, but I can tell you from experience that you're taking a risk.  When I required 3x, about half of my tenants became problems.  When I required 4x, only about 1 in 8 were a problem.  I also found that the 4x tenants were more likely to want to keep a good record and have a good relationship with me.  It's a lot easier to have rentals when the people who pay you want you to be happy with them.

Regarding extended vacancies, I buy rental properties in neighborhoods that seem like strong rental markets, i.e. not too pricey but not so cheap the neighborhood is scary.  Due to the large pool of potential renters, I don't have any problem with "extended" vacancies, although it does take two or three weeks longer to find an acceptable tenant.  If you only require 3x, the property may rent quickly, but there's a 50-50 chance you'll have to get rid of a bad tenant and repair a heavily worn property.  If you wait the extra two or three weeks, you'll have a great tenant who may stay for several years.

Sure Michael, I'd be happy to meet up with one of these days to discuss.  It's a little difficult for me to make the meetings due to my schedule, but we can arrange a time and place.

If anyone else has an interest in discussing landlording, getting financing for rentals, selling rentals, etc., please reply to this posting or send me an e-mail at comanche3000 at live.com.

Since this has become such a big issue, a referral program has been implemented which should help solve a lot of the problems you are facing with "credit-challenged" tenants.