Renting to an Iffy Tenant
Hello all, As a first-time landlord, I sorely need the advice of some old hands. I have two prospective tenants who have poor credit (each below 600), lots of debt and what seems to be a tangled credit history. However, I’m considering them because they offered to pay the year’s rent in advance. How badly…
Hello all,
As a first-time landlord, I sorely need the advice of some old hands.
I have two prospective tenants who have poor credit (each below 600), lots of debt and what seems to be a tangled credit history. However, I’m considering them because they offered to pay the year’s rent in advance.
How badly could this possibly go wrong, if I have all the rent in hand? I’m admittedly pretty naive about all this, so what would you do?
Thanks in advance!
No offense, but being a homeowner and/or being a landlord does not automatically equate to a life of constant worry. Little wonder you’re finding it hard to be a landlord when you write you’re either worrying about being outfoxed or worrying about receiving rent from someone with demonstrated creditworthiness. If you’re not comfortable with a prospective tenant, don’t offer a lease.
25+ year landlord here. I’ve had prospective tenants offer a year up front to compensate for various objections I had to them – I never took it.
What are they doing to correct their problems? (And as mentioned above, what was the problem?) What happens after the year is up? Will they pay regularly? Maybe. Maybe not. It’s difficult enough making a judgment about prospective tenants without accepting a known negative – and a big one.
This is a business decision and as a small landlord I can’t easily absorb a problem tenant. Let the big landlords give them a chance. I’m looking for someone who is going to settle in long-term with minimal hassle.
Are the tenants able to comfortably able to make their monthly rent payments?
YOU SHOULD STILL DO A HOUSING COURT, again, HOUSING COURT CHECK.
What caused their credit to falter?
Poor credit usually means that people don’t follow through on their bills, everybody always starts off paying, it’s the ones that stop that’s the problem. I would take 8 mos up front and 4 months security – give yourself a buffer.
I’ve given bad-credit-history tenants chances in the past and knock wood, it hasn’t come back to bite me yet.
They were up front from the beginning. I didn’t have to find out for myself through the credit check.
What I do that I find just as important as a credit check is call references. Jobs, past landlords, roommates. I also do some detective work online to make sure they actually are employed, etc. I usually come up with something. Even if it’s just a Facebook profile….I want to know who I’m renting to.
Rent up front? Denton might have a point. Where did they get that money? Maybe they’re drug dealers. 😉
hi! is there an option to rent with regular monthly payments to a tenant with good credit? just wondering if the appeal of upfront cash (obviously very appealing) outweighs lousy credit. sub-600 is really bad, so they need a really good excuse. i mean, that is more than a couple of missed payments. especially since you note that you’re a first time landlord, why not spare yourself the potential (likely) headache? as others have noted, there are definitely valid and reasonable explanations for a drop in credit score, but sub-600 is more than just a couple of late credit card payments. look at their credit report, which will detail what caused the score to drop (i.e. their cards are all maxed, multiple accounts in delinquency, are all things that are probably factoring in to such a low score). also, see a bank statement, and an employment stub. honestly, if looking at all 3 of these things leaves you still ill at ease, then keep looking for a tenant. good luck!
Thanks, everyone.
Bailey: What kind of riders would you suggest? I am worried about being outfoxed somehow and have no experience here, so any specific advice would be much appreciated.
Vinca: No, I just got the report back, so need to have a discussion with them. I do have other interested applicants, but quite like the idea of having all the money upfront as budgeting won’t be a problem on my end and I’d avoid the bother of worrying about rent every month.
Being a landlord is tough!
Several thoughts: what factors make their credit history tangled? Have you had a very direct conversation with these two candidates to discover how they found themselves in current position? Can each provide a guarantor with a good credit history? I’d also ask that they agree to a home visit at their current rental. If you or a family member has ever had a serious illness or dealt with some other tragedy, it’s not hard to imagine how a person with formerly sterling credit could be transformed into a credit risk. What they tell you in reply to above should strongly influence your decision. Do you have other candidates who would pay on a monthly basis? Have you considered whether YOU can carefully handle your own budget if you receive all rent in advance? Is there a reason why you’d choose a tenant who will pay a year’s rent upfront over one who pays on a monthly basis?
When was the last time they had a late payment on their credit report? Was it 5,6,7 years ago? If they give you a good explanation and prepay one year it still comes down to your gut feeling. If they are still missing bills I would run far far away from those tenants.
Some are truly on the up an up and are just trying to clean up their credit in such a tough market BUT be very careful – think of the movie pacific heights. Before signing the lease make sure you dot all your i’s and cross all your t’s. Add riders to your lease to protect yourself. Do as much research on the tenants as possible and always keep good records.