Nightmare renting to people in a low income area,

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January 8, 2013 at 7:20 AM #20435

ninaprincess
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My friend bought a house in Riverside as an investment property. Within 18 months, there were already three tenants. The first tenant stopped paying rent after the second month citing insect infestation that caused her to be sick and had to be evicted. The second tenant broke the lease saying that her ex-boyfriend found her living there and if she doesn’t move he would kill her. She left a mountain of trash in the house and two bathrooms that probably weren’t cleaned for the entire 6 months she lived there. The third tenant a single father with three kids had housing assistance from the gov’t but still missing his $300 monthly payment the last three months and on the verge of losing his housing assistance. He is leaving this month. My friend is looking for new tenant and among the 4 applicants, no one has credit above 500 with numerous collections and credit card debts unpaid. She showed me the credit reports and oh boy, people were living large. New cars, Macy, Victoria Secrets bills in the thousand of dollars.. Their family situations are also so complicated with one girl under 30 yr old that has three kids by three different fathers and now has a new boyfriend that has two kids of his own. Why are people living so irresponsibly?

Tired of the problems, my friend is looking to sell the house and eventhough the price will be higher, the transaction and repair costs would guarantee that she will lose at least $20k. I am so glad I didn’t buy an investment property in Riverside b/c we were looking togetther.

January 8, 2013 at 8:04 AM #757321

Ren
Participant

Riverside isn’t all bad – it depends on where you buy. If the focus was on super cheap properties (i.e., bad areas), you would get tenants who have no choice but to live at that level.

Bad areas can mean good cash flow but with many more headaches. For better cash flow with less headaches, you need to look out of state.

January 8, 2013 at 8:52 AM #757322

XBoxBoy
Participant

Thanks for the reminder of why I’ve never wanted to be a landlord…

XBoxBoy

January 8, 2013 at 9:09 AM #757323

Coronita
Participant

I guess that’s why I’m chicken and only consider areas where a good portion of the tenats are high(er) income, higher credit score people.

Had one issue with a really crappy tenant in bay area. Person trashed the place. Since then, I vowed never to rent to someone with questionable credit. Never had a a problem since.

A persistently shot credit to me is a reflection of the person’s responsibility or lack there of.

I was helping screening tenants for some folks in L.A. and you can’t believe some of the credit horror stories I’ve seen. The person was a utility linesman and making (with overtime) $120k roughly and could have easily afforded rent…Person’s credit was totally shot..Had over $125k in credit card debt spread between Macy’s and Visa, and that’s after the other 3 credit card accounts that were already settled and paid off as part of a credit pay off agreement…

Absolutely ridiculous..Living proof that it’s not that folks have a problem with not making enough…Like our government, folks have a major spending problem…

But that’s ok..Because the government is expected to take care of them 🙁

January 8, 2013 at 9:10 AM #757324

an
Participant

Bad areas isn’t all bad. You just have to be much more selective in who you rent to. I know someone who have many SFR rental in bad part of Fresno. Yet, their tenants always pay on time (some hand deliver the rent checks each month no less) and one of their rental have a tenant that has been in their for over 10 years.

January 8, 2013 at 9:20 AM #757325

Coronita
Participant

[quote=AN]Bad areas isn’t all bad. You just have to be much more selective in who you rent to. I know someone who have many SFR rental in bad part of Fresno. Yet, their tenants always pay on time (some hand deliver the rent checks each month no less) and one of their rental have a tenant that has been in their for over 10 years.[/quote]

True, but I guess I’m risk adverse and for me I don’t like dealing with the headache. One time in my life was already enough for me.

But to be clear. To me there is a huge difference between someone that doesn’t make that much money but nevertheless responsible, versus someone who makes decent money but is out of control.

“Salaried Poor” doesn’t equate to irresponsiblity…. A “persistent” shot credit, however, to me does..And for all I care the person could be pulling in high six figures……
Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.

January 8, 2013 at 9:33 AM #757326

an
Participant

[quote=flu]True, but I guess I’m risk adverse and for me I don’t like dealing with the headache. One time in my life was already enough for me.

But to be clear. To me there is a huge difference between someone that doesn’t make that much money but nevertheless responsible, versus someone who makes decent money but is out of control.

“Salaried Poor” doesn’t equate to irresponsiblity…. A “persistent” shot credit, however, to me does..And for all I care the person could be pulling in high six figures……
Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.[/quote]Agree on all those points. I was just trying to say that just because it’s a low end area doesn’t mean all the tenants are bad. In some way, you might find the best tenants there because they’re you’re typical life long renter. Compare to white colar tenant who are more likely to move w/in a few years. You just have to weed through all the bad tenants that low end area attracts.

January 8, 2013 at 10:27 AM #757328

carlsbadworker
Participant

[quote=flu]Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.[/quote]

On the other hand, if people have good credit and good income, they will probably be qualified for loans. Why would they rent from you since rent is higher than PITI in many cases?

January 8, 2013 at 10:33 AM #757329

SK in CV
Participant

[quote=carlsbadworker][quote=flu]Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.[/quote]

On the other hand, if people have good credit and good income, they will probably be qualified for loans. Why would they rent from you since rent is higher than PITI in many cases?[/quote]

Because it’s not so in all cases?

January 8, 2013 at 10:42 AM #757330

Coronita
Participant

[quote=SK in CV][quote=carlsbadworker][quote=flu]Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.[/quote]

On the other hand, if people have good credit and good income, they will probably be qualified for loans. Why would they rent from you since rent is higher than PITI in many cases?[/quote]

Because it’s not so in all cases?[/quote]

A lot of reasons.

1. They might not have worked long enough to accumulated savings

2. They might be waiting on a green card before they make a commitment

3. They might not have found what they are looking for yet in terms of housing

4. They might be here on loan from a company

5. They might want their kids to go to a good school district without having to pay the premium for the home purchase

6. They might feel that buying a home is a terrible investment and a permanent-renter…

7. They might feel like they can still get 50% off real estate and decide to keep sitting it out…

lots of reasons.

January 8, 2013 at 10:44 AM #757331

an
Participant

[quote=flu][quote=SK in CV][quote=carlsbadworker][quote=flu]Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.[/quote]

On the other hand, if people have good credit and good income, they will probably be qualified for loans. Why would they rent from you since rent is higher than PITI in many cases?[/quote]

Because it’s not so in all cases?[/quote]

A lot of reasons.

1. They might not have worked long enough to accumulated savings

2. They might be waiting on a green card before they make a commitment

3. They might not have found what they are looking for yet in terms of housing

4. They might be here on loan from a company

5. They might want their kids to go to a good school district without having to pay the premium for the home purchase

6. They might feel that buying a home is a terrible investment and a permanent-renter…

7. They might feel like they can still get 50% off real estate and decide to keep sitting it out…

lots of reasons.[/quote]
People who fit these reasons usually don’t stay too long (2-3 years max). Which mean, you’ll be constantly looking for new tenants. They also might be more demanding on the service side. These people aren’t likely to stay at your place for 10+ years.

January 8, 2013 at 11:39 AM #757334

Ren
Participant

[quote=flu]A lot of reasons.

1. They might not have worked long enough to accumulated savings

2. They might be waiting on a green card before they make a commitment

3. They might not have found what they are looking for yet in terms of housing

4. They might be here on loan from a company

5. They might want their kids to go to a good school district without having to pay the premium for the home purchase

6. They might feel that buying a home is a terrible investment and a permanent-renter…

7. They might feel like they can still get 50% off real estate and decide to keep sitting it out…

lots of reasons.[/quote]

8. Military.

I wouldn’t expect or even hope for a 10-year tenant – 3 years would make me happy as a landlord.

I tend to agree that there are good tenants to be found among the low income. If your rental is in good shape and priced below market, the responsible ones will choose yours over the other properties available.

January 8, 2013 at 11:40 AM #757333

Coronita
Participant

[quote=AN][quote=flu][quote=SK in CV][quote=carlsbadworker][quote=flu]Seen plenty of people who make a hell of a lot of money, but have shot credit, because they have a spending problem.[/quote]

On the other hand, if people have good credit and good income, they will probably be qualified for loans. Why would they rent from you since rent is higher than PITI in many cases?[/quote]

Because it’s not so in all cases?[/quote]

A lot of reasons.

1. They might not have worked long enough to accumulated savings

2. They might be waiting on a green card before they make a commitment

3. They might not have found what they are looking for yet in terms of housing

4. They might be here on loan from a company

5. They might want their kids to go to a good school district without having to pay the premium for the home purchase

6. They might feel that buying a home is a terrible investment and a permanent-renter…

7. They might feel like they can still get 50% off real estate and decide to keep sitting it out…

lots of reasons.[/quote]
People who fit these reasons usually don’t stay too long (2-3 years max). Which mean, you’ll be constantly looking for new tenants. They also might be more demanding on the service side. These people aren’t likely to stay at your place for 10+ years.[/quote]

Tenant in bay area stayed for about 5-6 years. New one will probably state for the same time. It’s not that big a deal, I guess particular since in bay area housing is always in demand. I guess because statistically, tenant pool in bay area tend to be in the tech industry. And a majority of tech workers are reasonably well paid with longer periods of commitment to remain employed for other reasons.

Here, I guess it depends on where. I don’t see a problem with rentals near tech centers, and there is always a flux of higher paid, reasonably responsible workers that need “temporary housing” 2,3,4,5 years.
Also, if rent is slightly below market, it helps…a lot..

In L.A., relatives used a leasing agent that exclusively helped find housing for employees from multinational companies who had employees on loan to the U.S….Employees typically stayed for 5-6 year rotations, and the rent was paid by the company (which was an added bonus. since it guaranteed rent was always paid in full and reasonable rent increases was always accepted. and in the unlikely event the employee damaged the place, you knew there was someone that could afford to pay for it…..)

January 8, 2013 at 11:52 AM #757335

EconProf
Participant

Here’s a tip: look thoroughly at their credit report and see how they spend their money. Beware of big debts for frivolous items, also any writoffs, municipal courts, debt collection agencies, etc.

January 8, 2013 at 12:28 PM #757337

SD Realtor
Participant

Before reading these tips, understand you cannot discriminate against any type of tenants. Here are some things I do….

– Don’t rent to students
– Rent only to single people or families. Maybe a committed couple.
– Rent only to people who have steady jobs. Part time work is not steady.
– No roomates at all.
– Any new tenants in the home not on the lease is an instant default. Time to evict.

I have had plenty of tenants with problems on their credit report. Even a few who had their home foreclosed on or short sold. More important is verification of their income and cash flow. I verify that the income they claim on the rental application can be traced to deposits in their checking account and that liabilities on the application match large withdrawals out of the checking account. I ask them to explain discrepencies.

While checking on previous rental history is important, never deem it to be reliable.

Low income areas are not a problem unless you as the landlord lack the will to strictly enforce the lease. This was the original posters (friends) problem.
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