How to Avoid Bad Tenants

Avoid Bad TenantsWhen you have places for rent, inevitably you will find tenants to avoid.  You need to understand how to avoid bad tenants.  As a matter of fact, if you screen tenants with any sort of consistent basis at all, about 95% of the inquiries will be from poor quality tenants.  There is even a scientific basis to these numbers.

With about 30% of tenants being ones to avoid, it is better to exclude a few good ones, rather than take a chance.  One bad tenant can kill years of rental profits.  Here is a case of a tenant I recently avoided.

I have been advertising an upcoming vacancy for about a week.  The place is paid for through October 31st, so I have about eight weeks to get it filled.  Good tenants look six to eight weeks out, so I am right on schedule.  It is a solid 3BR, 2BA apartment, with a garage and washer and dryer.  The existing tenant keeps the place in good repair and it is clean.  It is one of the easiest places I have to rent.

An abbreviated version of my standard response is this.  “Thank you for inquiring.  I will be looking for tenants with a 625+ credit score, and a solid household income of at least ~$45,000 per year.  If you are marginal on both of these items, I will generally decline you.  Your criminal and rental history must be clean.  If you have had a foreclosure, I can work with you a bit on this.

I also have some particulars about the pet policy, and lots of details about the apartment.

Most of my ad responses are via email.  Typically, there is a button on the page form on the places I advertise where the prospect can just fill in a few fields, push a button.  I get an almost immediate email back.  In this case, the tenant responded from a ad.

She inquires “Do u accept the housing choice voucher?”

I do not know at this time what type of housing voucher she is referring to.  But I do know I do not take section 8, or will not tolerate any lease changes that some HUD programs mandate.  Nor do I want to be short-changed rent due to the tenant causing damage that they cannot afford to pay.

Knowing that a program is just a program, and credit score is a terrific indicator of personal behavior, I needed to know more.

My reply was, “What is your credit score?”

I really did not know what to expect, but I assume it was lower.  Working age tenants on social programs that pay rent have a tendency to be high-risk.  It could have been 800+, as credit score is a perfect blind indicator.  It does not take into account race, income, public assistance status, etc.  It should pass any Fair Housing issues, and can be objectively compared against any criteria, by anyone, and come up with the same answer.

Her response.  “Maybe 500. I have a clean background, and perfect rental history. I’m employed with 2 children ages 17 & 18. My son is a senior in hs and my daughter is a freshman at Century College also employed.”

She adds “I do owe $2,000 in student loans which affects my credit also”

Now, I know that having student loans does not negatively impact your credit score.  Often, I have seen students with deferred student loans that have better credit because all the deferred student loan accounts are “as agreed upon”.  The loan company said they do not  have to pay anything (yet), so the student doesn’t.  A great way to get a good credit score.

When you do not pay the student loans, it impacts your credit score.  When a tenant does not pay a loan that never goes away, it is a problem.  Even in bankruptcy, the student loan stays.  The government will eventually garnish your social security if it is not paid.  You cannot escape student loan debt.  Yet, the prospect did not pay it.

Would they pay my rent if they got behind, if all I can get is a judgment?

I also know that only 2% of the population has a credit score less than 500.  That means, 98% of the population has higher.  This tenant is the bottom of the barrel in terms of credit score.  A low credit score like this tells me that she lies and cheats all her other creditors, and will lie and cheat me.

No thank you.

I replied back, “500 is a bit low.  Good luck in your search!”

This person might be the greatest person in the world, but I am unwilling to bet my retirement on it.  Nor am I willing to subsidize her lifestyle any more than the government already subsidizes it.  If she moves in and ruins the place, I have to pay.  If she skips her rent portion, I lose.  If she causes headaches, I get more stress that I do not need.  If she causes my other tenants to leave, I lose.  I want to post solutions on this blog, not problems.

She replies “Thanks creep”

What an attitude!  Imagine if I needed to evict.  Or inquire about a pet that was not allowed.  Or needed to have her pay for damages mid-lease.  Or show the apartment after she (or I) gave notice to move.  How would she react to a neighbor, in my multifamily housing situation, when there was an issue?  Would her adult children, or friends or relatives, have any better attitudes?

No thank you.   I can likely make more money and have less headaches being vacant.

What do you think of this type of attitude?  Was I too ‘mean’?  Would you have ever responded with that type of response?


33 Replies to “How to Avoid Bad Tenants”

  1. Haha, Love it Eric. I always enjoy your tips and stories, because we aren’t landlords yet. Rest assured that I’ll be emailing you questions next year, when our renting adventure will likely begin. Hope you’re having a great weekend!

    1. Thank you for reading!

      It’s always great to know I can help an up and coming landlord. It’s not too hard to avoid a bad tenant. While it is not a 100% sure thing, avoiding the very worst tenants is pretty easy.

  2. I will say we have had very good luck at using a credit score as a primary indicator and then listening to someones story.

    A few years ago we had a couple who had terrible credit, but if you looked at their payment history, it was perfect until the financial crisis hit. The husband lost his job, and they had a couple of rental properties that ended up in foreclosure.

    They had moved from Chicago to Dallas, where they had been living with one of their parents, they were now employed with a very high verifiable income and their payment history per their credit report had gotten a lot better. They paid 2 or three months in advance and gave us a large damage deposit.

    They ended up being great tenants. The important thing imo was they showed a history of decent credit before and after a tough time.

    The result was everything was paid on time, and the place itself was very well maintained.

    1. Thank you for reading!

      I agree. Someone that used to have great credit is only temporarily down, and will come back. They make great tenants. It’s the ones who have never figured it out that you almost always have issues with.

  3. One last comment, we would also look at someone with a 0 credit score if they had a good history of employment, prior rentals etc. If someone has no loans and a job they should be able to pay.

    We also have taken on a couple newly graduated from college where the husband (an engineering grad) was about to start his first job, and the wife’s income was fairly meager. Ie little income history) although they had stellar credit/background checks.

    My point is I think credit scores are a huge piece, but we also are willing to look into the story when we are presented a less than perfect credit history/income history.

    1. Someone with no credit might be good, if they have NO blemishes on it, and have a decent income. Even a parking ticket will bounce them out in my application process.

      Here is a post about no credit scores.

      Here is a sample quote
      When an individual does not have a credit score, we do not know if in a few months it will be 400, or 700. But we do know that having a good credit score is a choice people can make. By applying for a secured Visa card, available at most banks and many places online, a person can have a 700+ credit score in less than six months. There is a 99%+ approval rate for these cards. So, a solid credit score is easy to be had. Why do people not want to get a good score, or are unable to get one?

  4. Eric,

    My first reaction was that it is odd that you after all the prospective tenants you have dealt with, you find this personally offensive or noteworthy, but then I got to your point about attitudes and thought about it more.

    I know there are swindlers with great attitudes, but when people say what the woman above said, instead of, “I understand your decision and have made some mistakes in the past. I am doing X, Y, and Z to improve my credit, and look forward to applying to one of your properties in a few years, when my credit is much better,” that tells a lot about them.

    Nothing like seeing how a person reacts to a negative decision outside their control that costs them almost no time or money to get a sense of their maturity or drama quotient. If someone is throwing a tantrum or calling another person names because they can’t get what they want instead of owning up to their actions and being polite, they have long since lost, and they know it.

    I am a tenant, not a landlord, but was taught to show RESPECT from an early age. Showing respect and paying my rent on time and with a bottle of wine now and then is more than enough to keep my landlord happy. As a result I live in a very well maintained unit (not upscale, but well maintained, which I value a lot more than stainless steel appliances) that is perhaps priced a little below market, yet the reduced headaches are presumably well worth it for my landlord… It is what you constantly preach in your blog.

    1. Thank you for reading!

      A prospective tenants attitude prior to, and during a showing, should be the best you can expect. It is like the courtship, before the marriage. They (and the landlord), should be at their best behavior. If you cannot get along at that point, it will go downhill from there.

      I did not cause the tenants credit score to be in the lower 2% of the population. I did not take out her student loans. I did not spend her money on things, other then student loan payments. Yet, she was mad at me.

      A tenant with an entitlement mentality is one of the worst tenants you can have. They will expect you to expect, late rents, unclean apartments when they are leaving, lease violations and the like. I would like to say I dodged a bullet in this one, yet it was just proper screening. Any landlord can do it. I will let a less-experienced landlord take care of this one.

  5. Wow, that’s quite an attitude. You certainly weren’t a creep in your interactions with her. Sounds like she’s gotten the attitude that she’s owed something and when someone pushes back at that notion, she gets offended. I’ve used your screening email already on my properties and it’s been great. I probably sent it out to 30 people and got maybe 3 responses that they’d still like to see my property. The person we rent to has to jump through our hoops, right? We don’t jump through theirs.

    1. Thank you for reading and the compliments!

      It’s always a good idea to pre-screen tenants. There is no sense in wasting time with people that do not qualify,. Especially if you are showing a unit with a current tenant. You do not want to trudge riff-raff through your tenants home (unless they are riff-raff too).

      I can only imagine if I had to discuss a late rent payment with that person. Likely, she would not even tell me rent was going to be late, and then have a lot of excuses. And it would somehow be my fault…

  6. You were definitely not too mean. And I 100% agree with you on screening out tenants with an entitlement mentality. My boyfriend moved in with me a little over a year ago and has been renting his property out. He was/is a first-time landlord (I’ve been landlording since 2003), and it was a real eye-opener for him to screen applicants.

    The entitlement mentality was readily apparent with unqualified tenants. It was always the people with insufficient income who made all sorts of unreasonable demands for things to be replaced, before even being accepted. They should have been shopping for reasonably priced apartments instead of applying for a SFR for $2,350 per month.

    The other big trend was having people who blatantly lied about the reason for their poor credit score. They assume landlords will look at the score and accept their explanation for why it’s bad, rather than looking at the detail. I always carefully scrutinize the detail to look for trends. One couple said that their credit was bad because they had to move from their home (in Washington) to take care of their grandkids (in California), and the WA house was underwater in equity, so they were forced to give it back to the bank. That same couple said they had a large amount of credit card debt, but rather than filing for bankruptcy and starting over, they wanted to “honor their obligations” and work on paying it all back. Riiiight. The credit report revealed that they stopped making mortgage payments 18 months before they moved out, and that their credit card balances were increasing, not decreasing. Nope, nope, nope. I guarantee you if we had rented to them, they would have filed for BK within 6 months and we would have had a non-paying renter who we couldn’t evict until the bankruptcy was completed.

    1. Thank you for reading and great comment!

      It is amazing the reasons people give for bad credit. The real reason they can find by looking in the mirror. I just use the score, and not the detail. I always figure that FICO has a better handle on the details than I do. If people cared about their bad credit, they would do things to get it fixed.

      1. You’re absolutely right that the problem is the tenant. I respect your decision to go based on the score only, and you’re right that it would tend to screen out most of the details, anyway. Part of the reason I like examining the detail, though, is that it’s one more way for me to tell if the tenant is a liar. If they have a borderline credit score and they say it’s because of a medical issue, you can generally see that in about one minute by looking at the detail. But if they’re borderline on the credit score and you can tell that there’s no medical bills unpaid, but they just opened two new credit cards and have maxed them out, it’s an easier “no” decision. We all have our things. 🙂

        1. Medical issues are definitely a problem in a credit score. I do tend to look past some of those too. Using the exact score, 100% of the time, is the best way to comply with Fair Housing laws.

          Mostly what I see are small amounts of medical non-payments, less than $500, which go into collections. That tells me the person did not pay the deductible, or co-pays. While most bills are predictable, medical bills are not. The deductible is predictable though…

          I do hear that FICO is coming up with a score that somehow excluded medical collections. That might be a better score to use if it ever becomes a score that is viable.

  7. I completely agree with your post and philosophy. You cannot be careful enough relative to the screening process because once you turn over the keys, the tenant can make life a nightmare for the landlord if the wrong decision is made. Beginning landlords sometimes take a risky tenant just to fill a unit. Experienced landlords know that it is best to not take unnecessary chances. What service do you recommend for pulling credit reports?

    1. Thank you for reading!

      I see it all the time. I screen tenants for our complex, for other landlords. They constantly argue that “this is a great tenant, and wants to move in right away”. I would love to approve some of them, just to prove a point. The problem is, their misery spills onto my property…

        1. I only look at the screening reports, and approve or reject as part of my responsibilities in the HOA. I do not charge anything, and I do not market or show the properties. I have actually managed properties for some, and I charged 50% of one month’s rent, plus $75 a month on a ~$1,000 a month rent.

  8. Oh boy, she’s something else. It’s pretty cool that you can just weeds out bad tenants with just a few set of questions. I don’t mind bad spellings, as people get a bit loosely when they text, but there is limitation. Texting and emailing, people have that “delay gratification” effects, so they all should take a moment to correct themselves, but this person has no filter. I’m glad you avoid any future headache.

    1. Thank you for reading!

      I was not totally surprised by the entitlement mentality, but I was surprised that she was so rude (well not really, she was a low quality tenant…). I get all kinds that inquire, and I know only ~5% of the inquires are from solid tenants.

  9. With our property we 50 rental inquiries and only showed it ten times. Of the ten people we showed it to, 6 applied and only one qualified in terms of credit and income when we actually did the background check. She’s been a marginal tenant , but at least she pays (though recently its been late). We still need to decide if we want to re-up the lease or not.

    Its tough to decide, the devil you know or the one you don’t. I have a lot to learn from you.

  10. I’m so thankful to have you sharing these great tips with us, so that we don’t get ourselves into trouble in the future. We have a family member as our tenant now, and expect him to be there for a long time, but these are such good tips for the future. I may even “borrow” your script if you don’t mind. 🙂 And no, you definitely weren’t too harsh. 500 is crazy low, and definitely reflects some big mistakes in the past. As you said, you can’t bet your retirement on that!

  11. Wow i just found your blog and must say there’s some good info here. I too am thinking of getting into real estate to build passive income some time next year. For now I help my parents who are older take care of their rental property. I too have come in contact with the same type of renters. The folks who lie right to your face about their credit issues and don’t even earn enough to rent the place. I totally agree screening potential renters is a great way to not waste your time and money.
    Again Great Site!

  12. There’s no magic test for a good tenant, and even the pros can end up with
    criminals and slobs. Or, for that matter, slobby criminals. But there are a few
    smart things a landlord can do, and reading this post is a smart thing :).
    Great read.

  13. I stumbled onto your blog through a google search for disposing of a mattress. I am a tenant and have been at my current address for over 2 years. When we first applied for the house, my credit score was bad and my then boyfriend (now husband) had a score of zero. I was upfront that I had a bad score because I had defaulted on a student loan several years ago but signed up for the payment plan to get my loan back to good standing and that I had zero credit cards. My husband never had a credit score because he’s only paid for things in cash, neither of us had ever been evicted. My score was ran and a bit lower than expected. Our landlord seemed concerned but also could tell we would be good tenants, we had a combined income of over $75k, zero debt besides my student loan and, oh, we offered to pay a year of rent up front.

    He accepted us (didn’t make us pay a year up front) we’ve never been late on our rent, and after actually figuring out how to get my credit back, we both have a score of 700. He’s a great landlord and even gives us a Christmas present every year! I am really glad he took a chance on us.

  14. My mom owned a house with 2 apartments. She had a knack for dealing with prospective and current tenants. Never really had a problem and tenants stayed for years. The only problem ever that I can recall was a woman who moved her boyfriend in without permission. Once it was clear he had moved in, my dad went and told him he had to leave or the rent goes up significantly. He left the next day.

    My parents gave me this advice:

    Always meet the tenant in person. Ask them questions about income, their credit, criminal history etc. And watch their body language. Its the best indicator. Also discreetly look at their dress and their car if possible. If they look dirty or messy then you will know what to expect. Also ask to talk to previous landlords. One tenant I rejected had cash to pay and worked. But they were told to leave as they were troublemakers and noisy. Rejected.

    Never accept voucher checks or any other government assistance. I don’t want freeloaders as tenants.

    Check credit scores too and anyone under 650 is an automatic rejection.

    Where I live I can legally disqualify anyone with a criminal record and I do.

    But again above all else. I’m not all dollars and cents. Talk to your prospective tenants and trust your gut feeling. I do and it hasn’t failed me yet.

    1. Thank you for reading!

      Great advice, but it is better to just have a solid tenant screening criteria upfront, so you can eliminate any personal bias that you may have. Letting in a tenant with a sob story is always a recipe for disaster. In some places, you cannot decline someone with government assistance. And some people on assistance are on it as a leg up when they are temporary down. Someone who is down on their luck for a short time, i.e. a foreclosure victim, with still have a decent credit score.

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