As a landlord, would you rent to tenants with poor credit? Especially in light of the current changes the real estate market is undergoing. I SAY ABSOLUTELY!* A tenant with a foreclosure or bankruptcy?
What is the reason for the bankruptcy or the foreclosure? Did they get caught up in the sub prime mortgage mess and their taxes, insurance and interest rate adjusted up? I know many people that were comfortably paying their mortgage payments, until their interest rate adjusted and the payment went through the roof.
I have no problem with renting to tenants that have certain credit blemishes. The right ones make good long term tenants.
What was their previous payment history on their last rental? How long where they there?
How long have they been at their job? There are many good, hard working people that go to work everyday, but they just don't earn enough money to cover all of their expenses, each month. Or some people just have poor spending habits. Often times they are unable to make their credit card payments. I am indifferent to that.
The good tenants understand they must pay their rent every month to keep a roof over their heads. Many of them make great long term tenants. I have had tenants with me for over 8 years that pay their rent every single month. They came to me with credit problems and they still have credit problems.
Many tenants with poor credit, with a history of poor credit make excellent long term renters. Often times they are unable to move, as they cannot save the move in money to go somewhere else. Or, they are unable to move because other landlords will not consider them because of their poor credit.
In 13 years I have rented to 4 tenants with perfect credit...not a single blemish. Every one of those tenants broke their lease within 8 to 10 months, to buy a house or to build a house. My rental was just a stepping stone for them.
Vacancies can quickly deteriorate a landlord's cash flow. I don't want to tenants that are going to leave in 8-12 months. It's wear on and tear on the house, moving in and out, and it's time and money lost looking for another tenant.
I typically will not consider an applicant that has been evicted or has a repossession on a vehicle. In many instances, I have seen where once evicted, it becomes a habit. And, if a tenant loses their vehicle because they can't make the payments, how are they going to get to work, to make money, so they can pay me the rent, so I can pay the mortgage? It's a recipe for disaster!
Over the past year I have rented to half a dozen people that were going into foreclosure due to interest rate adjustments. So far, they have all paid their rent on time, and I look forward to a happy future with them.
But be aware, renting your primary residence is different than placing a tenant in a house that you have never lived in and have specifically purchased to use as a rental. I have never gotten a house back from a tenant in better condition than I gave it to them in. And in 2001, when I moved to the house I'm living in today, I chose to sell my previous home, rather than turn it into a rental. The rent would have been too high, the house was too big to be a good rental, taxes and insurance were too high, and I had equity that I wanted to move to my new property.
In considering tenants with blemished credit, do your homework and be very careful. If you pick the wrong tenant, you will be faced with filing an eviction.
*Please always remember, every tenant's situation should be looked at on a case by case basis. Everyone is different. All of the pieces of the puzzle must fit together, to make the "right" tenant, that will care for your property and pay their rent on time.
This article is authored by
Sandy Shores, Brevard County Real Estate
Brevard County Real Estate Investing
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