Hands On Real Estate Investing

We have a 4 bedroom 3.5 bathroom townhouse for rent. We received an inquiry from a 47 year old male schoolteacher with a 12 year old daughter. His initials are KLJ. A divorce damaged KLJ’s credit, but his income is over $80k per year, and he has a very good landlord reference. Due to his salary and landlord reference, we approved KLJ in less than 24 hours! To our surprise, KLJ said he had to “think about it.” Huh? We thought he needed to give 30 days notice to his current landlord. He said he needed to shorten his commute, however our rent was $400 more than his current rent.  Maybe KLJ needed some time to determine if he really could handle the higher rent. We gave him 2 days to “think about it.” [We had 3 other applicants and we needed to make a decision soon.]

After 2 days, KLJ presented us with an offer. He asked that we reduce the rent by $100 per month and in return he would sign a 2 year lease, and assure us that he would maintain the property in good condition. A 2-year lease was very appealing to us, so we accepted KLJ’s offer. To lock him in, we asked KLJ to sign the lease that weekend, and pay the full security deposit. Once again, KLJ sent a counteroffer. He agreed to sign the lease that weekend, but he only wanted to pay half of the security deposit at the time of the lease signing, and pay the other half in 3 weeks. To add insult to injury, KLJ offered to pay next month’s rent on the 9th of the month, instead of the 1st of the month. Huh? It reminded us of another situation we encountered several months ago. In that case, the tenant had to borrow the security deposit from his father. His initials were DA. After DA moved in, he sent us an email on the 1st of the month saying that he would be 2 weeks late paying the rent! He had just moved in and he was already in a “late status?!” To learn what happened next, click here.

Meanwhile, back to KLJ … since KLJ was not able to pay the full security deposit at the time of the lease signing, and his next month’s rent was going to be 9 days late, we decided to cut bait. We rejected his offer, and decided to approve a rental application from a young couple with 4 children. Their credit was also poor, but they both work and have fairly decent landlord references. We asked them for security deposit, first month’s rent and last month’s rent, and they complied. What did we learn from this tenant screening experience?

3 Lessons Learned:

1. If a prospective tenant starts out paying the rent late, then they cannot afford the rent, period.
2. If a prospective tenant has trouble coming up with the security deposit, then they have no reserves or emergency funds or savings, which is a red flag.
3. If a prospective tenant negotiates up front, regarding the rent amount, security deposit, changes to the rental property, chances are that they will also negotiate throughout the tenancy.

To learn 8 Tips for Screening Prospective Tenants, click here.

 

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The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.