Posted by: docktohome | October 31, 2010

Taking a Different Approach

My dad and I purchased our first investment property in January of this year.  The property is a 3/2 single family home in the Phoenix area in a middle income neighborhood.  Initially I had plans of living there but after about six months I decided to move back to Southern California.  Before making the move I put the house up for rent on craigslist and a rental website.  The rent was a fair price for the area at $1150/month.

As I mentioned this was our first experience owning and renting a property, and it was a learning experience.  I found a simple rental application online and planned on not charging an application fee.  Well let’s just say two applicants and fifty dollars later we realized that we would be charging an application fee.  Since my experience was limited to what I had read in books I wasn’t exactly sure how to go about evaluating the applicants.  Initially my dad and I had thought we could judge the quality of a tenant by their credit report, another false assumption.

With foreclosure and unemployment still looming over the heads of many individuals, homeowners are leaving the life of ownership for a cheaper or lower responsibility rental.  We didn’t think about this when we began our search for our first tenants.  It wasn’t until I had spoken with and looked over a number of credit reports that I realized 90% of my applicants had either enormous amounts of credit card debt, were in some stage of short sale, had declared bankruptcy, or all of the above.

This made me realize that today’s circumstances call for a different approach to tenant screening.  I’m sure other rental property owners have realized this too and adjusted their strategy for finding “qualified” tenants.  After readjusting my own ideas, the following helped me to find the most eligible renters and my current tenant:

  • Was the applicant upfront about their situation
  • How long ago was the short sale/bankruptcy
  • Were they consistent on their bills until specified period of hardship
  • What kind of debt did they have i.e. Luxury vs. Necessity
  • Are they willing to pay more up front to secure the rental
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