Landlords Beware for High-Risk Tenants

I'm going to reveal to you some of the warning signs of what we call "High Risk Tenants". Many experienced landlords have dealt with these types of tenants in the past and have developed a gut feeling or even a sixth sense in recognizing these types of tenants, and in most cases will do their best to avoid them in the screening process.

You MUST avoid breaking the law here! Some of these tenants are in what is called a protected class. You cannot discriminate against them or the class they fall in. You must find another reason for rejecting them.

Ok, so you've checked their credit, their references, and all looks good. They seem like nice people, but something is telling you that there is a problem. You just can't put your finger on what it is yet. Usually it is something that landlords have not thought of as a problem. So, here are some to be on the lookout for.

Recent Change In Marital Status

This is one of those protected classes indicated above. As a landlord, you cannot discriminate against or because of marital status.

You may however, discriminate based on damage the tenant or their guest do in and to the property. One of the most volatile situations is when a husband and wife have split up and one of them wants to rent a home you own.

A couple of scenarios come to mind and neither one of them is good.

1. Let's say you rent to one of them and let's say it's the wife. She is there for three to four months and the couple resolves their differences and decides to move back in together. Good for them, but bad for you the landlord. This means you now have a vacancy. Every vacancy will cost you a month's rent.

2. The stalker scenario. He/she may be coming over drunk, making a lot of noise, kicking in doors, etc. You get the idea. The police are called to the home, the neighbors are upset, and soon you're getting calls from police and angry neighbors at all hours. None of this is desirable. You'll probably have to evict the tenant and try to collect for the damages over and above the security deposits.

Some state laws even provide that a woman who is in fear of her ex-husband or boyfriend can move without notice with no penalty.

We always require a one year lease on all properties we rent. This way in the first scenario where the couple get back together, you can at least get paid the monthly rent until you find another renter.

The second scenario is a bit tougher. Chances are that this is not the first dwelling the "wife" in this case has rented since the separation or divorce.

So, make sure you always check past landlords, this may provide you information apart from just "Marital Status" that will alert you to some potential or a precedence of volatile behavior.

As a responsible landlord, you should also do a criminal background check in these cases. You may not find any problems; then again you may find that one spouse has been arrested for domestic violence or something similar that may tip you off to potential problems down the road.

You may have to rely on amount of income, credit history, or some other criterion that is clearly spelled out on the sheet that you hand to "ALL" applicants.

The ALL part of this is very important, If you're not providing the same information, and the same criteria to ALL Applicants then you may get to talk to the Fair Housing investigators.

Tenants That Never Lived Together Before

This is a situation where two or more persons want to be roommates, but have never lived together. They have partied, and or worked together, but never lived together.

College students are prime candidates here. This is almost always a bad situation for the landlord. But you can deal with this one a little easier than the first one we discussed.

You've got less likelihood of discrimination. What you want to do in this situation is require that "ALL" of the applicants meet your qualifications for renting your property. If one of them cannot meet the requirements, then you reject the whole lot.

If it is two recently separated people then go back to the first one on marital status.

The problems that may, or should I say, WILL in 95% of the cases arise are this:

The people that partied or worked together had a blast that way, but one of them is really a slob or they have a girl friend or boy friend that the others can't stand. They want their music louder than the others like it. So on and so on... OR... they let someone move in or move out without your knowledge.

You, the landlord, go to the door one day or call and you don't know the person and they don't know you. Rent has still been coming in, but the occupants are no longer the ones that signed the lease.

This is covered in our lease addendum and should be in yours. "No one except the persons who signed on the lease agreement can reside or live on the property." The problem for the landlord is, they are now living there and you may have accepted rent from the un-rented-to party.

In some states that can present a real problem in getting them out. If you have knowingly accepted rent from a tenant, you have automatically accepted him or her as a tenant. Then the question becomes, whether you knowingly accepted rent.

The best defense you can mount is not renting to them in the first place.

Recent Job Changes

If you get a rental application with several job changes, especially if they are within the past one to two years, you may have a problem on your hands.

Usually people who are moving from one job to the next in short time frames are unstable in their jobs. They are probably just as unstable in their living arrangements and most other parts of their lives as well.

Frequent job changes, equates to frequent residence changes. Usually because it takes a little time to find the next job, thus they can't pay rent and must move or get evicted. They probably won't be able to remember all of their addresses on the application.

That is why it is important when you check the tenant's references that you verify length of residence with the previous landlord. In fact the previous landlord may be more willing to give this information to you than say, "was he or she a good tenant?"

The Self-Employed Applicant

Self employed applicants can cause you problems. In fact in some circles, self employed means drug dealer or with today's immigration issues it could mean people smuggler.

These people may call themselves "Wholesales" or "Suppliers", even "Manufacture Representatives".

In any case, their income is usually always in a state of flux. They rely on their clients or customers to pay them for their income. If they don't get paid, guess who else doesn't get paid rent.

Here is what we do to check them out.

We make them provide us with a copy of their Tax Return statement, and their P & L Statement (Profit & Loss) that they provided the IRS for their taxes. Look at the Adjusted Gross Income. Not just the taxable income.

This will give you a more accurate look at what they really "Take Home" as pay. You're a landlord, you know how that works. Sometimes, things that are not 100% business expenses get written off.

Confirm that they do in fact work. Ask to see company business cards, and letterheads.

(These should be readily available. Most business people keep business cards on them to hand out at a moment's notice.)

Special Note: With today's technologies it is pretty easy to fabricate these types of documents, so dig deeper.

Look in business directories to see if they are listed. If not, ask them why? If they work from home, ask them why they are uprooting both their home and business. That's a monumental task as you may know.

You must do your due diligence here. When they answer your questions, write it down and then verify the answer. If they are leaving their current residence under unfavorable conditions, they may have already worked up a good story for the next landlord.

In conclusion, not all of the people in these categories are going to be bad tenants. More often than not though, they are. Just do your due diligence and really check things out. You will save yourself a lot of money and headaches when you do.