Landlords Beware, (Warning Signs) for High Risk Renters

I am 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 an intuition or even a sixth sense to recognize these types of tenants and, in most cases, will go out of their way to avoid them in the selection 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 are in. You must find another reason to reject them.

Okay, so you’ve checked your credit, your references, and everything looks good. They seem like nice people, but something tells you there’s a problem. You just can’t point to what is yet. It is usually something that the owners have not considered a problem. So here are a few to keep an eye out for.

Recent change in marital status

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

However, you can discriminate based on the damages caused to the tenant or their guests in the property. One of the most volatile situations is when a husband and wife separate and one of them wants to rent a house on her property.

A couple of scenarios come to mind and none of them are good.

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

2. The stalker scenario. He/she may come in drunk, make a lot of noise, kick doors, etc. You get the idea. The police are called to the house, the neighbors are upset, and soon you are getting calls from the police and angry neighbors at all hours. None of this is desirable. You will probably have to evict the tenant and try to collect damages on top of the security deposits.

Some state laws even stipulate that a woman who is afraid of her ex-husband or boyfriend can move without notice and without penalty.

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

The second scenario is a bit more difficult. Most likely, this is not the first house that the “wife” in this case has rented since the separation or divorce.

So be sure to always check previous owners, this can provide you with information in addition to “Marital Status” that will alert you to some potential or precedent for volatile behavior.

As a responsible landlord, you should also run a criminal background check in these cases. You may not find any problems; on the other hand, you may find that one spouse has been arrested for domestic violence or something similar that may alert you to potential trouble down the road.

You may have to rely on the amount of income, credit history, or some other criteria that is clearly listed on the sheet you give to “ALL” applicants.

The EVERYONE part of this is very important. If you do not provide the same information and criteria to ALL applicants, then you can talk to the Fair Housing investigators.

Tenants who have never lived together before

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

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

You have the possibility of discrimination. What you want to do in this situation is require that “ALL” applicants meet your requirements to rent your property. If one of them cannot meet the requirements, then it rejects the whole lot.

If it’s two recently separated people, go back to the first about marital status.

The problems that can, or should say, WILL ARISE in 95% of cases are the following:

People who party or work together have a great time that way, but one of them is really lazy or has a girlfriend or boyfriend that the others can’t stand. They want their music to sound louder than others like it. And so on… Or… they let someone move in or out without their knowledge.

You, the owner, go to the door one day or knock and you don’t know the person and they don’t know you. The rent keeps coming in, but the occupants are no longer the ones who signed the lease.

This is covered in our lease addendum and should be in yours. “No one agrees that the people signed on the lease can reside or live on the property.” The problem for the landlord is that he now lives there and it is possible that he has accepted the rent of the non-rented part.

In some states, that can present a real problem getting them out. If you have knowingly accepted a tenant’s lease, you have automatically accepted them as a tenant. So the question is whether you knowingly accepted the lease.

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

Recent Job Changes

If you receive a rental application with multiple job changes. Especially if they are in the last one or two years, you may have a problem on your hands.

Usually, people who move from one job to another in short periods of time are unstable in their jobs. They are probably just as unstable in their living arrangements as they are in most other parts of their lives.

Frequent job changes equates to frequent changes of residence. Usually because it takes a little while to find the next job, so they can’t pay the rent and have to move or be evicted. They probably won’t be able to remember all of your addresses on the application.

That’s why it’s important that when you check the tenant’s references you check the length of residence with the previous owner. In fact, the previous landlord may be more willing to provide you with this information than to say, “Was he or she a good tenant?”

The self-employed applicant

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

These people may be called “Wholesalers” or “Suppliers”, including “Manufacturing Representatives”.

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

This is what we do to check them.

We have them provide us with a copy of their tax return and their profit and loss statement (Profit and Loss) that they provided to the IRS for their taxes. Look at the adjusted gross income. Not just taxable income.

This will give you a more accurate picture of what they actually “take home” as payment. You’re a landlord, you know how that works. Sometimes things that are not 100% business expenses get written off.

Confirm that they do indeed work. Ask to see business cards and company letterheads.

(These should be readily available.) Most entrepreneurs carry business cards with them to hand out at any time.)

Special Note: With today’s technologies, it’s 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 is a monumental task as you may know.

You need to do your due diligence here. When they answer your questions, write it down and then check the answer. If they are leaving their current residence in unfavorable condition, they may have already crafted a good story for the next owner.

In conclusion, not all people in these categories will be bad renters. However, most of the time 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.