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Rent Investment Properties to Bad Credit Tenants?

Tenant screening is important but are investors killing themselves by being too tough today?

Is credit score, rental history and a criminal background check really any indicator of whether they will pay rent on time or not?

Should you rent your investment properties to tenants with bad credit?

Some want to run from those with anything less than great credit while other real estate investors swear by renting to those fresh out of foreclosure as their most loyal tenants ever.

So are you being too tough or looking at the wrong factors and either picking the wrong tenants or foregoing income while property sits vacant and returns fade?

According to Bloomberg News apartment vacancies are now at an 11 year low (4.5%), the lowest since 200, while rents are rising. So are you missing out, and missing out on the best tenants?

Solid tenants that pay consistently and preferably on time are key to real estate investing success and maximizing returns, but many landlords are completely out of touch with what makes a good tenant today or at least how to differentiate between good and bad prospective renters.

Tenant screening has developed rapidly and become much tougher in many ways. Many landlords and property management companies are now charging absurd application fees and making it incredibly difficult just to see homes for rent. Some real estate investors are even visiting current homes of prospective tenants, while others are searching social media to find out more about them. Note that these last 2 are among the best moves in the current market.

Traditional methods of tenant screening are out dated. So many have poor credit scores today but can still be awesome tenants. Some real estate investors need to look beyond scores to what’s on their reports; deadbeat or dollar signs?

Recognize that most everything else easily be faked today from IDs to rental history and references to income documents and everyone has a story. Social media profiles are a little harder to bury dirt on as is the conditions they live in now and how they maintain their current home.

What’s your opinion? Have you had tenants who looked great on paper but became a nightmare or bad credit tenants who you have kept for years and never want to leave? What’s the most effective form of screening you are using today?

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