In August of 2007, my house in Philadelphia was vacant and I had to put the house back in the market. I tried to rent the house by myself but I had no luck of getting a solid tenant. So I went back to my real estate agent and hired him to do the work for me.
The house is a single family home, two floors and a basement, 3 bedrooms, with a garage and a private outdoor parking space. It is about 1200 square feet and has central A/C. It is situated in the northeast part of Philadelphia, in an area called Mayfair. It is in a quiet and I was told that it is a good neighborhood. It is very close to the highway and about 20 minutes away from downtown Philadelphia.
My real estate agent, Earl would be in charge of renting out the single family house. His work would involve putting up a sign in front of the house, listing the property on the paper, taking phone calls, showing the place, checking tenant backgrounds and credits, and collecting the deposit money from them.
In September, he called me and told me that he had a great prospective tenant for me. This person, Billy, was an auto-mechanic and had a good income of $71,000 (considered high in Philadelphia). He had a girlfriend and two children.
Earl ran a credit check on Billy and sent me his credit report. Earl told me that the credit score was not the most important part of a credit/background check. There could be a person with great credit score but had no income. The income was the most important part because the tenant should have enough money to pay the rent every month. Some people might not have a good credit score, because they messed up their credit scores when they were young but had been working for many years to build it back. I thought it made some sense, since many Americans do tend to ignore or abuse their credit in the early stage of life.
Basically, Earl’s point was that I would most likely not see any applicants with credit scores more than 700. I was told that the local economy in Philadelphia had been lackluster and the tenant pool generally did not make a high salary. Given the average price of a house in Philadelphia, which was around $100,000, the financial requirement to buy a house was very low. This led me to think that most tenants could not afford the down payment of 10% or their credit score was inadequate for a mortgage loan. Thus, my expectation for a tenant in Philadelphia was lower. However, I still had hopes for a good tenant.
I received the credit report from Earl in the mail and looked at the history. The credit report was 3 pages long and it listed all the creditors and financial information for each account. There were a few late payments, which were from the year 2003 to 2005. There were a few past due amounts, including one from a collection agency. Other than that, I did not see anything else that caught my attention. The applicant did not have any criminal records.
I would say that it was my real first task as a landlord to screen through tenants. I was new to the process and did not the details to the process. I relied mostly on my real estate agent. He would handle everything from meeting the applicants, to showing them the house, to handing them the keys to the house. I had never met any of the applicants and the tenants after they signed the papers. My bad tenant and I had never met. All the work was done through my real estate agent.
Earl told me that the applicant, Billy looked on paper. There were a few late payments and past due balances, but overall, he thought that the applicant was a solid candidate. At first I wanted a tenant with high credit score and high income, but Earl already told me that that was highly unlikely. Since my expectations could not be so high and I was unfamiliar with tenant-screening process, I allowed Earl to make the decisions for me.
I noticed that there were previous missed/late payments on the credit report. Earl told me that everyone had missed or late payments on their credit report in the past (which I doubt is true), and he told me to focus on the current history, which showed more consistent payments.
At first, Billy seemed like a fine tenant. He would pay the rent for the first few months. Then he went missing in action. He disappeared for two months and stopped paying rent. He called back one day out of nowhere and explained that he was expelled from his house by his girlfriend. His reason not to pay rent was merely that he was not living in the house. Obviously, that reason was unacceptable. Beyond that, he gave me more problems and requested to have repairs done in the house by landlord and threaten to call the Department of Licenses and Inspection. He would find every possible excuse to avoid paying rent. I gave up dealing with him and I hired an attorney to file eviction papers against him. The eviction process was delayed for several months. Eventually, we agreed to a private settlement and he left the house.
I am not sure if one could have avoided this whole mess by preventing the tenant in the screening process. It would be difficult to forecast a bad tenant based on the credit report alone. I think another important check would be one on the tenant’s employment records and previous landlord experience.
Billy = My tenant
Earl = My real estate agent
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