Now that I’ve given you a system for finding high cash flowing working class neighborhoods and properties, I need to emphasize this: You can NOT drop the ball on the tenant screening! You NEED to screen your tenants. It is not a myth that in these neighborhoods, there is a higher chance of getting someone who’s money is stretched tight. Its not a good or bad thing, it just is a fact of a lower income neighborhood. However, this is how you deal with it, and learn from my mistakes so it doesn’t leave a bad taste in your mouth.
In this, I refer to the BiggerPockets Ultimate Tenant Screening Guide, which I highly recommend. I don’t field the calls personally since I use property management, but I get the accumulated documents, background check, and credit reports as well as feed back from rental references.
This guide is excellent, as it is very strict. In some cases, and in my neighborhoods, there are cases, however, where I have learned to be more lenient, and other guidelines that I absolutely follow.
Again. If you did NOT get this the first time: Your life as a buy and hold investor in a working class neighborhood will go A LOT more smoothly if you stick to these points, and are patient. Don’t just take your first applicant unless they are not going to cause you economic problems in the future. If you do your renovations right, you should have people beating your door down.
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9 Comments
You have my same concept in the real estate investment process.Coming from California to the South East part of the United States, I picked up a nice 3/2 house for 15,510 total and rehab cost of about 12,500. Most of the work is being done by myself and my two sons. ARV is 75k, this was my plan before I got back into the real estate investments this year. Enjoyed the info on reiclub. Thanks for the info on wells fargo home improvement visa, just got 5,000 to work with. Much success! Jay
Excellent! Im glad you showed that this works. I use this card every single year…then the house pays it off….then i use it again…I am trying to collect Boutique Lines of Credit Like baseball cards. Reusable.
if you are in a lower income neighborhood, doesn’t it make sense to rent to section 8 and in that case, their credit is not too good?
I have had a section 8 tenant with bad credit, and it wasn’t good: Woman could barely pay her rent each month. My learning lesson: Doesnt matter if they are section 8 or not, screen for credit. More than 2 chargeoffs on their credit report, get 2 months deposit. You can take them in, but know you need to get that extra deposit, AND that when they are late you FILE your 5 day pay or quit notices immediately, charge them a late fee, and charge them for any court filing fee: Whomever you take in, they need to know you are not playing about them paying the rent on time.
Great tips!! I would like to know what you tend to say outside of what you
have already mentioned in this video. Thanks!!
Is that 3x the rent at gross or net?
So if they gross $1500 per month they can afford a $500 rental payment.
What if they net after 401k, insurance, and tax’s about $1200? they are now
cutting it close.
Greetings from Colombia
I have month to month leases in my first property ! Just in case !
Nice idea – you can familiarize yourself with the process, and go to something more permanent later. Good thinking.