Re: First rental house and first tenant - Posted by JPiper
Posted by JPiper on November 14, 2000 at 03:41:14:
No firm answer, but a few comments.
First, a bankruptcy would not in and of itself rule someone out for me. The first obvious thing is that bankruptcy eliminates debt (providing it’s Chapter 7). Therefore, a fresh bankruptcy filing produces a tenant with no debt, and therefore more likely to be able to pay rent.
What I like to do is to find out the reason for the bankruptcy, and determine whether that reason has been dealt with. If the underlying reason is no longer there, then the situation may be entirely different. Medical bankruptcies for example are common when confronted with medical emergencies. Perhaps job loss and overindebtedness caused the problem…now they have a new job and little debt. Look at the reason.
Also be aware that while bankruptcy is a negative, one positive coming out of it is that you can’t file a Chapter 7 for the subsequent 7 years.
In this case the tenant has $4K in debt according to your post. Sounds like he may have reestablished some credit. How has that particular credit been handled? If it’s timely then that tells you something.
One thing you’ve left out entirely is income. I would want to see total gross income of 4X the rent from the prospective tenants. What type of jobs do they have? Salaried positions with well-known companies are collectable if they don’t pay the rent. Chances are if they are decent positions with some tenure, they won’t just leave to avoid your judgment (following an eviction).
I think it’s too easy an answer to simply rule someone out based on bankruptcy or other credit difficulties. Look at the underlying reasons. Moving down in payment is a positive decision sometimes, that may ease financial burdens. Even banks will make mortgage loans to people with bankruptcies after a couple of years. What they want to see is a positive experience following the bankruptcy.
Again, look for the underlying reasons for problems…see if that has changed. Look at the income.