Tenant credit and other background check requirements?

Is it common to do background checks and credit checks on tenants? What sort of expectations do you have for your tenants? I know I don’t want sex offenders. I know I don’t want anyone with a current criminal record. I do currently have 1 tenant with a 10+ year old felony on his record and no record since. I believe in rehabilitation and that may come back to bite me but we’ll see. I own a small park with 8 units. I’m working on filling a few spots. Current lot rent for a new lease will be $130 with it going up in one year to $150. We are outside a VERY small town but from what I’ve heard going rate would be $450 for a 2-3 bedroom apartment. So they aren’t paying a lot where you wouldn’t think they needed stellar credit, yet somehow several of my tenants have problems paying $110/mo. (That’s another discussion.) 

There are a lot of issues to discuss here – many of which are cultural.First of all, the minimum wage in the U.S. is $7.25 per hour, which yields a monthly income of about $1,200 per month. Even if that person works only part-time, They would have more than enough to pay your lot rent. Since it is illegal to pay someone less than the minimum wage, then the only answer if they can’t pay you is that they have no job at all – in which they would again have social programs available to pay a lot rent that small, So you basically can’t live in the U.S. and not be able to pay your lot rent. So why don’t they pay it? PRIORITIZATION. They pay everything else first (cigarettes, beer, cable TV, etc.) and you last – so they have no money to pay you. You have to make the rent their # priority. How do you do that? by evicting them immediately if they don’t pay (the concept of no pay/no stay) and hitting them with a huge late fee if they are even one day late.As far as the credit reporting goes, the U.S. system on credit scores does not work with lower demographic people. They are all flying through life at 800 mph only three feet off the ground. They can have stellar credit and then break their leg and default on everything and their credit goes to zero. Why? They have no savings and no back-up plan. So what’s really important is not their past performance on credit (which pre-dates their crash) but how they behave AFTER they’ve crashed. The winners have FIGHT in them and will do whatever it takes to keep a roof over their heads. They will borrow from family, work odd jobs, work park-time – whatever it takes – to get the rent paid, while letting everything else go into default. If FICO could measure this “fight” with a score, that might mean something. 

If your tenants are low income there is little point in checking there credit score but as Frank says when it comes to paying rent you should have zero tolerance. The primary reason tenants pay late is because they have learned, either from you or a previous landlord, that it is OK to do so.
Tenants need to be trained to pay on time by teaching them the consequences if they do not. As a landlord if you do not have what it takes to evict an old lady or a young family for not paying then you are in the wrong business. Compassion comes at a financial price to landlords.

More to Greg’s post then to Lori’s, one of the first landlord lessons I learned the hard way is it does not serve anyone to be soft on rent collection. If you give most low income tenants slack, they will use that till they fall behind the rent. Once they fall behind they never catch up and eventually a little behind becomes hopelessly behind and then end up getting kicked out (at considerable expense to the landlord.) They loose and you loose. It is much better to be a hard ass on rent collection day and keep everyone on track.  You might have a few casualties along the way, but there will be far more if you get known as being a soft touch.

You run a park, not a hotel – people don’t get to pay at the end of their stay. At a certain price point for MH, I could get comfortable with a lack of credit report if there was sufficient evidence of income. I would never, however, rent without a criminal background check. The business risk, to say nothing of the physical and emotional damage if something happens far outweighs the minor cost of the check, which you can add to the application fee.For Fair Housing compliance, you must be consistent in your application of these standards, so contact your MHA to make sure you have the right documentation and posted notices.