Overqualified Tenants Can Spell Trouble for Landlords

by | Sep 20, 2010 | Tenant Screening

When the air conditioning broke in a TriBeCa apartment in New York City, the tenant left a message for the property manager, but didn’t wait around for a response.  Instead, he checked himself into a suite at the Greenwich Hotel with a $2,900 a night price tag, and began faxing his expense receipts to the property management company. 

The management company’s co-owner, Michael Feldman of Choice New York Management, LLC deals with properties as diverse as New York City itself, with tenants paying from $50 per month under some age-old rent-controlled leases, to this tenant who was paying $8,500 per month.  “Someone who can afford that kind of rent can actually be the hardest tenant of all to deal with,” he explains.

In Feldman’s years as an asset manager overseeing over 1,000 units, he has found that some tenants are actually overqualified for particular rental properties, and that makes them a risk.  “The problem is they make so much money that their rental agreement doesn’t really matter that much to them,” he says. That’s a tough tenant to have in NYC, where the tenancy laws are the most “tenant-protective in the history of civilization” according to Feldman.

With such a diverse business, Choice’s property managers have to adapt tenant screening strategies.  “Our tenant screening practices need to reflect the specific apartment, and the pool of tenants we have to choose from in each case.”  Manhattan enjoys a low vacancy rate, especially compared to other U.S. cities in this period of high unemployment.  Yet, Feldman suggests remaining vigilant with tenant screening regardless of the vacancy rate in your area.  “I always forgo an applicant who gives me a bad feeling, even if it means a few more days of vacancy,” he says.

Feldman’s managers always pull a credit report on an applicant under consideration to make a threshold determination on qualification. Feldman looks for good credit – but not too good.  “I’d rather work with a 40% rent-to-income candidate who will respect the rental agreement over a wealthy candidate who may just walk away,” he says.

The results of criminal background checks are also crucial to the tenant screening process.  “We might look at a nonviolent offense from a long time ago,” he says.  Generally, though, a criminal history is enough to reject a candidate.  There is a zero-tolerance policy on eviction reports. “Working with someone with a prior eviction is out of the question,” he says.

Choice managers also ask for references, but they know they’ll have to scrutinize each one to determine if it is legitimate.  “With today’s technology, it’s much easier than it used to be to figure out if a tenant is scamming you by having their boyfriend or sister pose as the previous landlord,” Feldman says.  He doesn’t place much stock in personal references. “It is seldom when we get a bad one,” he explains. He does insist on a personal interview with an applicant.  When someone is applying for an apartment, “it’s like we’re all on a first date – they are wearing their best makeup or a freshly ironed shirt.  But we’ve got to figure out what’s going on with this person day to day.” 

Still, some tenants never cease to amaze, especially those who came with recent property acquisitions.  One, whose possessions are spilling out into the hallways after fifty years in the same apartment, was recently featured on the TV show Hoarders.  Feldman also found out that a tenant he inherited set a fire in the unit as a pyrotechnic stunt filmed for the popular reality TV show New York Housewives.  It’s an interesting job,” he says. “When it comes to tenants, if you don’t pick a winner, you’re in for a struggle. Good tenant screening definitely makes my life a whole lot easier.”

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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