Monday, February 6, 2023

Playing God is No Fun!

It might seem like a good deal to be in a position of power, but it ain't all that fun.  It is just stress.

Suppose you wanted to rent out your house or condo.  You hire someone to screen tenants.  To avoid any accusations of discrimination, they provide you only with income, credit history, and background check data - and even that is sanitized.  How do you select a tenant?

Now, if you are a raging true-believer, well, you might use this as a chance to enact your social justice theories - helping out the "little guy" who is "down on his luck" because they had a bad break here and there.  Or maybe not.  Today's social justice warrior becomes tomorrow's Republican in a real hurry, once they have two nickels to rub together.

You own this asset - well, maybe you and the bank own it - and you are going to lend it out to someone and hope they don't destroy it and hope they pay enough in rent to cover your overhead costs.  Maybe -just maybe - you might make a few dollars in profit, if you are lucky.  As I noted in an earlier posting, our condo, even with no mortgage on it, loses money on every other year, if we have vacancy or have to do major repairs because of the tenant damaging things.

Now say you put the place up for rent, and you have five applicants to rent the place.  One wants to do "Section-8" housing, which involves signing a lot of paperwork with the government in exchange for a guaranteed check from Uncle Sugar and the County for about 75% of the rental cost.  Section-8 tenants have a reputation - deserved or not - of trashing properties because they don't pay for them.  When something is free, you don't value it.  Section-8 landlords have the reputation of being slumlords.

The other four applicants - who all had to pay an application fee of fifty bucks or so to apply (to cover the cost of background checks and credit checks) are as follows:

Application #1

Lease Start: 05/27/2022

Lease End: 05/31/2023

Summary of results

Rental History: Previous landlord reports some floor damage.

Credit: GOOD

Credit Score: LOW 700s

Income: DID NOT PASS

Background Check: PASS

Pets: NONE


Application #2

Lease Start: 06/15/2022

Lease End: 06/30/2023

Summary of results

Rental History: PENDING

Credit: GOOD

Credit Score: LOW 700s

Income: PASS, But works in a restaurant and it depends on the hours he works. I asked for additional proof of income back to February and there was only one pay stub that was lower due to him getting covid. This could be risky.

Background Check: PASS

Pets: NONE

Application #3

Lease Start: 06/07/2022

Lease End: 06/30/2023

Summary of results

Rental History: PENDING

Credit: FAIR w/ multiple accounts with late payments.

Credit Score: LOW 600s

Income: PASS

Background Check: charged guilty of Misdemeanor 13 years ago and There is a civil action for possession that was dismissed in the landlord tenant court records (2019)

Pets: NONE


Application #4

Lease Start: 06/09/2022

Lease End: 06/30/2023

Summary of results

Rental History: PENDING

Credit: GOOD

Credit Score: LOW 800s

Income: PASS - but one year temporary government job

Background Check: PASS

Pets: NONE
Interesting, no? And bear in mind, these are real people who have real emotions, wants and needs. They are all like you and me, with their faults and features. How do you decide which one to rent to?

Compounding that, the tenant with the best credit score and the best background result has only a one-year temporary job with the government - which may or may not lead to full-time employment.  I suspect that after the one year, if they are hired, they will move on up to a nicer apartment and are taking this one only to save money in the interim.  It is hard to tell, of course, without talking to them in person.

Dismissing the Section-8 applicant, that leaves four choices.  Applicant #1 has two red flags - first, they want to occupy before the end of the month and only days after applying.  This could means a number of things, but it speaks of poor planning at the least, or being booted out of another situation at worst.  The income doesn't qualify for the rent (1/3 of gross income, max) and while it would be nice to lower the rent to accommodate their income, as I noted, it is a dicey situation as it is - we are losing money on this deal most years - and on the years we make money, we'd be better off with a savings account, in terms of return on investment. (UPDATE:  Over ten years, we have basically broken even with this condo - with no mortgage to service!  So much for "greedy landlords!").

The "floor damage" thing is interesting - that could be anything from a leaky waterbed (not allowed) to cigarette burns (also not allowed) to who knows what?   So... pass.

Applicant #2 looks promising, but has unverified income and probably a lot of under-the-table income.  Also, restaurant work isn't always steady work.  But so far, #2 is looking promising.

Applicant #3 has issues - you'd like to help this person out after they clearly made a lot of bad decisions in life. I mean, everyone deserves a second chance, right?  But there is a history of not paying the rent and a previous landlord having to go to court to evict.  Do you want to be next?  Pass.  Nevertheless I feel bad they had to pay a $50 application fee.  I hope it is refundable.

Applicant #4 looks promising - an over 800 credit score and a good paying job with an unnamed "government agency" (secret squirrel?), but only a one-year probationary period guaranteed.   Tenants with security clearances are excellent tenants - they stop paying the rent, they lose their security clearance, their job, and career.  Also, they generally are paid well enough to afford the rent.  That is the nice thing about renting in the DC area - lots of good tenants with steady jobs.

All that being said, this isn't fun.  You are playing with people's lives here - folks who have needs and wants just like anyone else.  Maybe applicant #3 is trying to turn their life around and needs a break.  I'll never know as I never meet these tenants - the property manager handles all that, and applications go through real estate agents.

While I would like to enact "social justice" by renting to the downtrodden, it makes no sense when you have better applicants to choose from.  It isn't that  you are turning away the lesser qualified applicant, but accepting the better qualified one.  People complain they can't find an apartment because of their bad financial history.  The problem is, these apartments are not going un-rented, but are rather being rented to be best qualified applicant - and that isn't them.

On the flip side, I spent nearly two weeks doing backbreaking labor, cleaning up some of the worst messes in my life and spending thousands of dollars putting the place back into shape for renting.  I don't want to do that again.  I would like to find a nice tenant who doesn't smoke and doesn't have pets that piss all over the brand-new carpet, and hopefully doesn't like to deep-fry foods in the kitchen.  Someone who is neat and tidy and returns the property in the condition it was found in.  Is that too much to ask?

And I say this knowing full well that in the past, I myself have been both a good tenant and a bad one - particularly during my bachelor days when every day was a beer-soaked orgy.  It is a sad fact, but renting to young, single men is always problematic.  But again, I have no idea of the gender or marital status or age or race of any of the applicants, just income, background, and credit rating.

Some argue that these rating agencies are often an unfair way of judging the worth of people - and I would agree. But of course, "back in the day" before credit scores and computerized background checks, there was the "good old boy" network, and if you pissed-off one landlord, well, it got around town, particularly a small town, and you'd find yourself on the street in no time.  Not only that, things like age, gender, and race were considered, and often the only criteria used.  Worse yet, the rent might be set based on these criteria.

So yes, these scores and whatnot can be unfair, but on the other hand, are not subject to prejudices.

If you can avoid stepping into these bear traps and maintain a half-way decent credit score and pay your rent on time, it avoids a lot of problems.  Bear in mind that credit score is based on debt, and debt is voluntarily taken on in most instances.

But no, it isn't "fun" to be placed in a  situation where you have to evaluate people.  And I suggest that if you think it is fun, maybe it is a sign of mental illness - some sort of sociopath or psychopath tendencies.  To me, it was nothing but stress.

But most of all, it is serious business - and you have to be hard-hearted about these things when you have a major asset of your life at stake.

Playing God isn't fun.  Never.