Help Choose The Best Tenants From Heaven
The more choices you have, the more stress you will have ironically. Blessed is thee with just one option, for there will never be a doubt in choosing wrongly!
Over 50 groups of interested parties showed up to my rental over two weekends with 20 submitting applications of interest. I’ve narrowed the candidates down to five, which is four too many. There might not be a right choice, just a suboptimal choice because all the candidates have credit scores over 700, make 80X the monthly rent a year in income, have over 10X the liquid savings, and seem like reasonably nice people.
As a personal finance blogger, I think it’s absolutely fascinating to understand what type of people spend ~$3,500/month for an apartment in San Francisco. I told myself 10 years ago that if I had to spend more than $2,000/month in rent, I would buy. Inflation is a powerful, powerful, thing because back then, the apartment rented for $2,200.
Perhaps you can help me choose as I think about the relative pros and cons of each.
TOP 5 POTENTIAL APPLICANTS
My ideal tenant is one that pays on time, is respectful of the neighbors, quiet, self-sufficient, and stays for at least two years or longer. In fact, this may be the ideal tenant of any landlord!
1) Doctor. 35 year old cardiologist who finished his residency a year ago and is now making $300,000 a year. The hospital where he works is just 8 blocks away. He has about $50,000 in savings, $130,000 in medical school debt, and a 710 credit score. A big positive is that he is very focused on cleanliness, given he has to scrub up at the hospital multiple times a day. He also plans to live by himself, which reduces wear and tear. My worry is that he may be too anal and ask me to fix every little thing if it’s not perfect. Also, a 710 credit score, although good, is at the bottom thanks to a forgotten 12 month old missed payment that is supposedly coming off his record this year.
Update: Doctor is out. Doctor brought over his 3 other more senior doctor friends and I believe they talked him out of it by filling his mind with luxuries and riches. My suspicion on his meticulousness came true.
1) Loving Bliss. A newly wed 33 year old couple with two cats relocating from New York City. She graduated from a Top 10 business school and works as an executive recruiter. I’m not sure this is exactly the job she wanted after spending so much time and money going to b-school. The husband graduated from the same Top 10 business school 4 years ago and is in the money management industry. They have no student or car debt and make about $150,000 each. I cannot get an employer reference from the husband because his current employer doesn’t know he is looking for a new job in SF, even though the employer is moving him out to SF to work for them! My other concern is that the wife is currently living at her family’s house in Berkeley until her husband comes to SF. Their application is great, and they are very nice folks who I can see living here for 4 years.
2) Big Law. Two, male, 27 year first year big law associates who each make $160,000 base salary + potential bonus. They went to a top 10 law school in California. The one guy was very enthusiastic and loved the place and offered to pay 3 months up front plus the security deposit. They each have about $30,000 in savings and credit scores of 780 and 805. The problem is, I haven’t met his roommate, who is currently out of state and won’t be back until end of the month and I need to make a decision soon. They are supposedly best friends, and the roommate is onboard with whatever his roommate says. The person who visited said they will likely work 70-80 hours a week as first year associates and really want a quiet place when they come home to unwind and sleep.
3) Big Law 2. Two, male, 27 year old first year big law associates who also make $160,000 base salary + potential bonus each. They both went to a top 5 law school. Met both, and they seem like fine, outstanding citizens. Credit scores are 770 and 790 and they too want peace and quiet because they will be working long hours. Combined savings is around $100,000. The only problem is that I can’t get keg parties out of my head when I think of two male roommates. They will likely each have girlfriends who will revolve through the apartment. One will probably end up staying there every weekend, therefore the wear and tear and liability goes up.
4) Next Online Dream. Two, male, 33 year old MBA grads who make about $130,000 base salary + bonus each. They are European but have their green cards. Credit scores are in the 780s and they have about $230,000 in savings combined. The problem is, one of the roommates brought his girlfriend, and he admitted she will be staying with them for weeks at a time. They are willing to pay 3 months rent up front + security deposit. Very enthusiastic guys who are both at start-ups.
5) Googler. I always thought that software engineers capped out around $250,000. Boy was I wrong. A 28 year old, 2005 grad from CalTech who works for Google put down he makes $450,000 a year and has $400,000 in savings. I am thoroughly impressed with his financials. He relocated from New York City and plans to live alone, although he visited with his girlfriend who also works at Google and has her own place. He did not put down his credit score which is weird. Im also concerned that after a year he will move out and buy a place with his girlfriend/fiance. Hopefully she actually just moves in with him and they live together for two yeara after his first year or so.
Note: I realized after typing these five out that I didn’t highlight a two female or single female combination. There were definitely female applicants, but their applications were much weaker for some reason. A couple females lived at home with their parents for one year, which makes me nervous because that doesn’t make them self-sufficient. One female just graduated college a year ago and makes $35,000 a year but wrote down she has $300,000 in savings. Bank of Mom & Dad? Her roommate graduated four years ago and makes $105,000 a year + bonus and also has $300,000 in savings. Wow. Another female makes about $120,000 and has a great application but didn’t follow up and said she needs a roommate. That’s a problem because I need to meet the roommate from the beginning and don’t want to have to go through this process again. There were no female MBAs, lawyers, or entrepreneurs interestingly enough.
WHICH WOULD YOU CHOOSE?
The other 15 applicants have profiles very similar to the five above. The only really unique person is the cardiologist who seems solid, but has a lot of debt, seems quite anal, and has a below average credit score. After a year of living there, he could decide that with his now $400,000+/year income, he’d like an even nicer place and split. Ideally, he would be too busy working for the next two years to notice. Maybe he’ll find a woman in year three, get married, and live together in the place for another two years. Who knows!
I really am afraid of my tenants throwing raging late night parties and obnoxiously loud NFL football parties because that’s what guys do. That’s what I did when I was younger. Two guys just seem to be messier than a couple and the cardiologist. I really don’t want to piss off my fellow homeowners, who make up the majority of tenants in the building.
After checking all the boxes, choosing a tenant is a big leap of faith. I’m just hoping I’ll get a good one who will take care of the place as if it were their own. Help me select the tenant from heaven!
Recommendations For Protecting Your Assets And Saving Money
* Make sure you refinance your mortgage. If you haven’t refinanced your mortgage in the past 6-12 months, I strongly suggest you at least check the latest rates online with Quicken Loans, the largest online mortgage retailer. They were founded by Dan Gilbert, also owner of the Cleveland Cavaliers. Because they have the largest online network, they can provide the lowest rates. They also seem more streamlined in the refinancing process than traditional bricks and mortar banks as well. Interest rates are at all time lows and won’t stay this low forever with QE tapering in the near future. My latest refinance was for a 5/1 jumbo ARM at 2.625% from 3.125%. Might as well check because it’s free and there’s no obligation.
* Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is? If you don’t want the credit monitoring service, simply cancel before the grace period is up.
* Get the best home insurance possible. In order for your property to grow in value you must protect your property from damage. Fires, floods, leaks happen all the time. If you have cut-rate insurance, you could very well pay way more than you should. Maintenance costs add up over time. I highly recommend USAA for all your property and auto insurance needs. USAA was founded in 1922 to serve our honorable servicemen and women and have since opened up to the public to provide the absolute best service and some of the best rates. Not only do I have my home insurance with USAA, I also have an umbrella policy as well as three CDs totaling roughly $500,000 with the company. I’ve been a client for over 20 years given my father served in Vietnam and I’m a huge fan.