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

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* Manage Your Finances In One Place: The best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing. I keep track of all my properties with their easy to update net worth dashboard.

Updated: 2Q2014

Regards,

Sam

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    I would go with number 1. The cleanliness and the proximity to his work make him an ideal candidate because he will take care of the property and the convenience factor (of walking to work) is most likely to keep him from moving after one year. He also would be very focused on work because he is either doing what he loves or doing it for the money and therefore less willing to want to go apartment hunting as long as the apartment meets his needs and doesn’t have a major inconvenience. Also, I personally wouldn’t care to own a place of my own if I were making that much money. I would much rather rent for the convenience factor and invest the money that I have left over. Those are my thoughts… (It’s hard to tell without meeting them personally)

    • says

      Doctor is out now. He brought in three fellow doctors older and much wealthier than him and I think they convinced him to find somewhere else. I had a feeling his analness would make him unhappy after a while. Glad to know now.

  2. says

    You identified risks with all of them! Any one of them could move because of the level of savings. The doctor may be the least likely to move because of proximity and his debt. All of them have the possibility of throwing wild parties. This is why after you analyze all the numbers, you have a feel for the people involved. If you can visit where they currently live, it may help. I realize some are moving from out of town. Hopefully, you have a gut feel for one over the other.

      • says

        Your Googler could easily move out! I wonder why he is renting anyway! When people do not comply with instructions, I always wonder why? Could they be hiding something or was it an honest mistake? It seems as though you are trying to make this very black and white and it isn’t. You are dealing with human beings. There is an acceptable risk with all of them. Which do you like the best? Good luck.

        • says

          He could definitely move out after a year and find a fancier place with that kind of income. Ive given it some though these past 10 hours and I’ve become lukewarm with this choice now.

          If my place was 30% nice and cost $4,500-$5,000/month, maybe that would be more suitable. But I don’t think it is for someone making $450,000/year and higher as he gets older.

    • says

      Krantcents — I agree with you. I would choose either the first lawyers or the computer tech for Google. They seem like the less rowdy crowd and the ones with their head screwed on straight. You seem to have a great selection to choose from! Good luck!

  3. joewatch says

    Number 1, and I don’t even think it’s close. Your negative, being too anal and asking to fix everything, is actually a positive in my view. I’d rather know about a small problem that is easy to fix when it’s still a small problem, instead of waiting for it to become a big problem that is difficult and expensive to fix. Without going into too much detail, a doctor cannot be fired / layed off so he has the most stable income.

  4. says

    I can’t believe how hot the rental market is! I heard a woman say on the bus just yesterday night that she’s scared to move because of how competitive it is out there to get a place. Sounds like you have a great pool of applicants to choose from. If it was me I’d look at all the things on paper and also how the applicants have interacted with me and what their personalities are like.

    You want to pick someone that you’re comfortable communicating with in case something needs fixing, they lock themselves out, etc. I like that the doctor is just one person and sounds like he’d really take care of the place. At the end of the day you want tenant(s) that are responsible, respectful, and independent. Best of luck!

  5. The Wealthy Canadian says

    Often, some of best tenants can stem from companies looking to rent. Sometimes companies offer lodging to their employees and in my view, this can offer good stability in terms of honoring lease arrangements and respecting your property.

    Don’t get me wrong, I’ve had superb tenants that have rented from me on an individual basis, and things have worked out tremendously well.

    Sometimes it’s not about the profession either. I’ve had people having high managerial roles
    rent a unit from me and which ended up creating a ‘Daddy Day Care’ scenario whereby they would call whenever a light bulb needed to be changed out.

    Choosing a tenant can be a challenge but if done properly, the experience can certainly be a positive one.

    All the best,
    TWC

    • says

      Yep, corporate housing is good. Interesting datapoint on the high managerial role type who is could be a PITA. It really is a leap of faith in the end. Added a new candidate from Google in the post who is promising.

  6. says

    I do not think that doctors are so focused on cleanliness. It is in a hospital somebody has to clean the mess after then.
    Like with all the rest, the streets are clean because comebody else does it.

    I think that none of them look solid for long term rent. All of them dinkies, pushing high thirties…

    On ther other hand I am surprised that you have learnt so much about them, just to rent a few square feet…

    With the market I am glad you have been so lucky, but in many places it went down dramatically, and most of the people after all taxes and
    maintenance hardly making 3%, while prices of the property is going down. If you are still paying mortgage for it it is really pain.

    Admittedly i invested myself into couple of properties, they should be out of the woods in 13 months or so..

  7. says

    You would think a doctor would just buy a house? They have a decent amount of savings for a great down payment, a decent credit score (yes they wouldn’t qualify for the top interest rates, but a 710 score still gets them a great rate), they also have a very stable job. So if they are willing to rent at $2k/month, why wouldn’t they just by a house.. or in the near future they would get ‘smart’ and realize they should just buy their own place.

    I’d agree that none of them look solid for long term rents but definitely solid renters.

    • says

      The doctor has a ton of debt and not enough longevity. He just started making $300,000 a year after making $50-60,000 a year for 3 years in residency.

      I’m still waiting. Hopefully this Google guy is good.

  8. says

    Good luck with your choice Sam! Sounds like Googler could be a good choice, perhaps even stay for 2 years (as he works on his longevity). Seems like you prefer a couple over two male tenants.

    • says

      I just think couples are over their partying and will have less folks over and be more stable. I could be wrong. Your thoughts?

      The Googler seems like he’ll want a more luxurious $4,500-$5,000/month place after a year w/ that kind of income.

  9. says

    Harmony is key… got for the stable love birds (#1). Unless they look like a divorce waiting to happen… wow, that’s horrible to say isn’t it? Well, I was going to say something about lawyers, but I bit my tongue.

    • says

      Do say what you think about lawyers! I honestly had some hesitation when I rented to a pair of lawyers before i.e. how the hell am I going to win a legal battle if something happens, but they were great!

      Love birds are great b/c they are settled and won’t have a rotation of hook-ups come and go. In fact, both previous tenants were love birds that stayed for 4 years each on average.

      I do fear a break up, but that’s just what happens sometimes.

      • says

        I agree… the love birds are likely a great way to go… and just because you had a great experience with a lawyer, shouldn’t null you into believing all will be so “great.” Geez… my suspicions creeping in again…

  10. says

    Pick one. They seem decent. Background check them all. If you need a resource I’ve got one. Interestingly, mgmt company just signed a new lease with the new tenant. He wanted 2 years. I said no. One year maximum. I need to see what he’s like. Frankly, he’s already a pain in the ass. One year with renewal option then we can talk about long term.

    • says

      That is very interesting that you would only want 1 year… and you know what? That is spot on. Let’s see how it goes for 1 year, and if all is harmonious, let’s sign another 1 year lease extension. Thanks for the reminder.

      How much are you paying your management company?

  11. says

    I’d go for #2, also. They’ll both be too tired to look for another place any time soon. Plus law strikes me as an area where change is slower than in tech. Who knows where the tech applicants will be a year from now, especially the startup guys.

  12. says

    Not sure why the love for #2 is so great. I’d go #3. More savings, credit scores virtually identical to #2 and you’ve met them both – with a good impression at that.

    Aside from these 2 i’d contact Googler and ask for the credit score

  13. says

    Hey Sam,

    I’d go with the meekest law couple. Maybe you can speak to the missing guy on the phone. I’m amazed that you’re able to get so much personal info out of everyone? Is that normal when renting in the U.S.? If so, I think it’s awesome!

  14. Brandy says

    From reading the comments, it looks like you are leaning toward Googler. That would have been my first one to cross off! Why didn’t he give you his credit score? Also, when I was 16 I put I made $100,000 on a credit card application. They gave me 5k credit limit. Anyone can put down a huge number.

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