What To Do When Elon Musk & Bill Gates Both Apply for Your Nice Rental House
In this month’s edition, we have a riveting property management fairy tale! Once upon a time in a nice, far-off place called “Charlotte, NC”, a nice landlord put a nice, vacant rental house on the market. Now the market was not too hot, not too cold, but just right…
The next day, a nice rental application was submitted for it. And the day after that, another nice rental application was submitted. The nice landlord dutifully ran the applications and found that both applicants looked to be fully qualified:
Tenant #1:
Elon Musk
802 credit score
Criminal record: 3 traffic tickets in last 3 years
Employed: CEO of X, SpaceX, & Tesla, Inc.
$221.4B net worth
Homeowner: no recent personal landlord history
No pets
Move-in date: 35 days from today
Length of lease desired: 2 years
Tenant #2:
William (“Bill”) Gates III
814 credit score
Criminal record: None
Employed: CEO of Bill & Melinda Gates Foundation
$127.3B net worth
Homeowner: no recent personal landlord history
Pets: 1 cat (10 pounds) & 1 border collie (60 pounds)- aware of non-refundable pet fees
Move-in date: immediate upon acceptance
Length of lease desired: 1 year
The nice landlord has a very nice problem! Two well-heeled applicants want his rental property. They have 800+ credit scores, no criminal background issues, plenty of income, and no landlord issues. That is great!
But outside of the nice fairy tale, is it really great? How would a regular landlord pick a winner and a loser? He may have to be not so nice?
The Musk application has many positive aspects with it having no pets and wanting to lock into the property longer with a 2-year lease request. But there is a 35-day wait for occupancy (each vacant day costs money!) and there is a criminal record (frequent speeding tickets can signal risky behavior).
On the other hand, Gates wants to move in right away (cha-ching!) and has a higher credit score than Musk. But he does have a lower net worth and who knows the damage the 2 pets could do to the house especially if he leaves after the initial lease ends.
So under normal circumstances and with no one else involved, both tenants would easily be approved for the property. But there is only one home. And they probably don’t want to share it. So what to do?
It’s a tough one and it happens every so often. Unfortunately, the non-approved person usually gets upset. But a decision has to be made.
I don’t think there is perfect methodology for this. Some landlords use tactics such as:
- First application in gets first dibs on the house: I like this one due to its simplicity and it seems to have the “get in line” logic that most adults can appreciate. Its major flaw is that a property manager really needs to pick the best available applicant for the owner client, regardless of who was first. If a marginal candidate applied first and then Bill Gates submitted an application, should I be married to the marginal candidate? I don’t think so.
- Make the applicants give their “highest & best” offer: The rent is listed at $2K/month. “How much rent are you willing to pay if we let you have the house- $2,500/month? Will you sign a 3-year lease? Move-in right away?” We’ve done this on occasion and it’s a lot of effort and most people don’t want to play (I’m not sure I would either). Due to the bad feelings it creates, I largely tend to shy away from doing this.
- Have some sort of points system based on all quantifiable application information. Add up the points and whoever has the highest score wins the house. This does not take into account any non-quantifiable information (or “soft skills” for lack of a better term) which tend to matter a lot with tenant relations.
Trying to make a choice between great tenants can be a good problem to have if handled properly (in and out of fantasyland). But I think I’d go with Musk application on this one. It’s very nice!
Happy Landlording!
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Sportsbook & Tenant Application Gambling- Now Both Live in NC!
Sports betting became legal in North Carolina on March 11. This may be news to non-residents. To residents, it’s been hard to miss the blatant and ubiquitous advertising bombarding us both in real life and digitally. My 10-year old son starting asking me about sports gambling after repeatedly seeing billboards on the interstate.
Son: Dad, what’s a 5-team parlay?
Dad: It’s a type of bet that either turns your college fund into a full ride or enters you into an indentured servant relationship with the college of your choice.
Son: Oh… Thanks…
Gambling is a funny thing. In the back of your mind, you know you’re going to lose. Logically, casinos and sports gambling entities don’t become massive conglomerates by paying out more than they take in. Quite the opposite! They know that if they can keep you gambling, you will lose. So why does anyone choose to gamble when the odds are that your money is going to find a new home? I mean, it is an optional activity that millions of people choose to participate in every day. What’s the appeal?
Well, some people do win big, cash out, and have a lot more money than when they started. The rest just write off the expected losses as an “entertainment expense.”
But what about when it’s a real-life situation and you need to win? It’s not about entertainment; it’s about having a house for you and your family to live in. And I’m not talking about sports gambling, but about tenant rental applications.
Especially now, many tenants do not have good credit, good reports from former landlords, and/or sufficient income to afford higher-priced rental homes. But they need to have a place to live.
So, tenants with substandard credentials are submitting rental applications that cost around $75 per adult. They know, especially with homes marketed by property managers, that it will be an uphill battle; most will uncover negative information and have standards that the tenants know they cannot meet. And there are not enough owner-managed homes where there is little tenant screening and where they can give a “down-on-my-luck” narrative and get a sympathetic owner to approve them (and this does not often work either). So they have no choice but to gamble and keep applying, though it is draining their finances one turned down application at a time.
But what if they could stack the odds in their favor and win? That would be appealing! And this what we’re seeing and hearing about. Don’t have good credit? Buy a false credit and criminal report. Need income? Photoshop paystubs that show more. Need a former landlord to say something nice? Create fake landlord reports.
It’s raising the stakes. If a landlord winds up approving a wayward applicant, the costs can be significant if the tenant reverts to previous ways and does not pay. Not only is there a loss of rent, but now there are court costs and attorney fees for filing for eviction. To boot, public tax dollars are funding pro bono lawyers to congregate in the courthouse to train tenants to appeal the rulings regardless of whether justice was served or not; this can make the process go on indefinitely as cases enter an overwhelmed court system, while the tenants stay in the rental houses. And when a court victory eventually happens, the landlord is often left with costly fix-up of a battered house.
The prospective tenants may be gambling on false rental applications ($75), but the real gamblers are the landlords who are not screening their tenants thoroughly ($10K+).
Legal sportsbook gambling may be new to NC, but attempting to illegally improve the odds is not a new concept. Smart landlords will run their screening checks thoroughly or outsource to a property manager whose job it is to keep up on the latest schemes.
Happy Landlording!
Learn MoreDoes the “Rental Bible” Say That Evictions are the Unforgiveable Sin?
“…but whoever blasphemes against the Holy Spirit will never be forgiven; they are guilty of an eternal sin.”
Mark 3:29
“Do not be one who shakes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.”
Proverbs 22:26-27
Evictions are bad to have on the credit report in the rental home game; I won’t try to gloss over that fact! There is a reason that they are asked about on every rental application worth its salt. Landlords do not like to see a prior eviction come up on a prospective tenant’s dossier because it means that things got about as bad as they could get with the tenant’s former landlord. It typically means that the tenant did not pay, did something really against the rules, and/or would not move out of the house. No landlord wants to have a repeat performance; it’s a major red flag! We like peaceful, nice relationships…
Now, there are two sides to every story. The narratives that previously evicted tenants will tell are typically less confrontational:
My mom got really sick so I moved out of my place and into hers to help her. My roommate at the time stopped paying rent and my name was still on the lease so it happened.
I’ve never lived at that residence in my life! I have no idea what you’re talking about!
COVID happened. Enough said.
I co-signed a lease for my friend so he could get into the property. I guess he didn’t pay. I’ll need to ask him about that.
(Free advice: Please don’t co-sign for someone else. There is a reason they couldn’t get approved on their own. The Bible even cautions against it (see above)!)
It’s always some combination of best intentions paved with unforeseen adversity. And I don’t doubt that at all. But life is life and stuff happens and will happen again. Landlords just don’t want it to happen on their watch.
When a tenant doesn’t pay or follow the rules of the lease, experienced landlords will try to communicate and work with the tenant to get things in compliance. There is often give-and-take and patience required to right the ship. But sometimes the tenant either cannot or will not do what they signed up to do. When backed into this corner, there is one nuclear bomb that a property manager has- filing for eviction. And this bomb is not free. It takes a lot of human resources to see it through, it costs the owner money while rent is not coming in (cash flow double-whammy), and (when vacated) the rental house is usually left in deplorable condition. It’s the downside of real estate investment.
So when a prospective tenant claims that a landlord filed for eviction “by mistake” or “on the 2nd day of the month after I left for vacation when the check was still in the mail”, I’m skeptical. Filing for eviction is a last resort and one most landlords would not take lightly. The costs are just too high.
A “successful” eviction typically means that every rock was turned over, every resource for payment exhausted, and nothing could be settled outside of the courtroom. That’s not a good reference for a renter coming in.
So, is eviction the unforgiveable sin? Is it an automatic rental application denial?
It really can’t be. No matter how draconian the landlord, saying that a human being isn’t worthy of having a place to live is a tough line. Bad things do happen to good people. And many people use these awful experiences to change for the better. We all learn from struggles and hard times and need another chance.
However, we do say that not disclosing an eviction filing on the rental application when asked is an unforgiveable sin. If we don’t start from a position of honesty, I don’t think differences can be bridged to make a tenancy palatable.
To determine whether a previously evicted tenant has a path for approval, we try to focus more on the numbers and less on the story. The stories are usually compelling, but what do the facts look like? We try to investigate:
What does their current debt level look like?
What is the length of the current employment and its real income?
How long ago was the past eviction?
What do prior (non-evicting) landlords say?
Why are things different now?
How much cash do they have on hand to put down to mitigate risk?
So, no, the “Rental Bible” does not say that eviction is the unforgiveable sin. But it is a very real red flag! Prudent landlords will need to put in the research to determine if it is likely to reoccur in their rental homes.
Happy Landlording!
Learn More“Rudy” is a Great Movie, Just Not a Great Rental Application
Rudy Ruettiger (aka “Rudy”) was the subject of a great movie in 1993 about his improbable story of getting into Notre Dame and then playing on their football team. It’s a true testament to the human spirit as he played high school football (not recruited), went to the Navy for two years, worked at a power plant for two years, and then after not getting into Notre Dame for low grades, went to Holy Cross College for two years before being admitted to Notre Dame on his 4th try! Whew!
Then he walked on to the football team and made it(!), got beat up on the scout team every day at practice, and then got on to the field his last game and picked up a sack. What a story!
Of course Hollywood embellished the story a little bit as Joe Montana, a freshman quarterback at Notre Dame at the time, said in an interview. No players were taking off their jerseys demanding that Rudy get in the game, it was typical for seniors to get into the last home game, and the players carrying Rudy off the field in triumph were just playing around. And Rudy’s legendary work ethic? “He worked his butt off to get to where he was and do the things he did. But not any harder than anyone else,” Montana said.
The truth is that Rudy should have never gotten into Notre Dame due to his bad grades (4 tries! Where did he get the money to pay the college application fees? Does “no” ever mean “no”? Did he finally get an admission officer who was napping?). He never should have been on Notre Dame’s football team (He was 6 years older than everybody else. He was 5-foot 6 inches tall and 165 pounds! He’s lucky he didn’t get killed in practice.). “Rudy” should have never happened and a movie was made about him because somehow it did.
As a Charlotte property manager, we sometimes get rental applications that I feel might have been inspired by Rudy. And I’m not saying that to be mean. I really feel that if we approved some of the applications we received, we’d essentially be ruining the applicants’ lives. For example:
We had a rental house on the market for $1,400.00/month. We received an application where the prospective tenants had several credit cards almost maxed out, they had been late 8 of the past 12 months on rent, and the rent they were currently paying was $1,000/month on a smaller house. How was adding $400.00 in additional rent (not to mention higher utility costs for a bigger house) a responsible move for anyone- landlord or tenant? It would just have made life much harder for everyone.
Even as romanticized as Rudy was, the chances are no one would have wanted Rudy’s life prior to running through the tunnel and getting into his one Notre Dame game. He was studying all the time to pass classes that were too difficult for him, while walking around with a beat-up body from banging into guys that were too big and strong for him to compete against.
Rudy may have learned character, perseverance, and many other worthwhile traits (while being the subject of a great movie!), but it was a hard journey. He was able to walk away with a Notre Dame degree, a great memory, and a lucrative speaking career after the movie came out. But I’m not sure there are any rewards for taking on more housing payment than one can afford. It’s stressful, and hurts families and relationships. Usually, it leads to evicted tenants and fired property managers.
We all want to root for the underdog, but Rudy is best seen in the theaters and not experienced in real life. Denying unworthy applications can sometimes be a great act of kindness.
Happy (& Responsible) Landlording!
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