Being a landlord means more than just renting out a property. But for those who are going to rent out a unit for the first time, some of the nuances can be overlooked and only encountered later, often times to the owner’s chagrin. We’ve discussed in this column before the importance of performing your own due diligence when it comes to evaluating a rental application. Owning investment real estate means taking on additional risks. One that comes to mind is what you can do when the tenants stop paying or are consistently paying more than 30 days past the due date.

Depending upon the location, some states are relatively liberal as it relates to tenant eviction. In others, it might seem impossible to evict someone due to non-payment. There can be some very protectionist clauses as it relates to tenant rights. Compare non-payment of an auto loan. A lender who finds the owner of a vehicle that is way behind on payments, the creditor will  simply repossess the car. With a home, it’s not that easy.

But what about in areas where it’s a little difficult to find tenants? What if you own a unit and you're having trouble finding the tenants who meet your criteria? Should you lower your standards in order to provide some cash flow? Should you take the risk of accepting an application from someone who has a damaged credit report? The answer might not be what you think.

For example, you accept a rental application and perform your background checks. The landlord reports that they were good tenants and paid on time, at least no payments that are seriously delinquent. But the credit scores aren’t so good. Do you toss the application away and continue looking for a new tenant, even if the rental market is fairly tight? Maybe not.

First, when looking at the credit report, are there late payments that are relatively frequent over an extended period of time? This can certainly indicate paying credit obligations on time are not at the top of their responsibility list. But if there appears to be a certain period where late payments show up? Maybe credit history was good up to the point and returned to an acceptable pattern after the isolated credit dings? 

In such an example, a little more research might indicate an isolated event out of the applicant’s control caused some speed bumps around the same period of time. Maybe there was a layoff. Maybe a couple was going through some degree of emotional straits? If whatever caused the credit dings can be identified and regarded as an isolated event, then perhaps the applicants might be a solid choice. Things aren’t always black and white. Doing a little more research in such an instance just might get that unit of yours rented after all.