In 2008 the housing bubble burst. The economy took a nose dive that the country is still recovering from. Millions of people lost their homes when values drastically fell. Many people found that their dream home became an underwater nightmare as the mortgage crisis deepened. All of those people had to find another place to live as their dreams faced foreclosure.
Many real estate investors who had rental properties asked themselves “should I rent to a person who was foreclosed? Are they a good risk?” Knee jerk reaction would be no. Obviously: they didn’t pay their mortgage! There may be more to the story.
As a landlord, you take a risk every time you rent your property. Eviction takes time and money, and can result in damage to your property by a vindictive soon to be ex-tenant. So you do things to protect your investment. Credit and criminal background checks, and so forth.
In the case of a tenant who lost their home to foreclosure in the mortgage crisis, this is even more important. Why? Things like credit reports can show a lot about a person’s financial history in total. What kind of credit risk were they before the recession hit? Did they pay their other bills? Was there an extenuating circumstance like a medical emergency that pushed them over the edge? Or were they deadbeats who didn’t pay anyone? Talk to the prospective tenant and get their side, then verify with the background check.
As a real estate investor who wants to rent your properties; another way to protect yourself? Get more up front. A larger security deposit, plus first and last month’s rent in advance. With millions of people who need to live somewhere, not renting to someone who lost their home will limit your pool of prospective tenants. Don’t keep them out, protect yourself. Check them out, be smart and get larger deposits. Those “deadbeats” may turn out to be some of your best tenants.