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Help Choose The Best Tenants From Heaven

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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 RENTAL 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 TENANT 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!

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Fundrise Due Diligence Funnel



Less than 5% of the real estate deals shown gets through the Fundrise funnel

Shop around for a mortgage: Check the latest mortgage rates online through LendingTree. They’ve got one of the largest networks of lenders that compete for your business. Your goal should be to get as many written offers as possible and then use the offers as leverage to get the lowest interest rate possible from them or your existing bank. When banks compete, you win.

Updated for 2021 and beyond.

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