If cash flow is paramount for a real estate investment certainly keeping the unit occupied is important as well. Just one month of vacancy can damage a P&L. Keeping the unit occupied means providing a rental space that’s maintained, in good condition with the rent being in line with competing properties.

subprime tenants

But there are times when you can charge more rent and get it while keeping the unit occupied all the while. How can you charge more rent in the neighborhood?

One way is to allow for those who may have had damaged credit. If you accept a rental application and run a credit report and the report is, shall we say, “less than stellar” instead of denying the application on its face, you may be throwing away money. Prospective tenants with poor credit understand they’re perceived as being somewhat of a gamble. If the credit report shows a habit of paying late, the tenants know they’ll probably have to pay a premium for their past. A landlord can charge higher rents and collect larger deposits in such an instance.

For those with an extended period of bad credit you may have to dig a little deeper to see if they’re going to be worth it. Even calling the current landlord may be deceiving as well—the landlord may give glowing reviews just to get rid of them. For those with a long history of late pays with an inability to prove timely rent payments beyond what the current landlord says, they may not be your best bet for a “subprime” tenant.

Instead, those that had good credit up to a point then a recent period of poor credit in all likelihood were victims of circumstances beyond their control. A loss of job or an extended illness could cause otherwise responsible tenants to let some things slide. Tenants can experience bad times just as someone who has gone through a foreclosure.

Renting to tenants with poor credit is obviously riskier but with a good explanation of what happened along with evidence the bad stuff is in the rear view mirror and circumstances have changed for the better, you might have a good candidate to charge more than surrounding properties.