When people talk about C properties, and how hard it is to find a good tenant for a C property, I always wonder first what they mean by C, and second what does their property actually look like?

No, because my tenants pay for space--- they don't pay for finishes or upgrades, and certainly don't know how to take care of them.

If you drive through the working-class WWII-built neighborhoods in your area, those are a lot of my bread and butter. The people who live in them usually work in fast food or factories. Usually, they have better tv's than I do, better cars than I do, and better vacations than I do. :P They probably don't eat better than I do, and my house is bigger and nicer, although not newer or in a better neighborhood. I just spend my disposable income on extra houses, or saving up for the kids' college or some other future need, and they're more paycheck-to-paycheck.

In my town, you can get a basic starter home for $40-$60k. Less, if you fix up a crummy house. More, if you get a bigger house. Annual household income is about $50k. So-- for about a year's salary, you can buy a not-fancy house. If you've got good credit and/or good savings, you can make your ordinary house fancy-- but then you've still got a $30k house on a block full of $30k houses with a really nice kitchen. Or, you can pick up a bigger house pretty easily, if you're willing to wait. That's what we did for ours.

One lesson I still struggle with is that a middle-class income does not automatically endow the family with middle-class values. If they were raised in poverty, but are pulling six figures--- they still have their poverty upbringing behind them. And that's when you end up with "my dog pees on the carpet in front of the ll and I'm not worried", or "let's spray paint the kid's styrofoam solar system on the living room carpet" or "I don't care if my kid throws knives into the wall" or "cigarette burns on the floor are a normal part of life" or "I've got roaches crawling on my kid, but I'm not going to do anything about it because I'm not really planning on staying here longer than my subsidy will allow" or "I'm going to brawl in the street because so-and-so disrespected my wife."

Usually, what you're looking for is people who can manage their money, and would buy, but aren't planning on staying long enough in the area for buying to make sense. They're looking for something economical, so they choose a humbler house than they can afford, and use the money to save up/pay for what they really want-- like a future down payment, or their college education, or whatever. In areas that have a very mobile population-- university towns, training areas, military, and so on-- it's easier to find those sorts of people coming through, vs people in areas with stagnant populations, where there's not much to bring in new blood.

My properties are definitely C type. These are older houses, primarily built before 1980. Many, over the years were built from 1900-1960's. As I got smarter,(paid the price for dumb mistakes) I moved into post 1978 houses and mobile homes as much as possible (to avoid problems with lead paint and asbestos). Mobile homes usually had wood paneling, so not as much risk. Besides, mobiles older than 1976 are getting pretty rare. There's a few but there's plenty from the 80's and 90's available. I learned to look for single story, basic rectangle style or simple L-style homes with gently sloped roofs, no flat or steep pitches. Single story homes are easier to work on. Older large 3 or more story homes and fancy Victorian style homes are much harder and more expensive to work on. I want the easy ones. Everything in them is BASIC. Formica post style countertops, basic cabinets,basic flooring, no fancy trim, just basic. Cheap to repair.I always provide a fenced yard.

I don't think upgrades would help. Maybe go from carpet to laminate floors or 12x12 tile or vinyl. Let the tenant provide their own area rugs if they want them.

The typical tenant in these makes about minimum wage up to $15-$18 per hour, so there is little room to raise the rent. I could bump it a small amount, but if they are not getting a good raise each year, they can't afford it. Then they move out for $25 or $50 a month.

The typical tenants, the best of a regular working group, if they are not trash or druggies, are just regular working people with little savings.

I generally get the places I have at very low prices. They need work. I fix them to basic and when done am into them for about $20K maximum (it's location of course). In Calif where I used to live (Santa Barbara) it would be ! million plus.

Anyway, most of the tenants have pets, dogs and cats. Most of them smoke (maybe 80%). If I said none of that, 80 percent would not be my tenants. Instead, they are glad to have a home where they can do what they want and is "affordable" for them. Good ones stay a long time and don't make trouble. Ones that do make trouble, they don't get to stay.

If I can get $500 a month ($6000 per year gross) for a place I've got less than 20K into, thats about a 25 percent return.

I think that first we must come to terms of a C tenant.

A tenant who is a C tenant is easily garnished(yes I know that wage garnishment laws vary by state) job stable, pays their bills, a non housebeater, otherwise they are a D or an F tenant.

Deanna makes several great points about her tenant pool. However, I believe making improvements in your house can aid in you charging more rent and being more selective thus avoiding the housebeaters.

What precisely are the needed improvements? I'm not sure, but I believe they are the appliances and fixtures in the kitchens and bathrooms. These in addition to having carpet free houses painted in currently popular color schemes.

All of my houses and tenants are Class C and Deanna described hers and mine to a T. Especially about the mindset of Class C renters coming from poverty.

You can take a person out of the ghetto but you can't get the ghetto out of the person.

Do you bother.........hmmmmm

Well the single biggest cost I have in my rentals is turn over. So if my C class place keeps a stable tenant in there 4 or 5 years, I don't think so. Chances are the place might be just a touch above already.

But if you are operating a revolving door where every year you are getting someone new into the place - stop the madness. Something isn't right and you need to have an honest conversation with your residents. Your customers are not satisfied - therefor you probably shouldn't be satisfied. Offer the next out going tenant $15 gift card if they fill out a short survey about the house and the living experience after you return the security deposit. The truth may hurt.......but the truth needs to be said sometimes and if we collectively improve our weaknesses - you actually get wealthier

The Letter "C" can be an indicator for the TYPE OF PROPERTY and/or THE TYPE OF TENANT.

Let's first look at tenants. You can have an "A" grade tenant with a college education and good paying job. A "B" grade tenant that has a trade, works with his hands and a "C" grade tenant that only has a high school education and lives from hand to mouth never having learned that money is for saving and not spending.

...You can take a person out of the ghetto but you can't get the ghetto out of the person...

I learned that years ago. Throughout the years, I've tried everything imaginable to get "better" tenants. There is no way in the world a tenant of mine cares if the kitchen walls are green, beige or trendy grey. There is a drop ceiling. They could care less if the floors are carpeted, laminate or tile. They make have a preference, but it won't change whether they take my place or not.

Sisco made a good point-- "However, I believe making improvements in your house can aid in you charging more rent and being more selective thus avoiding the housebeaters."

If you look at things from a pure numbers standpoint, there's not really much difference between a smaller house and a bigger house, a humbler house and a better house. It was pointed out in the "Evicted" book a bunch of us were reading recently, how there's not really much price difference between a slum and a clean/safe/functional place in Milwaukee. The biggest difference comes down to screening, and how much of a chance someone's willing to give a marginal/high-risk prospect. I've found the same thing true even amongst my own properties, minus the slummy part. :) All my stuff is clean/safe/functional, but I don't sweat it if I have late-70's laminate with avocado flower print on my countertops, or a Pepto Bismol-colored tub. (Both of which I lived with in my former primary residence, which is now my best rental.) :)

For example, I have a guy paying $385/month to live in a <500 sf 1/1. It has no closets, no w/d hookups. He could spend an extra $80/month to get a house that's twice as big, with a finished attic and a huge utility room and an extra half-bath on a triple lot. But he doesn't. He's happy paying $385/month-- and he bought himself one of those little tabletop clothes washers that you hook up to your kitchen sink.

I have another guy spending $345/month for a 525 sf 1/1 above-garage apartment. Four rooms: kitchen, bath, living room, bedroom. Utility hookups down below. At any point, he can spend an extra $200/month and get a 3/1 with a utility room. But he doesn't. He pays child support, smokes, just paid off a used Jeep, and is trying to get his DL reinstated after being suspended for 20 years.

I have another guy in a little 800 sf WWII-era 2/1 cottage. At some point in the past, the back porch was enclosed to make a laundry room. It's compact and cozy and he pays $460/month. At any point, he can choose to spend an extra $200/month and get a 1400 sf 3/2/2. But he doesn't-- he sticks to the $460/month place.

I had a young family living there a few tenants ago. Him, her, their toddler, and their unborn baby. They had come to me from Government Housing, and I gave them a chance. The price was lower then-- maybe $420/month? They moved out because his grandpa gave them a free place to live, if they fixed it up. I happened to know that their new address had no running water and the windows were all busted out. But you can't beat free, right? They left behind roaches. I cleaned it up, evicted the roaches, and re-rented it. I'd given them a good house, but not only did they bring in bugs from the government apartments, but they left a warm, safe house for a literal shack.

I don't screen them all the same, of course. I'm choosier for the 3/2/2 than I am for the 1/1 garage apartment. But I also learned my lesson not to disrespect my humblest places by being flexible to the point of disregarding major screening criteria. (ie, verifiable income--- bad stuff happens when you rent to a self-employed handyman.)

Different houses serve different parts of the housing ecosystem, just like different landlords serve different parts of the housing ecosystem. One of my important rules is never to put someone in my houses who feels like they're "settling" for it, or that they're better than it. I like people to be content with my space-- but I also know that there's not a whole lot of wiggle room in my market. Still, to a certain extent, I use price as a screening tool-- because even though that gap between $385 and $465 is frustratingly small for me, it represents a week or two's worth of groceries to them.

But again-- space triumphs over style every time in my town. I'm head and shoulders over my competition because I have hot AND cold running water. I don't have possums coming up through holes in the floor. Prospects don't come into my house and stomp five roaches to death before they leave. The run from the front door to the back door doesn't do a good imitation of a skateboard ramp. :P

In that kind of a world--- no one will pay significantly extra for HGTV light fixtures or Benjamin Moore's Top 2020 Wall Colors. You're doing well if your tenants don't decide to move rather than replace the light bulbs. Or they do replace the light bulbs, but lose the diffuser shade in the process. Or decide that your kitchen really needs to be blue, and get bored halfway through the process. :P It's hard to be psychic about those sorts of things in the screening process...

A lot of the problems from people of a certain type are internal. They follow them from place to place, and don't go away merely because you've upgraded their environment. They revert to type regardless of the opportunities you give them to succeed. You do your best to try to identify the warning signs, and place people who are stable into your units. Because what we think of as normal and ordinary isn't always everyone's normal and ordinary... :)

Oh-- I got sidetracked and forgot to wrap back to Sisco's point. :)

So one example is how pet rent come into play. Honestly, 12 or 24 payments of $25/month isn't going to help me at all if my tenants give notice and leave behind a house full of fleas. Then I have to take the house off the market for 2 or 3 months while I get rid of the problem, and re-rent a clean house. 3 months x $700/month lost rent isn't compensated by an extra $300/year unless they're suuuuuuper long-term tenants.

But where it comes into play is when a prospect calls and says, "Hey, I'm interested in your 2/1 for $465 and I have a German shepherd."

And I'm like, "No problem. That will be an extra $25/month pet rent, so it would actually be $490."

And for the more marginal people, they're like, "That's outrageous! For a 2-bedroom?!?!" Because the difference between $465 vs $490 is negligible for me, but it's significant for them.

I don't want to rent to someone who both (a) has a pet and (b) finds $25/month significant. If I have a pet owner, I want someone who can accept the higher cost without blinking. Not because the $25 x 12 is of value to me, but because it's an indicator that if a problem arises in their life, it's less likely to affect me. Whereas if someone who will balk at $25 month has a problem, they're going to be a far higher risk.

Houses in our area are going for $180k+ for modular homes these days...gone are the days we could get them for less (which is why we are not buying any more.)

But our C properties consistently get B tenants and I think it's because of two things:

1) Our area. There are very few affordable options for local worker housing. So we concentrate on that market. Pure luck with that one!

2) We DO fix our houses up. We paint, we do flooring, we provide appliances, including microwave and dishwashers, we add ceiling fans. He replaces all light switches and plugs with new. New hardware. Etc.

We don't do much with curb appeal though. Need to work on that!

This is a GREAT thread, especially for anyone coming into the game starting out with little or nothing. The best money (cash flow) is made in C houses. Not in pristine, hipster A loft apartments or D/F slum hoods...the C house is where I want to be.

Deanna, Richard, Roy and I have the same houses in the same hoods and generally rent to the same tenants....with some differences. Roy fixes his houses up nicer than I do, based on his pics. Richard's have more limited income. Deanna and I are the closest in terms of how we "fix them up".... basically, good flooring (vinyl plank or refinished hardwood are my choices) and good paint. NO carpet. Everything else stays "as is".

Allow pets. Charge extra. Screen the pet as carefully as you do the tenant. 2 minute in-home inspection has saved us.

If a unit is smoked in...I used to get upset. I'd spend a thousand $$$ cleaning, Kilzing, and de-stinkifying. Now, I up the rent $50 a month and leave it "as is". $600/year free income for being one of the few places in town that takes smokers. Few vacancies since so few places allow smokers. Most of them still smoke outside.

"Smokers WELCOME! Pets WELCOME!" Perfect Class C niches. I'm only in the unit 2-3 times per year for inspection for about 10 minutes. That isn't going to hurt any more than the summer I worked in a bar that allowed smoking.

So, what improvements do I do? Not many that cost me money. Mostly it's screening and offering amenities that few others do. And SCREEN! The 2 minute in home inspection is priceless.

Offer the Pay Day plan. Less $ to move in, but still get the max deposit + an extra month's rent each year. If they can't/won't budget, do it for them. Takes a few seconds to set up.

ACH payments. Don't rely on them to remember or want to give me the money. TAKE the money.

Fees. Charge them ASAP and stick to them. Here's a sample of a few I have:

1) Late fee $25 day 1...+$5 each added day.

2) Bounce ACH fee... $25.

3) Unlock fee... $40.

4) Missed appointment fee... $40.

5) Lease alteration fee (if they want to switch to monthly payment)... $50.

6) Weekly payment fee (if they get behind on any plan). Divide monthly payment by 4 or bi-weekly payment by 2 and add $25 per week.

7) Pet fee. $150 up front, $20 on the rent per month or $10 on bi-weekly. Going up to $25 per pet in 2021.

Give them what they want...for a fee. Want to pay late? Fee. Want a pet? Fee. Want to change your rent due date? Fee. There are others, but you get the idea.

Sure.

So-- you've got a highly desirable area. The desirability and the economic stability of your area are reflected in the prices-- both in terms of rental rates, but also in terms of purchase price. But even within highly desirable/competitive areas, you've got ordinary people who flip burgers or work the gas station, and they need a place to live, also. And they're definitely getting priced out of their own communities, because the communities are so desirable for outsiders to come into.

Someone with a highly desirable area is working with a broader range of people who want to live there, vs working with a narrow slice of people who happen to live there, if that makes sense? People move to my town by accident-- because it's where they grew up, or their mom still is, or they happen to have a very specific skillset. But someone with a rental 10 minutes from Disney World, or right on the beach in Miami, or in Aspen or Honolulu is looking for someone who is in the area because they want to be there.

So if I had a rental on the beach in Honolulu, I'd screen very differently than if I had a 2-bedroom shack in a half-bulldozed Detroit slum or two hours from El Paso.

That's one of the things about "C" properties, as we use the term here-- is that they're generally not the sort of places people live because they consciously desire to, but because it makes sense to live there due to its proximity to (work) (family) (whatever). Budget is definitely a factor as well, but it's secondary to whatever has brought them to the area, or keeps them in the area. That's not to say that people in Vail or Charleston or Myrtle Beach don't live there because they grew up there and it never occurred to them to move somewhere cheaper. But you don't put Myrtle Beach and Vail in the same category as you put Hugo, Oklahoma or Helena, Arkansas.

I paint, do flooring, provide appliances, and have ceiling fans as well. I replace light switches and plugs and light fixtures and blah, blah, blah. But--- I just bought a triplex last month for $4k, and after I renovate it next summer and sink maybe $50k into the whole thing, I might rent it out as a quad for $400/unit. I could certainly rent it out right now for $200 or $300/unit and not do a thing to it... but I don't, because the people who would live in it as-is aren't people I want to do business with. Because the fact that they'd be willing to live in it as-is is an indicator that they've already got Major Problems in life, and it would be a 99.9% chance their Problems would affect me, too. :)

"but I don't, because the people who would live in it as-is aren't people I want to do business with. Because the fact that they'd be willing to live in it as-is is an indicator that they've already got Major Problems in life, and it would be a 99.9% chance their Problems would affect me, too. :)"

Great post.

You all have me thinking. I am wondering if I am the exception to the rule on some of the discussion here. I will be thinking on this one.

As far as my rental goes, I consider it a C but, it is safe clean and functional. It is not fancy and is a 1930 house but I do have ceiling fans with fancy lighting and dishwasher. I provide a stove and refrigerator but nothing fancy.

What I mean by having less is that I have a 19 year old truck that I drive instead of a new one. I live in a 1910 house that is no more than 1000sf. My rental is 20 years newer. My cell phone is an Apple 5s that I bought just a few years ago for $80. That was a high dollar phone to me. I do not have cable or satellite, just over the air TV. I have basic internet.

Richard - you funny! 80's is an OLD house!? How about 1880's? My oldest was built in 1852. I joke that Lincoln could have slept there. I have several that are over 100 years old!

Now THAT's old!

But they are all in great condition.

I don't really know how to divide my properties into A,B, or C classes. It's a continuum from executive 5 beds with 2 car garage to affordable studio apts, various neighborhoods.

BUT...

None of them are run down, dirty, or ugly.

I coach too many LLs who operate on the "It's just a C rental - good enough" method and lose thousand$$$ due lousy residents.

I helped one who was confused why so many people walked thru but did not even do an app. It had a BROWN ref, 2 knobs missing from the stove, cracked glass in the front door, cobwebs on the stairs to the bedrooms, burned out lightbulbs...

My theory is that Momma picks the house, even class C. I will attract better people, even in class C, with a clean, freshly painted, updated appliance home.

Even low income people prefer clean with a few modern amenities.

The house might have age and use on it but it's clean and neat and safe. It will be the nicest home they look at.

This gives me the pick of the better prospects.

We NEVER show a home until it has been pro cleaned.

I NEVER want a person who will accept a home AS IS. THAT is how LLs get into trouble.

We use the Sec8 standards - no peeling paint, no broken glass, handrails...

Once we spend the effort and small expense to get the home up to standard it's easier to turnover.

There are decent low income people who pay their rent and keep up the property. We must first ATTRACT them and then sort with thorough screening.

But we'll never get that good C person if the house looks drab and needs repair.

BRAD

Now regarding updates that are worth it - our first focus is CLEAN and SAFE.

Next is DURABLE. Carpet free is a great example.

Pfister faucets means no call backs. Using the SPOTLESS finish because we have really hard water.

Some of our furnaces are over 66 years old so I am upgrading them one by one. I am doing this for ME, so we don't have furnace emergencies that interrupt my FREEDOM!!! and NEW FURNACE ehlps attract the gooduns.

Semi gloss white straight from the can on all trim and doors makes turnover easier.

Standardized colors again makes turnover simpler. Repose grey right now. I'm sure that will change in the next few years.

Clean, up to date, used appliances - all white so I can swap them easily. Nicer homes get stainless steel. Again, stainless to stainless is an easy swap.

A clean, modern ref will catch Momma's eye and separate us from the competition.

The better disposal (3/4 hp) is trouble free.

I pay a housekeeper $75-120 to clean EVERY home at turnover, no matter how clean it already looks. Mine are SUPER clean.

If rust starts to show on the ref door it goes to a worker or the curb with a FREE sign on it. We've been able to paint a few but usually by then the interior plastic is starting to yellow.

I thank the LLs who operate on 'good enough" because they turn away good prospects who come to us.

Another small note: we treat EVERYONE with respect. This helps us get the gooduns. We don't prejudge based on anything other than the app and 2 Minute In Home Visit. I recall a LL here turning away an approved applicant because they were 4 minutes late or because someone said God Bless. Good people might be late and God Bless is normal talk in Indiana, even among non-church goers.

BRAD

Another thought...

(Ya got me goin!)

We have cleaned up MANY next door yards. This must be done with kid gloves and tact, but it CAN help the neighborhood.

If we have a dumpster we INVITE the neighbors to use it. Goodwill AND the neighborhood improves.

My guy has trimmed MANY bushes and limbs for neighbors. This helps MY property look better.

We have spray painted several next door houses "as a neighborly favor" so MY house would sell.

I even tried to buy a neighbor's truck to move it off site.

I figure his junkie rusted truck reduced my selling price by $5000.