“The most important thing for a young man is to establish a credit… a reputation, character.” – John D. Rockefeller

As of now, credit history may not be as important of an asset as it once was. The Fair Employment and Housing Act (FEHA) has previously ruled that an individual’s income could not be used against a housing provider in assessing eligibility for housing. This was referring to people who were in a program such as Section 8 which provided a rent subsidy. In other words, if a tenant’s rent was 1500 dollars and Section 8 gave them a subsidy of 1000 dollars, then the credit worthiness or income standards could only be used for the tenants portion, or the 500 dollars that the tenant was paying directly. I knew of a case a few years ago where the Section 8 tenant was paying one dollar a month, so, presumably, in that case, the ability to assess creditworthiness of the prospective tenant would not exist.

WHAT’S NEW? SB 267 (Eggman) which as of the new year , is in effect, presents a further restriction. According to THE LEGISLATIVE COUNSEL’S DIGEST from LEGISCAN:

This bill would additionally prohibit the use of a person’s credit history as part of the application process for a rental housing accommodation without offering the applicant the option of providing lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay the portion of the rent to be paid by the tenant, including, but not limited to, government benefit payments, pay records, and bank statements, in instances in which there is a government rent subsidy. The bill would, if the applicant elects to provide lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay, require the housing provider to provide the applicant reasonable time to respond with that alternative evidence and reasonably consider that alternative evidence in lieu of the person’s credit history in determining whether to offer the rental accommodation to the applicant.

WHAT DOES THIS MEAN? This means that a person with bad credit can order “ability to pay” documentation in the form of a Section 8 voucher or some other proof that the tenants rental expenses, will be covered. We would then be required to use this subsidy documentation as alternative evidence of ability to pay rent, instead of a credit history. We can still request other documentation to verify employment and we can still check for public notices and unlawful detainers history to use in our due diligence in researching a prospective renter.

DO YOUR HOMEWORK. This, along with the limiting of security deposits calls on us as landlords to be more vigilant than ever in choosing a new tenant. It is difficult and expensive to remove a bad one, and it can take months longer than in the past. The old saying goes that you don’t really know someone until you live with them or rent to them. Signing a lease is a very important step as a housing provider. Make sure you give yourself the best chance possible of making the right decision. Your Apartment Association can help with research, take a look, if you can, at the individual’s current housing and ask yourself if your a confident in your choice before your sign the lease.

“I have always tried to be true to myself, to pick those battles I felt were important. My ultimate responsibility is to myself. I could never be anything else.” – Arthur Ashe

What we at PRS PROPERTIES CAN DO. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparables in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities.We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.