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By Robert L. Cain

In Texas, if a landlord rents to a convicted felon, he or she can be sued for negligence.  No, so far it hasn’t happened, but certainly could. Granted the felony has to be one of the Sinister Seven: murder, kidnapping, trafficking in people, sex abuse, sex abuse of a child, promotion of prostitution, or aggravated robbery or burglary. For some reason drug manufacturing isn’t included even though it should be. But now, in the cities of Oakland, California, San Francisco, Seattle, Washington, Portland, Oregon, Chicago, New York, and soon Berkeley, California, you can’t even ask a prospective tenant if he or she has a criminal record, not even one of the Sinister Seven..

Laws that restrict the objective and reasonable qualifications landlords may require make it more difficult to weed out bad tenants and even more perilous for landlords’ good tenants..  The previous perpetrators of any felony are more apt to be bad tenants than a citizen who respects the law and his or her neighbors. They have proved themselves to be no respecters of the law and community.

Landlords can still reject a convicted sex offender or meth cook (drug manufacturer), but only after that applicant the criminal record shows up on a search done after a conditional approval of the application.  At that point, the landlord has to tell them in writing that he or she will be checking the sex offender database and looking for a methamphetamine manufacturing conviction.  In either, the applicant can be rejected. That is much the same as the “ban the box” laws involving employment.

Even so, landlords can use perfectly legal and effective ways to weed out any and all bad tenants.  The first task is to create iron-clad written rental requirements answering such questions as:  What is sufficient income? What is an acceptable credit score?  What is the source of income? What are acceptable references? And you can probably think of more requirements. But be careful of violating the Fair Housing Act.  We’ll look at why in a minute.

In addition, these four requirements are always essential:

1. You must meet each adult applicant who would be moving in. None of this, “I’ll take it home for my husband to sign.”  Her husband must show up.
2. You must verify their identity with picture ID.
3. You must be able to verify all information on the application.  That means previous addresses, employers, income source, previous landlords, and income.
4. Their income must be sufficient (you decide what percentage goes to rent, not them) and be proved by pay stubs or award letters.

If applicants don’t meet any one of those requirements , reject them out of hand.  None of these has anything to do with felony convictions. Rental owners and managers come across such prospective tenants every day. Suppose you can’t verify the length of time at the last address.  Your applicant might have made up the address or landlord, or may have exaggerated his or her time at that address.  That might have been because prison was the address he or she tried to hide.  That’s grounds to reject immediately for lying on the rental application.  Likewise with time on the job or source of income, no verification, no renting from you.

An easy way to check previous addresses listed on the rental application is the Social Search.  That is a report from the Social Security Administration that lists all previous addresses of that person. Suppose you find that he or she lived at an address not listed on the rental application? The explanation had better be good (an verifiable). What would be most interesting is if one of the previous addresses was the state prison, not listed, of course, on the rental application.

Now suppose all the information is verifiable, income is sufficient, and landlord references are acceptable.  You still have an one more important thing to check: the credit report. You decide what credit is acceptable and, of course, you include that on your written rental standards.  You can use a FICO score or possibly say that the applicant can have had no bankruptcies in the past seven years, or no collections, paid or unpaid.  The requirements will differ by property and the demographics of your current tenants. A felon may have unacceptable credit or no credit at all. That is grounds to reject.

What to be concerned about when renting to an ex-con is, in addition to his or her committing another crime on your property is being sent back to prison. 

Length of time out of prison is a good indicator of how someone may have turned his or her life around, too.  The first three years out of prison are the most treacherous for an ex-con.  The Bureau of Justice Statistics reports that the most common crimes that result in rearrest are property crime (73.8 percent) followed by drug crimes (66.7 percent), public order crimes (62,2 percent), and violent crimes (61.7 percent).  But after seven years the rearrest rate for all crimes drops to 2.3 percent.

Arrest rate is one thing, re-incarceration is another.  Just because someone is arrested doesn’t mean he or she is going back to prison.  CBS News reported, though, “About 43 percent of prisoners who were let out in 2004 were sent back to prison by 2007, either for a new crime or violating the conditions of their release.” 

Even so for that 57 percent, an arrest can be as inconvenient for a landlord as a re-incarceration.  An arrest means the police may keep that person in jail awaiting trial.  In the meantime, he or she can’t go to work and will lose his or her job.  Even if your tenant is out on bail, the company may fire him or her. That means no rent next month and an eviction.

In states where it is permissible to reject for a criminal record, landlords need to be cautious about running afoul of the Fair Housing Act since minorities comprise the majority of felons, The NAACP reports that “Though African Americans and Hispanics make up approximately 32% of the US population, they comprised 56% of all incarcerated people in 2015.” Tthe Fair Housing enforcers will look carefully at who a landlord accepts and rejects with an eye to looking at illegal discrimination.  That’s why completely objective and reasonable rental standards are essential.  What is “reasonable”? That’s the $64,000 question and subject to interpretation by the Fair Housing folks.  Ask your lawyer.

Landlords have a duty to their good tenants to provide a safe and habitable home and a duty to themselves to protect their investments. Careful screening of applicants to weed out bad citizens is essential for both duties.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

By Robert L. Cain

A Nationwide Insurance study found that 31 is the average age people begin saving for retirement.  But will they ever be able to retire?  Are most people in a position, or will they ever be in a position, to amass enough savings to retire?  Saving for retirement is not even an option for many people.  There’s little or no money left at the end of the month to sock away anything  for savings. Yes, the statistics we’ll look at are discouraging, but there’s a flip side that is encouraging we’ll look at in a minute. Let’s look at the discouraging statistics first.

One study by LIMRA, a “worldwide research, consulting, and professional development organization”  reports that 61 percent of employees say debt has “negatively affected their retirement savings.”

The average 25-34 year old employee earns about $3500 a month reports the Census Bureau.  That’s before taxes and other deductions.  But just using that gross income figure, let’s look at where the money goes.  Average rent for a two-bedroom apartment is $1207 a month nationwide.  Of course, it’s more or less some places, but that is average, just as is income.  Then there are car payments.  A monthly car payment for a used car averages $391 a month.  Want a new car? Bump that up to $554.  That’s for one person.  A two-person household might add a second car for another $391 a month.  And that’s just the car payment.  Add gas, maintenance, other transportation and it’s another $336.

Then there are the student loans.  Those average $400 a month per person and take around 20 years to pay off.  So if someone finishes college with a bachelor’s degree at 22, the student loan will eat up $400 a month until he or she is about 42.  Grad school loans extend that repayment time and amount, assuming they aren’t paid off early. That’s if the loan isn’t put in forbearance for a time, which would obviously add to the time before it pays off.

And there’s food, and that’s another $1,000 or so.  Right now, we’re at $3334 in expenses, only  $116 before the $3500 is all gone for the month.  But we haven’t touched credit card debt.  The average monthly minimum credit card payment is $58, bringing us to about $3392.

The biggest knock after that is health care.  The “2018 Milliman Medical Index” from May 2018 reports that the cost is just over $6,000 a year for two people, double for a family of four, but even one person will pay $250 a month, and that’s even with the “most common employer-sponsored health plan.”  So now the entire $3500 is wiped out and then some.

Mind you, we haven’t touched child care, lunches, or dinners out.  Child care will eat up $200 a week per child, or $800 a month.  If it’s a couple with a child and two incomes, it’s possible, but another huge expense to deal with.

But won’t that all get better as those 31 year olds get older and they try to sock away some savings when they move up to better-paying jobs?  Not necessarily.  A LinkedIn survey of 1019 working professionals in September 2019 found that “41 percent of millennials—and 30 percent of all adults—found it difficult to move up in their fields because boomers are waiting longer to retire.” Because many baby boomers, those 54 to 74, aren’t retiring, there’s no vacancy for the higher paying jobs.  The Bureau of Labor Statistics reports that 20.6 percent of Americans 65 and older are either working or looking for work, up from 12.4 percent in November 1999, 20 year ago.  In fact, it’s the largest percentage since November 1960.

Why aren’t they retiring?  Transamerica Center for Retirement Studies reports that more than half of all workers in the US plan to keep working past 65 or just forget about retiring entirely.  After all, with their improved health, they won’t be forced into retirement and with their hammered 401(k)s from the Great Recession, their savings may be in non-retirement shape.  According to the Federal Reserve’s Study of Consumer Finances the median retirement account for people 55 to 64 who have a retirement account is $120,000.  If we include those without a retirement account, median savings are just $17,000.  Yes, they have to keep working.

A Moody’s study found that older workers failing to retire has held back wage growth.  The more workers 65 and older in a company, the more slowly wages increased and in fact the lower wages over all.

Those people who begin saving for retirement at 31 still have at least 36 years before they can retire, longer than they have been alive.  Considering their debt, which 2/3 of employees say negatively affects their lifestyle, and with the opportunity to move up in their jobs hindered by older workers not retiring, they could be on the lower rungs of the income ladder for 20 years, in their 40s and early 50s before they earn enough to think about sufficient retirement savings.

That means millennials and even many Gen Xers may be in no position to retire at 67 or even 70.  They simply won’t have accumulated enough savings to live the retired life they imagine. But some people will have the savings because they are careful savers.

Here’s the encouraging part. The Nationwide Insurance study reports that 56 percent of people have less than $100,00 in savings. But that means 44 percent have more than $100,000 in savings. The study further reports that 22 percent of employees say they are unprepared for retirement, but that leaves 78 percent, more than three-quarters, who are prepared. These are people who have found a way to put money away by whatever means.  These are the people who take advantage of matched savings from the companies where they work, either for retirement or other savings. As of 2020, they can contribute up to  $19,500. These are people who budget carefully and believe in paying themselves first. It’s hard to say what techniques they use because every person’s situation is different.  Whatever it is, it works for them and shows them to be responsible money managers.

Close to half of Americans are finding a way to save for retirement, and that is encouraging.  The other half may not be in as good a position to retire even after working 40 years.  Are those who save financially responsible? Probably. Are those who can’t save irresponsible? Not necessarily, they are just trying to get by.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

By Robert L. Cain

“Wage growth has hit a wall,” economist Joseph Song, wrote in a report for Bank of America.  Analysts had expected 4 percent growth but were taken aback at 3 percent and sometimes lower depending on an employee’s position.  Overall, raises ended up just over 3 percent in August 2018, down from 3.4 percent in February on their way down further.  But manufacturing wages have increased by only 2 percent, more about that and what it means in a minute. Why have wage increases showed?

Economists blame three things among others, the trade war with China, a slowing economy, weak productivity growth, and low inflation.  But two more things are often ignored, surplus workers and high corporate debt.

Surplus workers? But the official unemployment rate is at an historic low 3.6 percent. That’s misleading.  The Bureau of Labor Statistics provides another figure they call U-6 that is rarely reported.  That includes “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons.” That also includes people who have given up finding work for whatever reason but would work if the opportunity presented itself. The unemployment figure when those people are included is 7 percent.  The official unemployment rate is called U-3 by the Bureau of Labor Statistics, and that includes “Total unemployed, as a percent of the civilian work force.”  Who’s included in the work force?  Only those with any kind of job, part time included, and those actively looking for work.

But there’s more. The labor pool has increased with 63.3 percent of Americans working or looking for work in October, the highest since 2013. That larger multitude of available workers lets businesses be more parsimonious in their wage increases.

The last two times the “official,” U-3, unemployment rate was at 7 percent were in 2008 during the recession, when it was on its way up to 10 percent in 2010 and then in 2012 when it was on its way down from recession highs.

Then,  there’s the pool of 4.4 million just part time workers who would like to be full-time workers. They mean employers don’t need to raise wages much because they are available to be made full-time at maybe current wages.  Add to that the 4.9 million, officially counted or not, who want a job but can’t find one and there is a pool of workers just wanting a full-time job and ready to work for current wages.

Interestingly enough, while all non-supervisory workers’ wages have increased an average of 3.5 percent, supervisors wages slowed considerably to 1.8 percent in October.  The reason for that is that their pay includes bonuses for meeting sales targets, reports Joseph Song.  A “sputtering economy” and lower corporate revenue because of uncertain foreign trade revenue are sometimes the cause. Not selling means lower profits in addition to lower pay.

Add to that lower productivity.  Productivity drives wages up or down.  The tax cuts helped productivity because companies bought new equipment thus increasing the amount workers could do, raising wages.  However, since early 2018, investment in equipment has slowed to a trickle as companies hunker down fearing a slower economy, slowing wage increases.

Factory employment amounts to only 8.4 percent of the workforce, but it has an imposing effect on the pay of all US workers because manufacturing workers tend to earn higher salaries than other workers do, says Joseph LaVorgna of the research firm Natixis. As mentioned at the beginning, their wages are up only 2 percent, thus dampening wage increases across the board.

Inflation drives wage increases, too, but inflation has been mostly absent.  The Consumer Price Index has been falling, or increasing at a slower rate, and stands at 1.8 percent in October.  Supposedly that’s partly due to online shopping, and expectations of lower price increases because of a “globally connected economy,” says Sophia Koropeckyj of Moody’s Analytics. More inflation of course means higher prices and so employers have to compensate workers so they can buy things at higher prices.  But low inflation means there’s little pressure to increase wages.

What does all this mean?  Different economists think different scenarios. But here’s another wrinkle to consider.  Corporate debt has skyrocketed to a never before seen $10 trillion. Even though some of this country’s best-known companies have borrowed considerable amounts, most of the borrowing this year has been by weaker, BBB Bond-rated companies.   They have borrowed money for “financial risk taking,” such as payouts to investors and dealmaking on Wall Street rather than new plants and equipment, reports the International Monetary Fund.  That means the borrowed money won’t produce any income much less profits. And they’re borrowing at rates that only the top companies could get a few years ago because the Federal Reserve lowered interest rates. These borderline companies thought let’s grab some of that with little interest but not use it to make more money and increase profits.  Disturbing thinking.

Emre Tiftik, a debt specialist with the industry association Institute of International Finance is concerned.  He said, “we are sitting on the top of an unexploded bomb, and we really don’t know what will trigger the explosion.”

The economy keeps growing, but not particularly fast, only 2.1 percent annual rate, virtually the same as the average since the end of the recession in 2009.

The unexploded bomb could go off if there’s an unexpected shock such as a breakdown of US-China trade talks, a Persian Gulf military conflict, an oil shortage, or something we just haven’t thought of yet.  Out the window would go economists’ rosy outlooks. Gregory Venizelos, a credit strategist for AXA Investment Managers in London said “You can definitely think of an Armageddon scenario.”  And last year the Federal Reserve warned about the rapid increase in risky corporate debt.

Everything may be all right, but red warning signs and klaxons are there.  Slower wage increases, surplus workers, weak productivity, slower sales and bonuses, and $10 trillion in corporate debt are disturbing.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

By Robert L. Cain

They don’t mean to, but things just happen to them. They aren’t conniving and deceitful, just unconscious. These are people who go through their lives making one bad decision after another, who have a black cloud that follows them around raining (or worse) on everything they try to do, and who wonder why they “never get a break.”  They simply blunder through life. These folks actually may not even know what they do puts them decisively in the category of “bad tenant.”

An unconscious tenant can be, and often is, exasperating.  We know they mean well and that they don’t intentionally do all those things that make them unacceptable to live in our properties, but they do them just the same. Actions are what count far more than the intent.

What are the characteristics identifying bad tenants?

First, they don’t take care of their homes.  They can be messy, filthy, and generally unkempt, and they break things.

Second, they don’t pay the rent on time or at all.  Of course, they always have an excuse.  They call it a reason, but it is an excuse nonetheless.

Third, their qualities as neighbors come in a variety of colors and tints.  They may have loud parties.  They or their friends may park in other people’s spaces in an apartment complex.  They may get into arguments with neighbors about things other than the parking places.  Their children may run wild through and around the property.  They may leave their possessions in the common areas.  They may smoke right outside people’s windows.

Fourth, they consider property rules only suggestions.  The landlord makes up those rules only because it’s “his way or the highway.”  The idea, then, is to break as many of them as they can get away with.  The response when they are caught is to either apologize and say “I forgot,” or say “I didn’t realize there was a problem with that.”

Those are all characteristics and actions of the bad tenant, but they also are identifying actions of unconscious tenants, but not necessarily the characteristics.  The unconscious tenants’ advantage is that they are that way all the time; they can’t help it.  The professional bad tenant knows how to seem as if he’s a good citizen and especially good tenant, and can fool the less-than-careful landlord.

The advantage for rental owners comes before an unconscious tenant has ever even filled out a rental application and has had checked what pass for references.

Sometimes you get clues about the lack of quality of prospective tenants, both bad and unconscious, without their ever having lied even once. Bad tenants tend to be inconsiderate and rude as do unconscious tenants, albeit for different reasons. These six behaviors that will give you a clue the problems you will have if you rent to these tenants.

First clue: an unconscious prospective tenant walks into the unit smoking. Today, polite and considerate people don’t walk into someone else’s property smoking without asking permission–EVER.

Smoking in someone else’s house used to be permissible and acceptable, but not today. With so many states prohibiting smoking inside any public building and not even within 20 feet of the door, smoking has become anathema.  Plus, many rental properties don’t allow any smoking anywhere on the premises, inside or out.

After you tell them that you don’t allow smoking in your units, if they put the cigarette out on the floor, even if it’s concrete, that’s a sure sign of an inconsiderate boor whom you don’t want to rent to. If they flick the cigarette out the door without ever putting it out, that’s another sure sign of someone you don’t want.

Second clue: they park in front of the driveway, blocking it so cars can’t get in or out. Unbelievable gall. Figure that you would have trouble with these jerks from day one.  Count on their parking in other people’s spots, blocking people in their spots, and always asking if they can have special dispensation to deliver, load or unload something.  It will be a constant stream of complaints and irritations from neighbors about these people’s inconsiderate habits.

Third clue: unconscious people walk into a unit without knocking or saying anything. Can you believe behavior like that? It is not their home. They have not even filled out a rental application yet, much less agreed to pay the rent mostly on time and been given the keys.

What they have done is most likely unconscious behavior.  After all, they saw an open door and that means it’s okay to just walk in.  They may be trying an assumptive close, but not likely and it doesn’t work here. Their cavalier attitude about your property should immediately eliminate them as prospective tenants.

Fourth clue: they bring their or children dog into the unit and let either run wild through the unit. Figure you will have to reject them after you check their rental application. If they won’t even control their dog or children when they’re trying to get to rent from you, how do you think they’ll do after they move in?  Imagine what previous landlords will say about them. Also, figure you will have constant complaints from neighbors about one thing or another having to do with their children or dog.  We can only speculate what those complaints might entail. Older children will result in a different set of complaints than will younger ones, of course.

Just as bad will be as their children run amok through your property, the parents scream at them.  That means the children usually ignore their parents’ instructions and may be just as unconscious as the parents.

Fifth clue: if they are late for their appointment to look at the unit, they will be late with the rent.  Of course, they will have an excuse.  But you’ve heard them all, haven’t you.  If it isn’t the flat tire, it’s kids to the doctor or the all-time undefinable favorite, the “family emergency.”  Whatever the reason, consider that they are trying it out on you to see if it will work after you let them move into your property. And why didn’t they call?

Sixth clue: look at their car if you can. If it is well-maintained (and is actually theirs), you have a clue about how well they take care of the rest of their lives. Look for a missing hubcap. If one is missing, I have heard from several landlords, it is a sign they won’t take care of their homes. This could be your experience, too.

Unfortunately, I had some tenants once, who when they applied to rent the house, showed up in a cute red car in perfect condition, clean and everything.  After I rented to them I never saw that car again.  What they had was a VW bus with writing all over the sides of it.  I don’t remember what all it said except for something about peace and love and a few peace symbols.  At least it wasn’t gang graffiti. Oh, and next to the definition of unconscious tenant in the dictionary was their picture.

Here’s the point to remember when screening and even before screening: how you do anything is how you do everything. Count on any inconsiderate behavior or unconscious behavior to be a precursor of even worse behavior if those people move into your property.  Any one of the six activities above is grounds to think about immediately rejecting a prospective tenant and meticulously double-checking everything and verifying every reference. It will save you time, money, and grief later on.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

By Robert L. Cain

They were 18 years old, got a free t-shirt, $5,000 in debt, and a 600 FICO score. Before the Credit CARD Act’s implementation in 2010 made them stop, credit card companies set up tables on college campuses and handed out credit cards along with free t-shirts and coupons for free food to college students.  It was like free money to those 18-year-olds because they were blissfully ignorant about how money and finances work. The credit card companies figured that mom and dad would pay the bills to save their children from financial disaster.  Sometimes that worked.  Other times in landed the kids in financial purgatory.

Times have changed, and credit card companies face many more restrictions on their marketing on college campuses and their ability to take advantage of 18-year-olds’ financial ignorance and inexperience.  But Millennials lack of financial understanding is the same as it was when credit card companies were handing out credit cards like candy. The result, reports Bankrate, some 58 percent of young people have been denied at least one kind of credit because of their credit scores. Some 36 percent with annual incomes under $40,000 couldn’t get credit and 22 percent with incomes over $80,000 couldn’t.  For Millennials, it was credit cards (36 percent) but 18 percent couldn’t get a car loan  They could be denied not just a credit card, a car loan, but a mortgage, or a rental.  And they may not understand why.

Today’s young people, the Millennials, technology is second nature because they have used it their entire lives.  But a 2018 study from Discover found that only 12 percent of them have what Discover described as “a complete understanding” of what will affect their credit, compared to up to 29 percent of “older generations” who have a “complete understanding.”  (That means that almost three-quarters of “older” people still don’t get it about what affects their credit standing. But that’s another story.)

Even so, young people have managed to accumulate debt. An NBC News study found that three of four Millennials owe money. And it gets worse. A quarter of 19 to 34 year olds have more than $30,000 in debt and 11 percent owe more than $100,000.  Just 22 percent have no debt at all. That 11 percent owing more than $100,000 accounted for at least 30 percent of the money owed.

Credit card debt is the most prevalent kind, not the highest dollar amount of debt, but the most common with 46 percent owing that. Student loans come in second in prevalence with 36 percent owing those, but of course those come with far higher balances. The average debt of graduating seniors more than doubled since 1996.

Who is it then who is not having financial or credit difficulties and who is?  Elevate’s Center for the New Middle Class found out.  Most of the financial problems non-prime Millennials have come from a lack of financial education. They define non-prime as those people with FICO scores below 700.  Most of them learned about finances from trial and error.  Only 49 percent learned anything about that from parents, never seeing how their parents dealt with finances. They were clueless.  Conversely, 61 percent of prime Millennials, those with a FICO score over 700, learned about finances from their parents.

What factors could cause them difficulties in everyday living?  The Elevate study found that almost six in 10 of them lived paycheck to paycheck, and more often than not 41 percent of them ran out of money every month.  Half of them worry about living expenses exceeding their abilities to pay and only 41 percent  say they could meet short-term financial goals as opposed to 65 percent of non-prime Millennials.  Only half of them have any kind of handle on day-to-day financial matters, while 65 percent of prime Millennials say they are confident they have their goals under control.  And the non-prime Millennials are in debt.  Two-thirds say they have too much debt, twice as many as the prime Millennials.  And they are “more likely to experience unexpected car repairs or non-routine medical expenses,” the study found.

What could they learn that might make life easier? A study by FINRA Foundation, The 2018 National Financial Capability Study, suggested that Millennials’ blissful ignorance encompassed at least four items.

One, taxes. Billy Hensley, president and CEO of the National Endowment for Financial Education, said “taxes are a mystery to most of us.” They may not realize that if you file a simple return, that is, one that has only taxes taken from a paycheck and maybe a little income from stocks, or interest income,  it doesn’t cost anything.  You don’t even have to file if your income is less than a specific amount.  But if you want the taxes withheld from paychecks to be refunded, you have to file. You could get all the money paid in taxes back. But many don’t know that.

Second, of the one-third of adults under the age of 30 who have student loans, more than half of them never tried to figure out what their monthly payments would be before they agreed to the loan, reported a policy brief from the Global Financial Literacy Excellence Center.  The result is that they may be paying far more than they could have if they had shopped for a different loan type, say a subsidized government loan.

Third, they don’t know how to build a credit history or what factors affect a FICO score.  They don’t realize that even one late payment, that’s one made more than 30 days after the due date, and missed payments will remain on a credit report for seven years.  Two missed payment can cause a 60- to 110-point drop in a credit score says Equifax.  Those may not just be a late credit card payment but other unpaid bills and rent.  Further they don’t know how to, or care to apparently, access the free credit report they are entitled to every year.

Fourth, they not only don’t budget, but they don’t save, either. Jonathan Clarke, associate professor of finance at Georgia Tech’s Scheller College of Business says, “Being able to think through a budget can make all the difference in the world in terms of achieving financial security.”  He reminds us of the old adage, “pay yourself first.”  Ten percent a paycheck is a terrific place to start by putting that amount into a savings account before it ever gets to the account where it can be spent with a debit card.

Financial knowledge accrues benefits that many people can’t imagine: good credit, more income, financial security, and far less stress. Little has changed over the decades as to the financial illiteracy of young people. But today, unlike say in 1970, the world is far more complicated.  Everything is tracked, recorded, and reported.  A new more world-wise attitude would serve young people.  Figure that those who would take your money, who would lend you money, who would offer unneeded services are not there to benefit you but to benefit themselves.  Once people of all ages figure that out, the way to achieve financial security will become obvious.

Written for Zip Reports where they provide applicant screening services.  Visit their website.

By Robert L. Cain, Copyright 2020 Property News Service

Cash is king, at least for $19.99.  If $25 or less will bill buy it, chances are that’s what you’ll use, at least if you’re under 25 or over 45.  A Federal Reserve study, “2018 Findings from the Diary of Consumer Payment Choice,” examined how people use cash and found that cash beats cards hands down for purchases under $25 across all age groups.

People still do carry cash.  The Federal Reserve report found that the amount of cash people have on hand was $59 in 2017, little changed from previous years. Why is it that people opt for paying cash over using a card, especially for smaller purchases

Most of the evidence is anecdotal, relying on individuals willing to explain why they prefer cash to paying by card, but their reasons make sense. I did a quick, completely unscientific survey just to get an idea of people’s opinions of cash.  One person wrote back to me, “It depends! If I’m buying a beer at the local pub—cash. If I’m filling my RV with gas—card. Anything that might have a warrantee— card.”  But another response was, “Card, 2% cash back on everything. Different card for gas, 4% cash back there. Everything is inflated, have to try and get some back.”  Still another man wrote me, “Cards (debit/credit) for most everything. My cash is my ‘rat-hole’ money!!!!”  I can only speculate what “rat hole money” is.

Dollar bills are accepted almost everywhere.  Amazon opened no-cash stores, but they backed off and accept real money now, and several cities have even prohibited stores from refusing to accept cash.  Even when someone might otherwise use a card, sometimes cash can be the only option to pay because some small stores don’t accept cards.  Then there’s the incident at Target a couple of months ago when their online payment portal went down.  Wanted to pay with a card? Too bad.  Paying with cash? Step right up.

The benefit that people mention most often is convenience.  A creditcards.com study found that 40 percent of people prefer cash because it is faster and easier. Just take the money out of your wallet or purse and pay.  All done, no hassles, and it’s fast.  Yes, it has gotten faster to pay with a debit card than when the chip cards were first introduced, but there must be as many card terminals as there are stores, every one different.  Unless you’re a regular at the store, it may take a few extra, sometimes aggravating, seconds to sort out how the terminal works.  Some you can put your card in before the cashier finishes ringing up; others if you do that, the whole thing blows up and you have to start again.  Then you have to read the screen to find out what you’re supposed to do next. For example if you want cash back, with all of the terminals different, it could move from the upper left corner to the lower right or lower left, or who knows. On each screen snares lurk that can mislead the less–than-attentive or more distracted.  Then you get to start all over. Grrr. But with cash, just get the change and out the door you go.

Some gas stations give discounts for cash, but you have to go inside, probably twice, and pay in person, once to give them the cash so they turn on the pump and then to get your change when you’re done.  Is it worth the extra 25 cents to 50 cents for 10 gallons of gas to pay at the pump by card?

The tendency to spend less is another reason people may appreciate cash.  Using real money is painful. Take it out, hand it over, and it’s gone.  As a result, you are more likely to decline the add-ons and extras because spending real money is real and hurts more sometimes.

Plus, if you want to enjoy your purchases more, pay with real money.  “Individuals who pay with more painful forms of payment [cash among them] increase their emotional attachment to a product, decrease their commitment to non-chosen alternatives, are more likely to publicly signal their commitment to an organization, and are more likely to make a repeat transaction,” found a 2013 Journal of Consumer Research  study. It is because “Consumers must physically part with cash in a transaction, so they can easily feel the money they are spending.”  “I use my card. The money in my pocket is too valuable to waste,” one respondent posted to me.  Not so much with a debit card and not at all with a credit card because the money doesn’t seem real.

There’s no debt with cash.  Use a credit card and the bill comes at the end of the month. Pay with real money and there’s no bill and no interest.

Then there’s the privacy issue.  Pay with a debit or credit card and those who want to know can track the purchase, what it was, where it was made, and how much it cost. Broadcast to anyone who has access to bank records, in real time, and to businesses who pay for the information, they can inundate you with offers for their products and services.  If you want to keep a birthday present purchase secret from your husband , wife, or significant other, you’d better pay cash.  A debit card charge shows up immediately on the bank’s website and a credit card purchase on the bill at the end of the month.

One important warning by financial adviser and friend Sal Boenzi, “I’m currently working on a continuing education class and the topic is Elder Financial Abuse. One of the recommendations listed to help prevent this abuse is to ‘limit the use of cash, and use checks and credit cards instead, which leave a paper trail.’”

Pay with cash and it is anonymous.  Pay with a card and all bets are off. One person wrote, “I think that the government is at war with everyone who wants to use cash.”

Cash is easy, but maybe cards are easier and hurt less when we use them.  For smaller purchases, cash is convenient and preferred at least by people under 25 and over 45.

Written for Zip Reports where they provide applicant screening services.  Visit their website.

By Robert L. Cain

Own rental property?  Homelessness is all your fault. Shortage of available rentals is all your fault. Higher rents are all your fault.  State legislatures are on the warpath to make housing better for renters but are punishing rental owners and damaging the rental property business.  In New York, Oregon, and California, and the city of Seattle, increased restrictions on the rights of rental property owners are making owning rental property a bad business decision driving landlords out of the business.  What those who want to improve tenants’ situations forget is that you can’t do just one thing.  They believe that they can pass laws and the parties who are negatively affected will just stand by and eat it. They won’t.

Rental owners have a couple of options for counteracting the effects of the laws states and municipalities enact that negatively affect their businesses.  We’ll look at those at the end

This year the New York State legislature passed what the sponsors described as the “strongest tenant protections in history.”   What it really does is ensure that rental properties in New York will deteriorate. If a landlord wants to make a capital improvement on a property, those include such things as boilers, roof replacement, or, according to the IRS “Addition of new or replacement components or material sub-components to property,”  anything that “Extends the useful life of the property” and “Ameliorates a material condition or defect.” The new law caps such expenditures at $15,000 on individual apartment improvements for 15 years for which the landlord can increase rent.  Then the rent reverts to what it was before the renovation.

Spend more than $15,000, it comes out of the landlord’s pocket.  Landlords can only raise the rent 2 percent a year to pay for the improvements when before they could raise it 6 percent.

New York also caps the maximum rent increases for rent-controlled tenants. Those are to be set at “the average of the last five Rent Guidelines Board annual rent increases of one-year, rent-stabilized renewals, or at 7.5 percent, whichever is less.”

If a tenant complains about a rent “overcharge,” the court or state Division of Housing and Community can go back six or more years, up from four, looking at rent history to determine if the overcharge was too high.

And that’s for existing tenants.  New tenants get protections, too.  A New York Times article reports, “Security deposits will be limited to one month’s rent and procedures will be improved to make it easier for renters to get their security deposits back. Tenants who were seen as troublemakers by landlords — perhaps for standing up for their rights — would sometimes end up on blacklists that would be shared among rental agencies. That practice would be banned.”  In addition, “[existing] Tenants would be better protected during the eviction process, particularly against retaliatory evictions.” No, there won’t be an official “blacklist,” but landlords can still call other landlords for references.

Look for buildings and units to fall into disrepair because landlords simply can’t get financing to pay for improvements and repairs. A lender has to be able to show that the property owner could get enough more rent to cover the loan payments.  No financing, and the rental owner won’t be able to make the improvements. That in turn decreases the value of real estate because unresolved repair problems and deteriorating buildings drive down real estate prices.

The regulations will hit the “mom-and-pop landlords hardest because many of them are surviving month to month.  Any inability to raise rents appropriately can result in their simply abandoning their properties as has happened in the past. A coalition of four real estate groups, the Taxpayers for an Affordable New York, said, “This legislation fails to address the city’s housing crisis, and will lead to disinvestment in the city’s private sector rental stock, consigning hundreds of thousands of rent-regulated tenants to living in buildings that are likely to fall into disrepair.”

What’s just as bad is that if a property owner wants to move into his or her own property or have a family member move in, he or she may not be able to because only one “owner use” conversion is permitted.

As if that isn’t enough, there’s more, though not so egregious, that is easy to find by doing a search for New York rent laws.

That’s just New York. Landlords are the targets of recent restrictive legislation in other states, as well.

Seattle has for many years been on the forefront of attacks on landlords. Washington state Landlord-Tenant Law provides for a 20-day, no-cause termination notice.  That didn’t work for the City of Seattle.  Instead, they passed the just-cause eviction ordinance many years ago.  That requires a one-year lease and a “just cause” for terminating a tenancy.  “Just cause,” of course, can include non-payment of rent and violation of lease terms.  But it cannot be because the landlord wants the tenant out and doesn’t want to deal with a formal eviction and with court and court costs.

Then the city of Seattle recently passed two ordinances designed to “combat racial discrimination.”  The 2016 “first in time” ordinance and the 2017 “Fair Chance Housing Ordinance” are supposed to keep landlords from slyly avoiding renting to minorities.

The “first in time” ordinance required that landlords rent to the first applicant who meets their rental standards. That law was overturned on March 28, 2018 by a trial judge because it violates a property owner’s right to choose whom to allow on his or her property.  However, the Fair Housing issue is still in place.  If a member of a protected class believes he or she was illegally discriminated against, the Fair Housing enforcers will investigate beginning with the assumption that every landlord wants to illegally discriminate and it is their job to catch them.  One method to avoid having to rent to a first-in-line unacceptable tenant who “meets” rental criteria is to begin numbering rental applications with the number 3.  Another, and better, method is to create rental standards that are so stringent they keep less-than-desirable applicants from even thinking about applying.

Now in the courts is the “Fair Chance Housing Ordinance” that prohibits landlords from considering an applicant’s criminal record. The Pacific Legal Foundation described it as “Landlords can deny someone tenancy if they are on a sex offender registry for a crime committed as an adult, but only if they can prove to the Seattle Office for Civil Rights that they have a ‘legitimate business reason’ for doing so.” Deciding what a “legitimate business reason” is makes work for lawyers and judges.

Then there’s Oregon.  Governor Kate Brown called SB 608 “a critical tool for stabilizing the rental market throughout the state of Oregon.  It will provide immediate relief to Oregonians struggling to keep up with rising rents in a tight rental market.”  Once more, landlords are being blamed for too few rentals that cost too much to rent.  Ethan Blevins attorney for the Pacific Legal Foundation believes, “As housing costs have skyrocketed, blame has tended to be placed on landlords, rather than land-use and zoning regulations that have often been a key driver on housing affordability. From what I’ve observed, there is also a tendency to exaggerate the role of discrimination in landlords’ rental decisions.” Oregon is notorious for restrictive land-use regulations, but those certainly aren’t the fault of rental owners..

SB 608 reverses the prohibition for rent control in the Oregon Landlord Tenant Act and mostly prohibits no-cause evictions.

No-cause evictions have been a valuable tool for landlords who simply want a marginal or bad tenant out but don’t want the hassle of a legal eviction.  The previous law made that possible with a 30-day, no-cause termination.  The tenant had no recourse in court but just had to leave.  That was a benefit to a tenant because with a court-ordered eviction, it appears on a credit report for any landlord to see when the tenant applies to live in a new place.  Not so with a no-cause eviction.  Only if the prospective landlord calls the old landlord and gets a straight answer would the truth come out.

Under the new law, only in the first year are no-cause evictions allowed.  After the first year, landlords can end a month-to-month tenancy with a 90-day notice but only for a “qualifying landlord reason.”  Those don’t include just because the tenant is an irritation or the landlord doesn’t want to go through a court-ordered eviction.  Those “qualifying reasons” can include wanting to move into or have a family member move into a unit.  It can also be because the landlord is selling the property to a person who plans to be an owner-occupant.   Then, if the landlord takes possession for a “qualifying reason,” he or she has to pay the renter one-month’s rent when the notice is delivered.

As if that weren’t enough, rents can be increased no more than 7 percent a year plus the “yearly change in the consumer price index.”  The law specifically exempts properties less than 15 years dating from their first occupancy certificate.

The law covers all rental properties, both apartments and single-family.

Saving California to last because there’s such a diverse situation to deal with. Individual cities sometimes have their own laws that negatively affect landlords. However, just discussing 2019 changes, as of August 1, 2019, the city of San Diego requires landlords to accept Section 8 vouchers and forbids stating that they do not participate in the Section 8 program.

Then AB 2343 extends the notice requirements to 10 days for nonpayment of rent and five days for a nuisance excluding Saturdays, Sundays, and legal holidays; that’s up from five days all around.

The state has had its share of emergencies in the past year and the legislature responded with AB 1919 that makes it a misdemeanor to raise the rent more than 10 percent after a state of emergency is declared.  In addition, it would make it a misdemeanor to evict a tenant after the declaration of a state of emergency and rent or “offer to rent” at a higher rental price.

If a third-party pays the rent for a tenant, AB 2219 allows a landlord to require that the person paying the rent acknowledges in writing that they are not living in the property and that acceptance of the rent does not create a tenancy with that third party. That’s actually landlord friendly in that it keeps tenants from sneaking in people who have not been screened by the landlord.

The National Apartment Association in their white paper, “The High Cost of Rent Control,” reports that economist and housing-policy expert Dr. Anthony Downs wrote “the economic and social costs of rent control ‘almost always outweigh any perceived short-term benefits they provide.’”  In addition, he found that rent control are both “unfair to owners of rental units and damaging to some of the very low income renters they are supposed to protect.”  As I mentioned at the beginning, you can’t do just one thing.  Passing a law will make those negatively affected by the law to do what they need to do to keep themselves afloat.

Attorney Ethan Blevins of the Pacific Legal Foundation says the biggest threats to landlords now are “Probably the resurgence of rent-control policies and the rise of draconian tenant screening restrictions, such as bans on criminal background checks.”  Even more difficult is just keeping track of the changes in the laws that could result in fines and even jail for a misdemeanor.

How to deal with these gross attempts by state and local governments to damage the businesses of rental owners.  Carefully drafted tighter rental standards and policies followed by meticulous screening including landlord references will go a long way toward ensuring that quality tenants rent a property.  To avoid the business-killing restrictions, such as rent control and inability to evict bad tenants, the only workable solution is to sell rental properties to owner-occupants and buy other rental properties in states and cities that want responsible landlords to do business. The top landlord-friendly states as ranked by several websites are Texas, with Colorado, Arizona, Florida, Indiana, and Georgia also welcoming rental owners.

Written for Zip Reports where they provide applicant screening services.  Visit their website.

By Robert L. Cain

By the time the Tucson police pulled her over, Randi Marie Hartjen had severely damaged the credit of six Phoenix-area women using stolen identities to rent or purchase six vehicles.  How she did it shows how easy it is for someone to take over the credit of another person.

Since the institution of the EMV chips in credit cards, credit card fraud has diminished, but bad guys always find a way.  Of course, as we would suspect, online sales using stolen credit card information have increased some.  Crooks buy things online with stolen cards and have them shipped to a UPS store or other neutral site so the owner of the card won’t wonder where that package came from and won’t see the charge until the bill comes.

Many companies and industries are easy victims of account takeover because they “have had little reason to invest in the tools, tactics, and personnel to effectively prevent, detect, and resolve fraud,” said Al Pascual of Javelin Strategy & Research in an article in Enterprise & Cloud, March 18, 2019.  As a result, they are easy targets.

It’s a relatively easy process.  Most of the time, they need only a Social Security Number, name, and address.  But in many cases, as shown by Ms. Hartjen, you don’t even need a Social Security Number. She stole six vehicles from companies using stolen driver’s license information.  Three of the vehicles came from Enterprise Rent-A-Car and three from Carvana.  She rented the cars and never brought them back.  With Carvana, not even a credit card or Social Security Number is required.  I went to their website to see how they operate.  They sell cars online and offer prequalification explaining “When you pre-qualify with Carvana, you see real, personalized terms without affecting your credit score. We do not complete a formal credit inquiry until you place an order with your Carvana Financing.”  I partially filled out a pre-qual form online (using dummy information, of course), just to see what they asked for.  They never asked for a Social Security Number to check credit, but they implied that on their website.  So all Ms. Hartjen had to do was show up with a phony driver’s license and drive off with a free, seven-day trial drive.  Then she just didn’t bring the cars back and disappeared.

Here’s how she did it. Once she had the correct driver’s license information of the women she took over the accounts from, she simply went to DMV and changed the address on the license then got to renting, test driving, and stealing.  Smooth sailing from there, at least until she saw the flashing blue lights in her rear-view mirror.

That was just to steal cars.  If a crook has someone’s Social Security Number, opening new accounts is a piece of cake.  Half of all identity theft involves credit card fraud.  Once they steal someone’s Social Security Number, they can open new credit card accounts and turn them into cash.  And it can all be done through the mail.  Some 200 million people get credit-card offers in the mail and dutifully throw them in the recycling bin.  Bad guys root through that and presto, they have everything they need to get themselves a new credit card in the name on the application.  The banks sent out the pre-approved letter, so they don’t look too hard at them when they are returned dutifully filled out.  Within 10 days, a crook has a new credit card ready to cash in on.

Do it online or on the phone, and it’s just as easy.  Using a public computer terminal, so the IP address doesn’t help the authorities any, and a burner phone, the thief is anonymous.  Fill out the form or call in the application, and 10 days later, brand new credit card.

Eric Kraus, fraud management vice president of FIS is quoted as saying the bad guys think, “If I can’t steal cards, the next best option is taking another individual’s information and getting a card sent to me.”

Then there’s Instant Credit.  How many times have you been offered a store credit card when you made a purchase to get 18 or 20 percent off your next purchase?  Clerks get commissions for signing people up, so they aren’t particularly diligent.  In 20 minutes or less, with a stolen or even fake SSN, the “customer” has credit and the clerk a commission.

How do the bad guys get SSNs? An article in The Balance suggests “doing some searches via public records and finding the deed to their home online may provide one with an SSN.”  Other times, they buy SSNs off the internet.

Every time someone’s SSN appears anywhere, it is ripe for theft.  Even doctor’s offices ask for a person’s SSN on their forms.  And many doctor’s office staffs are less than vigilant in protecting the information they have.

Other times, it’s closer to home.  Sometimes the crook knows the person he or she is about to ruin.  The promotional pricing of a Friends and Family Plan can make taking over an identity simple.  In fact, some 51 percent of this kind of fraud comes from people the victim knew.  Then the victims end up eating the damage with few of them willing to prosecute a friend or family member.

The amount of fraud from account takeover is $4 billion a year and new account fraud is $3.4 billion a year. The crooks have shifted to these targets since the banks and credit card companies have short-circuited credit card fraud with the EMV chipped cards and paid close attention to anomalies in credit card charges.  That has resulted in a drop of $1.7 billion in losses from 2017 to 2018. Now the fraudsters take over other people’s accounts and run up bills that hit consumers directly that can mean months or years recovering their identities and restoring their good credit.

Randi Marie Hartjen’s case is just one example of how easy it is for someone to take over another person’s account. She will no doubt be going to prison, but so many more are taking her place.

Written for Zip Reports, where they do employee and tenant screening.  Visit their website.

By Robert L. Cain

Kids are moving back home with mom and dad more than at any time in recent history. The Census Bureau reports “More young people today live in their parents’ home than in any other arrangement: 1 in 3 young people, or about 24 million 18- to 34-year-olds, lived in their parents’ home in 2015.”  And that’s up considerably from 10 years earlier when arrangement “in 35 states. . . the majority of young adults lived independently in their own household,”

The numbers are staggering.  The Census Bureau reports that 31 percent of 18-35 year olds live with mom and dad.  What’s more, “almost 9 in 10 young people who were living in their parents’ home a year ago, are still living there today.”  Add to that another 21 percent who have “Other” living arrangements.  The Census Bureau doesn’t break “Other” out, but it includes people living with relatives other than a spouse such as siblings and grandparents. So the percentage of young people living with relatives including parents could exceed 40 percent.

And some of them are just mooching off parents and relatives. One in four of the people living “at home” doesn’t have a job and isn’t going to school.  What’s more, even those who have jobs sometimes don’t see any need to contribute to the family by paying rent or buying food. But that’s their parents’ problem.

The reason for this mass moving home is of course that young people today are often facing huge debts and can’t find jobs that pay enough to cover everything such as rent and child care.  It’s in the news almost daily. And we have to feel bad for those who are saddled with huge student loan debt and poor employment prospects.

But claiming to live at home can be a convenient ploy for people who may have worn out their welcome in rental housing.  So when someone applies to rent and says he or she has been “living at home,” for the past however many years, are we to take that claim at face value?

The maxim “verify everything” is more important than ever.  We have to find out if they actually are and have been living with mom and dad, or grandma and grandpa, or a brother or sister, or if they are just covering up a questionable rental history.  We have any number of ways to ferret out the truth.

First, on their application they will list where they live and the phone number to reach parents.  Many times it will be a cell phone number and a determined bad tenant will have a friend claim to be mom or dad.  First, check county tax records online to see who owns the property they say is mom and dad’s.  If that checks out, see if there’s a landline for the house.  If there is, call it instead of the cell phone number on the application and talk to mom or dad.

They will probably claim that they haven’t lived anywhere but at their parents’ home since they got out of college or whenever.  But to rent, they have to have a job or other verifiable, consistent income.  When you call the employer, not only verify employment but also ask, “just to be sure, I have their address as. . . is that the same as you have?”

In addition, there are two databases to check: credit report and Social Search.  On the credit report, it lists current and past addresses in addition to how well that person pays bills.  The Social Search lists every place a person has lived that the Social Security Administration has a record of.  Are there any addresses that seem to contradict your applicant’s claims?  If there are, that’s grounds for immediate rejection or at least a credible explanation for why it isn’t listed as an address. It’s also an opportunity for some entertainment if an odd address shows up.  Check the ownership of the address and call the owner or manager of the apartment. It could be interesting.

Then there’s the driver’s license trick. You get picture ID from applicants, so it only makes sense to take full advantage of it.  Obviously you are making sure the person you are talking to is the person he or she claims to be, but a driver’s license also has the person’s address on it.  Does that address match the address on the application?  If not, does it match any former addresses?  Oh, wait, your applicant claimed to have been living with mom and dad ever since college.  Thus any address other than mom and dad’s gives you reason to be suspicious and ask hard questions. When was the license issued?  Every state has a different system for showing when a license was issued and how often someone has to renew it.  Usually renewals come on a birthday.  What if the license was just renewed and it wasn’t your applicant’s birthday?  Why? Is it to cover up a recent address your applicant would rather you didn’t know about? More had questions to ask.

Any anomaly is worth pursuing. Your applicant needs to explain anything that doesn’t make sense to you. Yes, the number of millennials living with parents is huge and far more than anytime in recent history.  Chances are, your applicant is legitimate, but the maxim always applies, verify everything.

Written for Zip Reports where they do applicant screening for rentals and employment.  Visit their website.