How Landlords Rent to Second-Chance Tenants and Still Profit

Renting to second-chance tenants works as an underwriting model, not an act of charity. The referral agency interviews and case-manages the applicant before you ever see them, a subsidized portion of the rent arrives from a program rather than a paycheck, and the landlord evaluates the tenant’s situation instead of a thin credit file. Casper Andrews has run that model across roughly 30 properties in Southern California under his company Power and Change LLC, and estimates he has helped between 100 and 200 homeless people get housed.

The mechanics matter more than the intent. Single room occupancy beds get filled six at a time by a phone call from a program coordinator. Rent gets collected in pieces. Some tenants pay $200 to $300 on a unit whose mortgage is higher than that, which only works if the rest of the portfolio is built to absorb it.

What follows is the actual structure: where the referrals come from, the baseline Andrews refuses to break, how he financed 20 years of acquisitions on a salaried job with no overtime, the deals that went badly and what they cost, and how mixed-use space turns a rental into a community operation.

What renting to second-chance tenants actually looks like

Andrews’ portfolio is not a specialty asset class. It is about 30 properties across single-family homes, duplexes, condos, small multifamily, mixed-use commercial-residential, and a ranch in Norco, California. The second-chance element is a tenanting decision layered onto ordinary residential inventory, not a different kind of building.

The most structured piece is single room occupancy. Andrews runs SRO beds filled through second-chance programs including Salvation Army and HOPICS, which place people who are homeless with a landlord and keep case management attached after move-in. One of his SRO properties housed men who had served in the military and were struggling to get back on their feet. One of those tenants kept the premises clean, collected rent portions when Andrews wasn’t available, and eventually became his property manager.

His frame of reference for how subsidized rent works is not academic. He grew up in a Section 8 household in Compton, where the government covered part of the rent and his mother paid the balance. That is the same payment structure he now sits on the receiving end of, and it is why a tenant with no credit and $800 a month of income does not automatically read as a decline.

The volume claim is worth stating plainly, because it sets the scale: Andrews says he can honestly account for helping at least 100 to 200 homeless people become housed, most of them through the SRO beds, where residents were coming directly off the street.

Where the tenants come from: agency referrals do the screening

The pipeline is a phone call, not a listing. A program coordinator calls with a specific number of placements. Andrews describes the exchange as: “Casper, we have six women.” His answer: “Okay, I got six beds over here. Bring them on over and we’ll work it out.”

What makes that answer defensible is what happened before the call. The applicants were already interviewed by the program that referred them, and case management continues after they move in. That is the substitute for the credit and rental history you would normally pull. You are not skipping screening; you are outsourcing it to an organization with more contact with the tenant than any background check will give you.

The second structural support is how rent arrives. Part of it comes as a subsidized portion routed through the program, and part comes from the tenant. Andrews or someone on site collects the tenant piece. That split matters for underwriting: the largest share of the payment is not dependent on the resident holding a job in month four.

Andrews’ argument about credit is narrow and worth taking seriously. Many of the people he signs agreements with have no credit because nobody taught them young enough why it mattered, not because they made a series of decisions to default. A blank file and a damaged file are different risks, and a standard screening template treats them identically.

He is direct that this does not always work. He has had referrals go well and he has had the same bad outcomes any landlord gets. The point is that the referral relationship gives you information a credit report cannot, and a partner to call when a tenancy starts sliding.

Sometimes I look at the situation, not just the application. I try to look at the person’s situation. I can honestly say I’ve helped at least one hundred homeless people, two hundred homeless people become housed.

— Casper Andrews, Power and Change LLC

The non-negotiable: every property must clear its own baseline

Andrews runs what he calls a basic program design, and the first rule is that his mortgage baseline gets met. Period. That is the line that keeps the model from consuming the business.

Three things hold that line up:

• A clean credit report. He treats maintaining it as a cost of staying in position to buy.
• Private and hard money lenders kept in his back pocket. Not for the plan, for the exceptions: a pocket deal that appears when he isn’t liquid, or an emergency repair bill he didn’t budget for.
• Heavy equity. He is candid that cash is tight right now, but says it isn’t tight in the dangerous sense, because he could sell something and be untight. The Norco ranch alone carries over $1 million, and closer to $1.5 million, in equity.

That equity position is what lets him keep properties whose community function outruns their cash flow. It is also the reason he can accept $200 to $300 a month from a 21-year-old with no rental history on a unit carrying a higher mortgage. The subsidy for that decision comes from the balance sheet, not from wishful thinking about the tenant’s income.

His advice to newer investors is more conservative than his own behavior. If someone asked him the responsible answer, he says, it is: just do business. Solidify the business first so you know you’re good, remember that it’s a business, and then help where you can. He is explicit that doing it his way creates frustration internally and with the people who care about you, because when a marginal tenancy fails, the accountability sits entirely with you.

How this gets financed when you don’t start with capital

Andrews was not born with money and did not inherit a trust. He worked for the LA County Office of Education for 20 years on a salary with no overtime allowed, which means his income was fixed and his only lever was what he did with it.

The capital stack that produced roughly 30 properties was assembled piece by piece:

• Reinvesting essentially everything he earned from the day job.
• Buying and selling cars on the side until the profit was enough for a down payment.
• Pulling equity out of his own home.
• Cross-collateralizing his home to get deals closed.
• Taking seconds against properties he already owned to close on new ones.
• Building long-term relationships with private and hard money lenders so he could move without waiting on a bank.

The first purchase was a condo. The second was his mother’s house, bought when he was 25 because her marriage had ended and she could no longer sustain the home she had been proud to buy at 18. She still lives there. Andrews calls it what it was: an emotionally driven purchase, and he says most of his real estate decisions have carried some of that, which is not a good thing at all.

He includes it as a warning even though the outcome was fine. Emotional acquisitions can work and still be bad practice, because the underwriting that made them work was luck rather than structure. The financing moves above are repeatable. The reason for that particular purchase was not.

The failure cases and what they cost

The most expensive lesson came from getting the tenant thesis wrong before ever signing a lease. Andrews bought practically a whole street of fourplexes in North Edwards, California, near the air force base: five buildings, four on one street and one behind, at a genuinely good price. The plan was to rehab them and contract with military personnel.

The rehabs finished and the first tenant appointment got scheduled. The very next day, people started breaking in. Counters, newly installed fixtures, windows, copper wire, water heaters, all stripped. He redid the roofs, got scared, and sold the whole thing to another investor for a gain of roughly $200,000.

His own read on it is not that the area was bad. It is that there were homeless populations in that community he could have worked with, and he chased the bigger dollar from the base instead of doing what he actually knows how to do.

The tenant-side failures are less dramatic and more familiar. One tenancy he collected full documentation on, bank statements and everything else, held for several months and then fell apart. When he got the unit back there were holes in the walls, missing window screens, roaches everywhere, and belongings the tenant refused to come back for.

California timelines make those situations expensive. Andrews notes that under the state’s squatter and eviction realities a non-paying occupant can stay close to a year before the courts remove them, and he has paid tenants to move out to end it faster. During COVID he could not evict at all, which is how he ended up explaining to the sheriff’s department that he was not running a brothel out of one of his buildings, he simply had no legal way to remove the tenant. She later called to thank him for the chance and told him she had gotten her kids back. Both things are true at once.

The residue is caution. Andrews says the bad outcomes do not get erased by the good ones, and that new tenancies sometimes show early behaviors that make him brace for the same landmines.

Using mixed-use space as the community engine

Buying commercial-residential and mixed-use is what changed the model from housing people to serving them, because a mixed-use building can host functions a rental house cannot. Andrews describes the uses as effectively limitless once you own the space.

What that looks like across his portfolio:

• One property serves as the headquarters for food distributions. Tenants help run them, and it keeps their own refrigerators full.
• Another building hosts community meetings and gang intervention sessions, where rival groups talk through ways to slow down the violence, and where mothers who lost children and fathers coming out of prison have a neutral room that isn’t a church.
• The Norco ranch runs wellness programs for kids, with horses, sheep and chickens. Andrews found sponsors to cover feed and takes donations for the garden.
• Commercial space hosts career workshops where barbers, plumbers and electricians walk kids through what the work took, what it pays, and what to do next.

For anyone copying this, the referral partners are the whole build. Food banks will let you collect food or deliver it to you for distribution. Local hospitals and clinics will send people out to run presentations. Local housing agencies, homeless support programs, and drug and alcohol support programs consistently need space for workshops, day programs, and information sessions when they place clients into housing.

Andrews’ first instruction to anyone considering this is not about acquisition. It is to look inside yourself and decide whether you can stomach what comes with it, because the same building that runs a food distribution on Saturday can be occupied by a non-paying tenant for a year.

Frequently asked questions

How does rent actually get paid when a tenant comes straight off the street?

In two pieces. A program-subsidized portion is paid through the referring agency, and the tenant pays the balance, which can be a few hundred dollars a month. Andrews grew up in a Section 8 household with the same structure and now underwrites to it from the ownership side.

Collection is a job someone has to own. Andrews has had on-site residents collect tenant portions when he wasn’t available, and one SRO tenant who did that consistently eventually became his property manager.

What screening do you keep if you’re not going by the credit report?

You keep the agency’s screening. Programs like Salvation Army and HOPICS interview the applicant before referral and keep case management attached afterward, which is more ongoing contact than any background check produces.

Andrews still pulls documentation when the referral is informal rather than program-based, and he has had those tenancies fail anyway. The distinction he draws is between an applicant with no credit history, often because nobody taught them why it mattered, and one with a damaged history. Standard templates score both as declines.

What’s the biggest financial risk in renting to second-chance tenants, and how do you cap it?

Occupancy without payment. In California, a non-paying occupant can remain for close to a year before the courts remove them, and during COVID evictions were unavailable entirely. Andrews has paid tenants to leave to shorten that clock.

The cap is structural, not tenant-level. His program design has to meet the mortgage baseline first, he keeps a clean credit report, and he keeps private and hard money lenders available for emergencies. Equity is the last line: if pressure builds, he can sell an asset rather than let one unit’s vacancy loss compound.

Do you need mixed-use or commercial property to run community programs, or can you do it with single-family rentals?

You can house people in any residential asset, and Andrews’ SRO beds and single-family placements do exactly that. What single-family cannot host is programming with outside foot traffic.

Mixed-use is what made food distributions, community and gang intervention meetings, and trades career workshops possible for him, because those uses need a room that is not somebody’s living room.

How do you decide whether to keep an equity-heavy property that isn’t cash-flowing well?

Andrews keeps it if the mortgage baseline elsewhere is being met and the property is doing work nothing else in the portfolio can do. The Norco ranch carries over $1 million in equity and runs kids’ wellness programming funded partly by sponsors for feed, so selling it would end the program, not just book a gain.

The honest counterweight is that the equity is only useful if you are willing to use it. He says he could sell something and relieve the current tightness, which is what makes holding a slow asset a decision rather than a trap.

The bottom line

If you want to run this model, build the payment structure before you build the mission: line up one referral agency that case-manages its placements, confirm how the subsidized portion is paid and who collects the tenant’s share, and confirm that the property clears its own mortgage without the tenant’s portion being perfect. Everything else Andrews does sits on top of that baseline.