4 Tenants in a SFR

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4 Tenants in a SFR

Chris Adams
Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes

Oh the joy of having to find tenants in November !

One of my tenants is moving out over Thanksgiving weekend, he gave me 60 days notice and understands he will not be receiving his last months rent back if I can not place a tenant prior to the end of December.

The house is a 1650sf 4 bed 2 bath w a nice size 2 car garage, on a 1 acre lot with a good sized driveway.

I have had 1 phone call about the house in the week it has been on Clist, this person is looking for a 4 bedroom home for her and her brother along with 2 other friends/boyfriend. They plan on splitting the rent 4 ways.

My initial thought was no, hell no. But the ore I thought about it, I'm starting to feel like a hypocrite. I'm constantly trying to teach my nieces and nephews about being financially responsible, and here in front of me are 4 people that might be trying to do just that.

I realize the pitfalls here, 4 people would have to be named on the lease. If 1 person leaves then there are 3 left to pay rather than 4. 4 people will put more wear and tear on the house that 2, but then a family with kids would probably be worse than 4 adults.

Typically in any situation where i feel less confident about the tenants I raise my Sec Dep requirements. As it is I require 1st/last and 1 month sec dep.

I'm meeting with them today to show the property, so I hope to get a better idea of their character. I also run credit & background checks.

I still have 7 weeks to find a tenant so I am in no rush here.

I'd love to hear some thoughts on the idea of 4 adults as tenants in a SFR

Thx

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Jerry W.Pro Member
Moderator
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
12y

Hey @Chris Adams , be sure to put on your lease that they are jointly and severally liable for rent and damages. Make sure that it is clear that you can sue any one of them for unpaid rent and damages and they must pay all of it, and it is up to them to get the money back from their friend if they want to only pay one fourth of the claim. the standard claim is I didn't do that Ralph did, or I paid my 1/4, etc. They need to understand each of them are liable in full, This might not sound fair but trust me it is very important.

Since I am posting I wanted to tell you how impressed I am with your acquisition model. I very much like your plan. Best of luck.

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  • Josh Walworth
    Traverse City, MI · Member since 2013 · 11 posts · 0 votes
    12y

    @chris adams

    0Reply
  • Josh Walworth
    Traverse City, MI · Member since 2013 · 11 posts · 0 votes
    12y

    Please disregard my post above. Posted by mistake!

    0Reply
  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    12y

    With 4 working adults you have a much better chance of them always having enough money to pay the rent, than you would with 2 adults and 2 children.

    As you stated, probably less wear and tear than little children.

    Why not?

    0Reply
  • Kyle Hipp
    Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    12y

    if one of the people wants to move out you do not have to allow the other 3 to remain. They signed the lease and you qualified them on the basis that all 4 would be on the lease. Now it might not be practical to do this but bring this legal situation up in order to save yourself some trouble if that scenario plays out down the road. If something in the lease changes, all four tenants need to agree. If you set up your initial lease with that in mind you should not have much of a weakness moving forward. I have one unit where there are 3 adults living. 2 are brothers in there 30s and a former coworker in his 50s. It has worked out pretty well for the last couple years.

    0Reply
  • Dan Walters
    Real Estate Investor · Boise, ID · Member since 2009 · 62 posts · 27 votes
    12y

    Chris-

    First off, that's great that your tenant gave you that much notice. They obviously are respectful to you and the time of year in which they will be moving.

    What other types of marketing are you doing other than CL? Do you already have a sign out on the property?

    There's always the ideal tenant that you are hoping to find for your property, and when you receive apps that are outside of that ideal it's easy to go right to the negatives of "what ifs". Stick to your criteria for qualifying a tenant(s). If they pass the initial financial/background/reference checks then take the next step to meet with them. That initial meeting should give you a solid "gut" feeling to make a decision. There is more diligence you can always do but stick to qualifying criteria first and then decide if you need more info to make a decision.

    Like you said, you have ample time to find the right tenant however that time moves rapidly if your not proactive. Now is the time to be aggressive with your marketing and not passive because you have all that time. If you do not move forward with these applicants, start marketing the property heavily (CL, signs on property/flyers around neighborhood&community...etc) to generate activity.

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  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    12y

    Hey @Chris Adams , be sure to put on your lease that they are jointly and severally liable for rent and damages. Make sure that it is clear that you can sue any one of them for unpaid rent and damages and they must pay all of it, and it is up to them to get the money back from their friend if they want to only pay one fourth of the claim. the standard claim is I didn't do that Ralph did, or I paid my 1/4, etc. They need to understand each of them are liable in full, This might not sound fair but trust me it is very important.

    Since I am posting I wanted to tell you how impressed I am with your acquisition model. I very much like your plan. Best of luck.

    3Reply
  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    @Dan Walters

    Im using Clist and the client was going t post on his work BBoard, he works at one of the orthopedic companies, which is our preferred tenant base. I'm going to drop a sign down today.

    As for the 60 days notice, it was part of his lease renewal, he had informed me he was going to be purchasing and home and didn't want a full 1 yr lease again.

    He and his wife have been the perfect tenants, and I would like to be able to refund his last month if I can find the right tenant.

    0Reply
  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    @Jerry W. Line 1 of my lease reads

    "This lease, dated 6-16-13 is between Sierra Property Management LLC., herein called “ Landlord” AND, __________________, herein called “Tenant”. If this lease contains more than one tenant, each tenant shall be held jointly and severally responsible."

    Hows that=)

    0Reply
  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    @Jerry W. I have actually been thinking about having a legal mind review my lease, would you have any interest? I figure since your in Wy and Im in IN there may be a few differences

    I should mention its quite a few pages long

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  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    12y

    @Chris Adams , excellent. If possible you might have it also explained in layman's terms as well. Some judges are picky that its meaning must be plain, even though the legal terms are exactly correct. As to looking at your lease I would be glad to give you my impressions, but they would not be legal opinions due to not being licensed in Indiana. The good part about that is that I cannot charge for it either :-). I also look at the leases of other folks to see if they have things I like. Uh BTW might want to send your application form to hehe.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    12y

    Great offer Jerry, bet you'll be busy, LOL And very important point!

    Not mentioned I don't think, check with your jurisdiction as to the number of adult, unrelated parties that may reside in a single family dwelling. Many have limit of 3, if you're in violation you might as well toss your lease out the window.

    I did a lot of leasing, about 20 years, to college students, it's not a bad gig at all, actually great. They team up too. Another point is to have a total rent due for the unit, regardless of occupancy.

    As to additional wear and tear, I have done leases at a base rate and additional rents for an additional adult, unrelated tenant.

    If you have a 3/2, you could be leasing to a family of 7 and conform to HUD requirements, but you can't add to your base rent really and have a marketable rent level, just saying, additional wear and tear issues are really minimal IMO. But higher rents for unrelated parties, it's something that they can understand and accept and a valid excuse, barely, to charge more. :)

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    12y

    I don't see why you should not entertain them as potential tenants. Perform your typical screening process, but in this case, on all 4 parties making sure all 4 come back clean.

    Podcast Guest on Show #130
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  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    @Bill Gulley Great ideas there. Since there is a brother and sister involved I wasn't to concerned about the # of adults, but I'll be smart and check on it anyhow.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    12y

    One other point, I think this could be a means to be diversified within one unit. If any one of the 4 losses their job, there are three other incomes who are all held responsible for the entire rent. Not a bad way to go.

    Podcast Guest on Show #130
    0Reply
  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    @Michaela G. @Will Barnard @Kyle Hipp

    This is my first time leasing to a "group" if you will. All of my tenants have been single or couples. I guess my first thought was of all the bad things that can happen. Being a LL I guess we are programmed to be skeptical.

    Meeting with them in a couple hours and will post more.

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    @Chris Adams

    We do this all the time with our student houses ... your prospective tenants are working? With students we often have mom & dad as guarantors as they have insufficient income or credit history to qualify on their own.

    In addition to being jointly and severally responsible for the lease, I trust you tell them to coordinate amongst themselves and provide you with a single rent payment each month ... I like to do this with our student houses as it gives me a single contact and I do not have to listen to roommate drama.

    I would also emphasize that none of them can sublet, or advertise to sublet, their room/space without your prior written approval and that any changes to the lease require prior agreement amongst all lessees prior to bring the request to the landlord.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    12y

    Nothing wrong with being cautious, just make sure you perform your due diligence and make sure it is legal in your area to have that manhandles on one lease in one unit. Then, if you accept them, make sure you seek legal counsel to have the proper verbiage added into your lease contract.

    Podcast Guest on Show #130
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  • Kyle Hipp
    Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    12y

    Chris, my further advice would be to try to get a conversation or interaction from all 4 people. A lot of times you will (at least I do) interact with one person primarily. You want to determine how the 4 get along to see if you will have any difficultly coming to consensus going forward. You should be able to glean a lot about their group dynamics from this meeting, I.e. who is the leader who follows, who is picky or pragmatic. Good luck.

    0Reply
  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    12y

    For my rentals, the biggest problem is always loss of job and not being able to pay rent. So, I see it as a positive to have several working adults, who are responsible. So, if one of them has problems, the others will have to catch up , because they're responsible.

    0Reply
  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    Lots of great point here from everyone.

    Thanks for the input!

    0Reply
  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y

    I have not had this situation come up.

    The # of unrelated adults is a good point to check out. Otherwise I would come down with most people that more people that are working and are able to be held responsible the better chance of getting paid even if one of them flakes out.

    Also given it is a 4BR place I don't see as much potential for drama as if it was a smaller place where you would have people sharing a bedroom or the one guy paying less to agree to sleep on the couch or that kind of stuff.

    0Reply
  • Jon K.
    Member since 2011 · 798 posts · 216 votes
    12y

    Make sure your city zoning allows 4 unrelated people living in one house.

    Sure, more people here are working, but a roommate isn't going to want to pay other roommate's bills if they don't have to. If one of the four moves out (either because they can't pay, or they move in with a girlfriend/boyfriend, or they don't get along with their roommates), it's not so easy to collect rent. Make sure they all qualify and they all know that they individually are responsible for all rent. Make sure they have a solid deposit.

    More people = more wear and tear, more noise, and more cars. Make sure your neighborhood lets you have 4 cars there. Young people also tend to bring more parties and more girlfriends/boyfriends staying over. Still, potentially less damage than kids I would say.

    Younger roommate settings mean the tenants generally know nothing about minor repairs and maintenance. Expect to have to fix minor issues that grownups would know how to fix themselves. Young people in roommate situations are more likely to damage stuff-- they're living cheap and have less incentive to baby the house. Personally, I prefer a single family tenant. But, that doesn't mean that these four won't work out. At some point, one of them will likely want to move and they'll have to find a replacement roommate. I suppose single family tenants divorce, etc. too-- young roommate houses tend to be the type of people who move more often and are less settled down in life.

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  • Jon K.
    Member since 2011 · 798 posts · 216 votes
    12y

    for her and her brother along with 2 other friends/boyfriend

    Wait, 5 people living there?

    In a roommate setting, you're much more likely to end up with a few (or even all) of these people letting their boyfriends/girlfriends and friends stay over often. Young people do that. It's not necessarily going to be "just 4" people living there. They'll most likely have people stay the night regularly = more noise/cars/wear.

    1Reply
  • Chris Adams
    OP
    Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
    12y

    There are only 4 not 5. non are boyfriend/girlfriend, I was mistaken on that.

    0Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    12y

    We make sure they understand it is one lease that we will ask them to sign and collectively they are responsible for lease violations and damages , should they occur. Some towns do limit unrelated adults in a residence but is often a town ordinance so alot of places unrelated adults aren't an issue. One important point that comes up is that the property is not theirs without everyone signing and the whole deposit. When we run across this with students in particular I have to hammer that point so they don't drag their feet. A lease is no good to me if it is not fully executed.

    It is a slow time of year to rent so my experience with a 4 bedroom is that there are fewer calls and less people with kids more roommate situations.

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