Accepting applications and Guatantors

[Martin Guerrero]

Hello my fellow landlords,

I have listed my first property and have my first applicant.  I have a couple of questions regarding doing due diligence on applications.  I have set a minimum standard of 3x income.   rent is 1500/month so annual income of 54K or 4500/ month.  Applicants income is 4450 per month and has listed a guarantor. Tenant has put down a guarantor on application.  Does Guarantor need to fill out application as well and does guarantor put any money down as well? In addition to that Guarantor is tenants current partner and they currently live together so the current landlord is also the guarantor.   Meets credit score requirements of greater than 625 although did have an account that had some issues on record, but was paid off and has had 100% on time payments for the last 3 years.  No criminal or eviction history.  Any advice would be greatly appreciated.

[Richard F.]

Aloha,

Yes, if a Guarantor is needed to meet your criteria, of course they should complete and pay for an application...how else will you know if they have sufficient assets and record of responsibility to "guarantee" anything? As the current LL and "partner" (business or life?) you need to closely examine all details. Is the income verifiable and legit? Do they have necessary business permits to operate? Does Guarantor actually own the current residence? Given the current situation, sounds very questionable...verify, verify, verify. By the way, your 625 score does not instill a lot of confidence, here is a chart to give you some insight:

[Martin Guerrero]

Thank you so much @Richard for your feedback and advice. I appreciate your valuable time. 

[Mary Jay]

 deleted

[Richard F.]

Quote from @Mary Jay:

 Did you mean “odds of Not going delinquent withing the next 24 months”?

[Richard F.]

Sorry, I clicked to quick!

No, it means what it states...this chart was direct from Equifax some years back. Y

[Nathan Gesner]

Quote from @Martin Guerrero:

1. I don't accept Landlord references from family members or friends.

2. Your applicant's income is $50 shy of 3x the rent. It's OK to be a little flexible on this based on the person's lifestyle. For example, a 70-year-old single woman making 2x the rent may be safe because she has very few living expenses, no debt, and comes from a generation of people that take responsibility for their actions. On the other hand, she may have a ton of medical expenses that eat up her money every month. I feel it's important to look at the whole picture.

3. I do not accept guarantors because it's problematic. If you are going to accept them, they should submit an application and be processed like any other applicant. Then you should have them sign a Guarantor Agreement to show they are financially responsible if your Tenant fails to pay. There's a lot to unpack here, so the easy solution is to never accept Guarantors.

I really recommend you study this issue more, learn how to set standards, and learn how to stick to them. This guide is a good start: https://www.biggerpockets.com/...

[Martin Guerrero]

@Nathan Gesner thank you for your reply and your feedback.  I agree with you that it is more important to look at the overall picture.  

[Caroline Gerardo]

625 is too low for me.

So "partner" owns property where proposed tenant now lives? Look up title on that property from a title company to name match. Guarantor is moving in with proposed tenant or will they now have double the expenses? If they are moving in they should cosign on the lease not guarantee.

What is line of work? You have w-2 2022 and year to date paystub that match in income and job?

Is w-2 from guarantor that's weird and I would need both parties IRS returns as "guarantor" sounds self employed paying the partner?

You looked at where they now live, and the car interior is clean?