Thoughts- Including child support in income-the child is in college

8 Replies

I have an applicant whose income is largely from child support. The remainder is disability.  References seem good, long term renter in two places, saw letters of reference which were excellent but getting ready to do some calls.   The child has started college in town this year and is living with her.  He graduated from a very good local private school so would be a serious student and he likes the apartment and  the close location to school. However, kids can be flakey sometime and I  believe child support is linked to him staying in school.   Mom indicates she wants to stay a long time but she is on disability so once he is done with college she can't afford this apartment. For the normal tenant I would not look four years out but I am wondering what others think about this situation. I do plan to verify the support has been paid and  few other items.  She is the best candidate at the moment.  

Not sure about RI, but Texas's standard child support ends when the child turns 18 or when they graduate from high school.  Individual custody agreements can vary, but I would require a copy of the order, if the tenant wanted that income to be considered as a qualification factor.  Otherwise, this could be an early graduate, and you could be looking at a tenant who will lose that income, when the child turns 18 sometime in the next year.

I have seen the order and  the obligation is for the child support and payment to tuition which I think it is in some other Northeastern states.   My concern is  that it is tied to the attendance of college.  Typically I have seen in these situations that support ends if they stop attending college.  Having kids in college I know that some have on and off relationships with higher education.  That being said the son is more keen on living in the apartment then the mom to be closer to school.  He also seem invested in both school and the move.  The house they are renting is being sold to the landlords son so no red flag there.

@Colleen F.  I'd rent to them if they qualify as of now. Who knows what will happen in the future with them or with another resident you bring in. It's tough to predict what will happen later for any resident we bring in to our community so I think it's best not to try and just work with what we currently have. 

That being said, if you have another application that is more qualified than I'd go with them. Otherwise, I'd rent to the family you asked about. 

Medium logo1Joe Fairless, Best Real Estate Investing Advice Ever | http://www.apartmentsyndication.com | Podcast Guest on Show #227

"She is the best candidate at the moment" seems to be the key to this dilemma. The child support income is strictly time limited and from what you write it is fairly clear you see the risks but are hoping to overlook them so as to lease the unit. I would pass on this applicant. What are you left with when the child support runs out? A tenant unable to pay rent and who you may have to pay to evict. Better to face the known loss of a month's vacancy to look for better candidates than to gamble on this tenant's precarious finances. It can be hard to turn down a weak applicant and you can sometimes try to convince yourself otherwise, but when there are genuine issues as there are here it is better to wait for a better applicant to come along.

Personally I wouldn't worry about what happens 4 years out when he finished college and the support ends.

The concerns about his stop attending college, is there a way you can verify either way, if the check stops if he decides to stop school?

Another concern would be what if he meets a girl friend three months into college and wants to move in with her, will that income be diverted?

On the other hand, anyone you hire today with a solid employment could get fired or laid off tomorrow, we don't concern too much about that, or how likely their employer might go belly up etc...

There will be risks either way.  I say try to see if you can get some clarity on whether the income is tied to his attending school...if so how is that determined, full time school?  Part time school?

I would rent to them. If he is a good student and has set the goal to finish college, I bet he will complete his education. If and when the child support ends, they as a family will need to make a decision as to what to do. He could get a job. Her disability support benefits could increase. She could apply and receive other types of support benefits. If her disability income is SSDI, she could get a part time job to supplement it.  If she doesn't know how to do that, she could see a vocational rehabilitation counselor. They could inherit some money. Who knows? If they qualify now, there would be no reason to turn them down.

It may also be worth sitting down with them and discussing your concern and see what they envision for the future for maintaining the appropriate amount of income required to sustain the tenancy. 

We have had some tenants whose income dropped below that as required by our initial criteria to rent and they have managed fine, never missing a rent payment and able to pay for their utilities. That said, we have also had tenants whose circumstances changed and couldn't make rent; they then had to move.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

Thanks,  I not so much worried about what happens in a year or two  I am mostly worried about the son dropping out.  Only an issue since the income is heavily dependent on child support which ends if he stops college.  I did verify the attendance and major as I do with college students I rent to.  much about that if the income was 50/50 but without child support I don't know how she would do it.

@Joe Fairless   I don't right now have better applicants.  The flake factor is high  at the moment.  I had the piano lady who disappeared, the women who wanted to live hear despite over an hour commute, I suggested she check out the train first and  the one whose family talked her out of moving out of their house. Among other odd situations.

  @Sam Leon  I can always request verification of status in school down the road but  verifications tend to lag a little when they drop out.  It is a point about people being laid off down the road. I guess I did not think of it as similar to a layoff.

@Marcia Maynard  they are on the edge with qualifying, the income is pretty much exactly what they need to qualify. I also can turn them down based on another point if I want to get technical.  I plan to discuss  what she would do down the road or if the disability is all their will be for income always  or if it is temporary. @Stephen E.    I can wait  but I  don't see the applicants getting better as we enter the late fall winter.  The next best option is to offer a short term lease to someone if this doesn't work out.

I think I am going to finish the application with these candidates and decide based on my discussion with her on the income components.  One of the things they asked about was caretaking but I made it clear that was  not my policy and  I  don't do work in lieu of rent.  When they see I stick to that we will see if they want to still go through with the process.

It appears the son is over 18, and therefore gets included in the processing.  He will have had to apply for financial aid and will have an 'award letter' stating any loans or grants.  I would ask for a copy of that to assist in your decision making.

Curtis Bidwell MBA, Philia Holding Co LLC | http://www.PhiliaHC.com | Podcast Guest on Show #95