Some of the posts I find most interesting on BP are screening questions. One of the reasons they are interesting is that the landlord posting the question is often too close to the issue and does not see problems while a dispassionate observer can. So here are my current applicants. I have two 24 year olds who are engaged; they have only lived in their parents' home before, so no landlord's references. One has two years experience as a programmer for a university, the other worked for eight years as a staff supervisor in a drug store. I can't get a response from the university; the drug store describe their former employee in glowing terms, say he is mature and responsible and that they would hire him back in a heartbeat. They earn approximately $80,000 in total; rent is $1,200 a month, so rent is handily 3 x income. However they have just both started new jobs at the same company, one as a program developer and the other on the IT Helpdesk. They have both been in these new jobs for one month.
On their credit check both of them have just one item: they each have one credit card in their individual names and with different issuers. They both have the same credit limit $3,000 and seem to carry a balance of a few hundred dollars suggesting they pay in full each month. All bills have been paid on time and are R1. Their credit scores are in the mid 800s, which in a way is a bit of an indictment of credit score methodology - they only have one credit item, and not much history to go on. That and the very recent jobs plus lack of landlord references makes me a bit wary. In terms of personal appearance they seem like fairly mature individuals, consistent with the employer description. Both are university graduates. I managed to reach one of two personal references given and the referee, a medical doctor, had known one of them for twenty years and described them as very mature and responsible.
So here is what I am minded to do: approve but ask for each of them to provide a parental guarantor so I have two parents on the line. A slightly easier approach would be to have only one parent act as guarantor but what if one of them left the unit, leaving the other behind? Each having a relative on board seems to reduce downside risk.
So BP, what would you do? Approve, reject, approve with guarantor? It is an interesting question. I wish I had an applicant with long term, stable employment, landlord references, well developed credit and more experience in life. But I don't, I have these applicants. Everyone's got to start somewhere and everyone has to find a first apartment. But I would like to know what a few other landlords make of this one.
@Stephen E. APPROVE. They have all the hallmarks for developing into responsible renters. Approve with additional security deposit to make up for the lack of rental history and new jobs. No need to get cosigners; it just complicates the matter. On the new jobs, ask for a hire letter from the employer that states the job offer position and salary/wage and hours. Ask for copies of the paycheck stubs from their start date to now. Put both on the rental agreement as jointly and severally liable. Since they are new to renting, plan to spend extra time with them when you go over the rental agreement. Check in with them after one week and again after one month and every three months thereafter until they have a proven track record with you. They will be learning from you, so prepare to take the lead. Treat them with dignity and respect and you can expect the same in return. I'm assuming legal history came through clean, right? And what's up with a credit score in the mid 800's (too high for someone with such little credit history); is that a typo?
Marcia Maynard, Fischer Properties | Podcast Guest on Show #83
Approve!!! I have a pair of tenants almost exactly as you described. They are awesome, low maintenance, and extremely boring which I like.
I would approve, wouldn't ask parents to get involved. They're 24 and gainfully employed, a pretty good find from my perspective.
Approve, a social media search would tell you more about these two then their credit history but they seem just fine. Verify the jobs - don't ask for cosigners they aren't college students anymore and it looks like they have decent jobs which you can get them to verify I am sure. In some ways these are ideal candidates because they are more likely to stick with you given they are just starting out. Do make the agreement in both names jointly and severely like Marcia said.
@Marcia Maynard I really appreciate you commenting on this and always read your posts with interest. I am glad you had the same reaction. Believe it or not the credit score came in over 800. I was very surprised myself - surely someone with several accounts and longer history is more likely to score this high but there you have it. The credit bureaus in Canada are largely the same firms that operate in the US so you would think that they would have similar scoring standards. I have scanned copies of the paystubs and will receive them in hard copy; they qualify on one of their incomes alone. Checking in with them regularly makes great sense. Thank you.
@Bryan N. Funnily enough the current tenant in the unit was a newly graduated student and it was his first home outside of student housing. He was a pharmacist and earned $100,000 / year in his twenties. My best tenant, always pays on time (all of mine do with very rare exception) and no trouble at all. The place is spotless for showings. So I do appreciate that young people can be responsible renters.
@Rob Gribben I can see what you mean. It is their first place outside the home. In Ontario a landlord's rights are severely curtailed due to tenant friendly laws. In contrast a guarantor is a straightforward legal contract and is enforced in small claims in front of a real judge, not a Landlord and Tenant Board adjudicator of questionable quality and intent. But I hear what you are saying and I will think about this.
Thanks to all for commenting. As you can likely tell from my original post and from the above I was likely approving them. I will have to think some more about the issue of a guarantor. One thing I have learned is that in tenant screening you have to make what is likely the most important decision in landlording based on very little information. I have made two mistakes in leasing my units. Neither were ever late on the rent, so they were not really bad cases. One was a terrible old curmudgeon who was abusive and very difficult to deal with. The other was a married couple who were lease breakers and cooked up a whole bunch of claims to the Landlord and Tenant Board, their proposed remedy for all of which was terminating the tenancy at the date they wanted so they could move to a new house. Thankfully I rented that place just in time to side step that process and get them to call it off. So I have had good luck or I should say I have been careful, but I have learned that besides the matter of serious financial issues, behavioral issues can provide very real headaches.
@Marcia Maynard I should add that in Ontario tenant security deposits are heavily circumscribed. There are no security deposits for damages, etc.; the only deposit that can be collected up front is last month's rent, and this can be no more than the current stated monthly rent in the lease. So in these circumstances with no additional security deposit permissible would you instead seek a guarantor?
You can make money as a landlord in Ontario, but they make you work for it.
@Colleen F. I had exactly the same thought about them likely to stick around for a while. They are saving for a house, and house prices in Canada have gone up substantially and come with a lot more expenses than a rental property. I would love to have them stay for three years or so...
I have not heard anything else so I think I am going to do a mix: approve but with a guarantor in place for one year given I cannot get a higher security deposit here in Ontario. The guarantor ensures rent is paid for a year at least. They seem like good kids.
Just be careful about possibly chasing away a good tenant situation. I'm glad I trusted mine after all the checks. They were honest upfront, their story checked out, application and references/reports checked out and I didint see a need to push anything. I'm very glad I didnt. I wish I could find more tenants like these.
Approve them. Think about the jobs this way. Imagine they were to be laid off from that longer term job while they were your tenant - it would be possible for that to happen and as long as they paid in full you would still keep them.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!