Struggling between 2 rental applicants

13 Replies

We own 2 duplexes and have been landlords since 2009.  We are just completing a major renovation of our second duplex, which we picked up at auction in the fall.  We have executed leases and secured deposits on one of the units, and have 2 strong applications in hand for the last remaining unit.  We are struggling to decide between the two sets of applications and could use some feedback.

Both applicants are married couples.  Couple A has two incomes, a W2 employee and a self-employed person, and they live in our area.  Couple B has 1 income presently, but are relocating to the area and would have 2 incomes shortly.  Couple A has seen the property 3 times in 3 days, and have seemed lukewarm to our property for a while before coming on strong as of late.  Couple B walked into the property today and said "we'll take it" within 5 minutes.  Couple A's and Couple B's credit scores are within 10 points of each others, essentially identical.  Couple A has asked us to provide a storage shed for the back yard which would add approximately $500-$1,000 in expenses, and have asked other questions that lead us to believe they may a little "particular".  Couple B seems content with the property as is.  Couple A submitted their application 12 hours before Couple B, but were told we would evaluate after reviewing all applications.  We have yet to check landlord references, but have verified income.

I am looking for some feedback from experienced landlords as to who they would select.  We can make a compelling case for each.  Couple A's dual incomes may outweigh their extraordinary amount of questions and request for the shed, etc.  Couple B's lack of a dual income may be outweighed by their very easygoing demeanor.  The credit history seems to be a non factor with each.  What would you do?

Do both couples make 3 times rent currently? That seems to be the going rate around BiggerPockets. If they do, then I would choose couple #2 who is NOT looking for you to add things that are not currently there. Nitpicky in the beginning means really picky a little later down the road.

If couple #2 does not currently make 3 times rent, then I would choose #1 or wait until you find a candidate who meets all criteria AND gives you a good feeling. Better to have the place vacant an extra month that deal with hassles and ridiculous requests. 

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

Thanks, Mindy.  3 times in gross income or net per month?

@Mike H.

In this case if both meet the income requirement, credit requirement and other I would go based on the personalities of the tenants. One other thing I would consider is would you consider a tenant more long term or short term. I would  not sign a lease longer than 12 months but would prefer someone who would seem to stay for long term.

Both couple qualify on the income metric.  I agree with your logic.  

We only offer one year terms at first, but have had success with 2 year terms after  Thank you!  I'm killing the thread, because I was hoping for more anonymity for this topic.  I've reposted under our trade name.

Originally posted by @Mike H.:

Both couple qualify on the income metric.  I agree with your logic.  

We only offer one year terms at first, but have had success with 2 year terms after  Thank you!  I'm killing the thread, because I was hoping for more anonymity for this topic.  I've reposted under our trade name.

Never mind - figured out the privacy settings! New to the forum and already very impressed.  Excited to learn from everyone. 

some questions / thoughts to help you ponder:

- perform reference / background checks before anything else - you may find a red flag

- is couple B's W-2 income more than enough to cover the rent (ie, rent < 30% of gross monthly income, or whatever % you are comfortable with)?

- In your state, can you require more than the standard security deposit and 1 month's rent? 

- if you build the shed for couple B, can you charge them (and future tenants) an extra monthly fee it use it?

- which couple do you think is likely to stay in a lease longer? Consider turnover costs as a factor (all other factors being good enough)

- I am self-employed and can attest that not all self-employed people are created equal (think about a musician vs. a lawyer or investor with his own LLC). if you are truly worried about Couple B's 2nd income, ask for a 2-3 years tax returns showing total income and carefully consider the circumstances and stability of the self-employment (10 years as a piano teacher vs. just starting out).

- finally, do find yourself already annoyed with couple A? if so, do your due diligence but also trust your gut... this might be the most important thing I have learned over the years.

Originally posted by @Justin Ashton :

some questions / thoughts to help you ponder:

- perform reference / background checks before anything else - you may find a red flag

- is couple B's W-2 income more than enough to cover the rent (ie, rent < 30% of gross monthly income, or whatever % you are comfortable with)?

- In your state, can you require more than the standard security deposit and 1 month's rent? 

- if you build the shed for couple B, can you charge them (and future tenants) an extra monthly fee it use it?

- which couple do you think is likely to stay in a lease longer? Consider turnover costs as a factor (all other factors being good enough)

- I am self-employed and can attest that not all self-employed people are created equal (think about a musician vs. a lawyer or investor with his own LLC). if you are truly worried about Couple B's 2nd income, ask for a 2-3 years tax returns showing total income and carefully consider the circumstances and stability of the self-employment (10 years as a piano teacher vs. just starting out).

- finally, do find yourself already annoyed with couple A? if so, do your due diligence but also trust your gut... this might be the most important thing I have learned over the years.

 Thanks, Justin.  Valid points and good feedback.

Both candidates passed the background checks, finishing references tomorrow.  Both couples' incomes are well in excess of a comfortable margin.  We aren't concerned about the second income for Couple B because the first income is sufficient, still 2 incomes are superior to 1, in my opinion, for spread of risk.  

On your last bullet point - yes, we were a little annoyed by Couple A.  I've never had to show a unit 3 times, or have someone take measurements of every room, corner, and closet.  At first they were very lukewarm, but we engaged them despite the quirks because the property is in the final stages of a 6 month, $160K renovation, so it's not for everyone.  We entertained adding the shed because it would be paid for in 2 weeks of rental income, and we were afraid of having a 1 month vacancy, which would be our first since 2009.  However, now that we have another couple who loves it for what it is, we feel vindicated.  It's almost like dating, so to your point, we should probably go with our gut instinct since the paper file is very similar. 

@Mike H.  applicant B has one income, is relocating to the area and will have a 2nd income shortly.  This is very common when the family relocates for one spouse's job and the other spouse finds new work after they are settled.  I would not be concerned with that.  It sounds like both are solid applicants.  Gut instinct:  who will stay longer, take better care of your property and not annoy you?  Thats who I would go with. 

It sounds like you really have a win-win situation on your hands. You mentioned credit scores for both but you did not mention evictions and criminal records. I am assuming that both of the couples must have clean records? Personally, I would select the easy-going couple who made the decision quickly. They seem like they will be low maintenance and from your post you seem to be leaning toward Couple B. Couple A may keep making requests after the shed it could be something else. 

@derekb I'm with you on the second income.

@rhondalette We will run the background check tomorrow.  Just got the second application in about 90 minutes ago.  Thanks for the feedback!

Couple A looks like already more involved :))) it looks like you have a very good quality rental and good quality applicants. What is your best interest ? Ask for 2 years lease. Put into lease that any requested improvements more than let's say $500 will reflect into increasing the rent.
Originally posted by @Mike H. :

We own 2 duplexes and have been landlords since 2009.  We are just completing a major renovation of our second duplex, which we picked up at auction in the fall.  We have executed leases and secured deposits on one of the units, and have 2 strong applications in hand for the last remaining unit.  We are struggling to decide between the two sets of applications and could use some feedback.

Both applicants are married couples.  Couple A has two incomes, a W2 employee and a self-employed person, and they live in our area.  Couple B has 1 income presently, but are relocating to the area and would have 2 incomes shortly.  Couple A has seen the property 3 times in 3 days, and have seemed lukewarm to our property for a while before coming on strong as of late.  Couple B walked into the property today and said "we'll take it" within 5 minutes.  Couple A's and Couple B's credit scores are within 10 points of each others, essentially identical.  Couple A has asked us to provide a storage shed for the back yard which would add approximately $500-$1,000 in expenses, and have asked other questions that lead us to believe they may a little "particular".  Couple B seems content with the property as is.  Couple A submitted their application 12 hours before Couple B, but were told we would evaluate after reviewing all applications.  We have yet to check landlord references, but have verified income.

I am looking for some feedback from experienced landlords as to who they would select.  We can make a compelling case for each.  Couple A's dual incomes may outweigh their extraordinary amount of questions and request for the shed, etc.  Couple B's lack of a dual income may be outweighed by their very easygoing demeanor.  The credit history seems to be a non factor with each.  What would you do?

 Hi Mike, really in my opinion, you have two couples with one income.  I never trust self-employed income.

And you are completely within your rights to "discriminate" against an applicant who you feel would be difficult to worth with.  People who are rude or difficult are not in a protected class.

Go with Applicant B.  Applicant A will be nothing but a regular pain in your rear. Take it from someone who learned over many years to not rent to the tenant who expects you to alter your property to fit their whims.  I learned to tell them they should keep looking for a property that has what they want :-)

The only exception would be if they were the only option in the universe.  Fortunately for you, that's not the case.

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