Evaluating Applications

10 Replies

Howdy!

My husband and I just bought our first investment property! We received our first applications for the rental, two friends in their mid-twenties. They are both living at home with their parents currently. Do I call their parents as a reference? If so, what questions do I ask?

I will also be calling their employers tomorrow. Please give me any advice you have. I know about the typical questions (are they currently employed there, can you verify income, how long have they worked there). Is there anything I am legally not allowed to ask?

Thank you in advance!

Originally posted by @Edward Mccracken :

A credit check should show you their history of addresses.  Also, look at the counties they lived in website so see if they had any evictions filed in their name.  

 Thanks for your response, Edward. I have verified that their state ID matches the address in the credit check (no other addresses listed). I also verified with the tax appraisal district that the addresses listed are owned by the parents (or at least someone with the same last name). 

So if they have lived with there parents, they obviously don't have any prior history or evictions. I have a few questions that I want to ask the parents, but what is your advice?

-where does applicant currently live?

-how long has applicant lived at your house uninterrupted? Where did they live before that?

-does applicant have any financial obligations? House payment, car payment, child support, etc

-why is applicant looking to move?

-is applicant financial responsible?

I figured I could get the most juice out of a parent, especially without any rental history. What do you think?

My criteria was that they must be employed for at least a year and have more good credit than bad. I always ran a credit check as well on every one who would be on the Lease Agreement. 

Since this is their first adventure away from the nest, I would ask if their parents would be willing to co-sign for at least one year, at which time, the parents would be removed from the lease and these two young whipper snappers would be on the lease by themselves after that.  (Parents would each need to qualify as well- e.g., credit check)

If the parents won't consent to this, then they don't have faith in their children, so why should we?

I started many young people on the way to learning responsibility and how to manager their finances by having their parents co-sign for the first year.

So the answer is...........CO-SIGNERS !!

Nancy Neville

The parents shouldn't be references. They should be guarantors if you don't feel the kids themselves qualify for the lease. What parent will say bad things about their kid looking for a place to live?

Originally posted by @Account Closed :

My criteria was that they must be employed for at least a year and have more good credit than bad. I always ran a credit check as well on every one who would be on the Lease Agreement. 

Since this is their first adventure away from the nest, I would ask if their parents would be willing to co-sign for at least one year, at which time, the parents would be removed from the lease and these two young whipper snappers would be on the lease by themselves after that.  (Parents would each need to qualify as well- e.g., credit check)

If the parents won't consent to this, then they don't have faith in their children, so why should we?

I started many young people on the way to learning responsibility and how to manager their finances by having their parents co-sign for the first year.

So the answer is...........CO-SIGNERS !!

Nancy Neville

 Great advice Nancy!! I will definitely ask them if they are willing and able to co-sign! 

Originally posted by @Ariel O. :

The parents shouldn't be references. They should be guarantors if you don't feel the kids themselves qualify for the lease. What parent will say bad things about their kid looking for a place to live?

 Ariel, they didn't list the parents as references...they listed the parents as an emergency contact and put the parents' address as their current address. I figured with my first time as an investor, I want to check every source they provide...especially since they don't have any rental history.

The rent is $1500/mo. Co-applicant 1 makes $2000/mo with consistent overtime on top of that. Co-applicant 2 makes $4750/mo. So total, they make $6750, which is 4.5x rent (meets my criteria for 3x rent). 

Co-app 1 has 800 credit score...no outstanding debts other than minimal credit card debt. Co-app 2 has 600 credit score....$400 car payment, no credit card debt. Had some issues 2 years ago, but collections have $0 balance. 

What are your thoughts?

I agree with Nancy re: co-signers. Friends have a way of getting into fights after moving in together, one of them moves out, and with your luck the one that moves out will be the one making $4k because they will feel they are paying more than their fair share! 

Make sure your lease has joint and several liability and clauses that limit number of days a visitor can stay in a row so you can avoid ending up with a rogue tenant you haven't vetted in your property.

@Brianna H.

I would make sure they are both on the lease and on the hook. I think for coapplicant 1 you would need a cosigner because of a high Rent to Income ration, and for coapplicant 2 b/c of previous collections.

Just my .02 and depends on your  rental market, too.

Thanks for all your responses! This has really helped! I think I will require a co-signer for both applicants OR double the security deposit.

I was almost kicked out of college for lack of payment because I couldn't get a co-signer for a loan...I have always been the most financial responsible person in my family, but sometimes you just can't get someone to co-sign no matter how responsible you are. 

I spoke with both of the applicant's moms. App 1 Mom said she would gladly co-sign. App 2 Mom said she would have to ask her husband, so we will see what happens! :-)