Leasing to Business Owner with Bad Credit & More

Leasing to Business Owner with Bad Credit & More

Austin, TX · Member since 2016 · 2 posts · 0 votes

Hello All,

I have a question about renting a House (5BD) located in Central Texas to a Business owner and his family from Puerto Rico. They have commercial Business and deal with selling Energy solutions (& products) to large industries. Their income is is not constant obviously due to the nature of their Business.

They are having a hard time finding a rental in the city because of their very poor credit (foreclosure, back taxes to IRS, etc.). I did not run their apps yet but I am guessing i wlil see a lot of negativity on their reports. 

However, they both are hard working professionals (both are Engineers) and would like to sign a 3 yr lease to start a new chapter in Austin.

Will it be wise to ask for a large deposit and rent it to them? They are likely going to garner new clients in the area to increase their business. They work out of Home and visit their clients to sell their services and products.

One half of me is saying I should take a risk by asking 4 months of deposit and move forward with the tenant as I will be guaranteed a stable income for 3 years. The worst that can happen is  eviction but I will be cushioned by the 4 months deposit. 

Whereas, the other half of me is saying to avoid them and look for folks with better credit and stable income w/ W2.

Any thoughts would be highly appreciated.

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  • Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    10y

    Go with your gut. Don't do this when other options should be available.

  • Member since 2016 · 13k+ posts · 12k+ votes
    10y

    You do not need to go with your gut on this one. Landlord screening code #1 do not rent to applicant with bad credit, foreclosures, back taxes etc. This must be your first rental if it isn't how did you survive this long.

    Try finding good applicants rather than wasting your time trying to find ways to make bad ones work. New landlords always do that and for the life of me I can not figure out why. You answered your own question when you stated "They are having a hard time finding a rental.........) you should have got the hint.

    All the other landlords have already turned them away don't be the only sucker to feel sorry for them.

  • Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
    10y

    Also watch out for the "long" lease. Anything over a year is not an option in my book. A lease protects the tenant more then anything, as they will still leave with or without a lease but you can't get rid of them easy or increase rents, etc... for the term of the lease.

    For the record if you "need" to rent to these tenants then make it a month to month to start so if they fall behind you can tell them you're not renewing their lease after what ever month they are late.

    I believe in second chances but you have to lessen the liability on your end at the same time.

  • Austin, TX · Member since 2016 · 2 posts · 0 votes
    10y

    Thank you all. It's always good to learn from experienced folks here.

    I had asked for a 3month deposit but they refused to pay anything more than 1 month so I am moving on. I am proceeding with another applicant who is extremely qualified. 

  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    Yep move on. Austin is a great area so should have no problem landing a good tenant. This other potential tenant sounds delusional wanting a premium tenant one month deposit with all of those issues they have.

    They created their own mess so must deal with the repercussions of it.

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