Flipper/Rehabber · Monterey, CA · Member since 2014 · 193 posts · 117 votes
Lately, several potential tenants whose income didn't meet the 1/3 guideline (monthly income should be 3 times the rent) have offered to have a co-signer. The idea gives me the willies, and so far I've declined to go for it.
But I'm curious if any of you have ever allowed a co-signer under such circumstances. If so, how did it go?
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
10y
Good for you for turning them down. A co-signer just gives you someone else you can sue after things go terribly. They don't guarantee that the high-risk tenant will become miraculously trouble-free, because they agree that you can sue them, too, after you kick the tenant out.
In my experience, learning things the hard way, co-signers are worthless. Any tenant who can't qualify without one, will still be a problem tenant. You'll still have to kick them out for behaving badly. Then, big whoop, you'll have someone else you can list on the lawsuit for past-due rent and damages after you go through the eviction.
Co-signers do not miraculously turn high-risk tenants into angels.
My particular story happened when the market crashed and we ended up with about a 25% vacancy almost overnight. The owner told me I needed to lower my standards. Okaaaayyyyy. So, I rented to a woman who had welfare (which on it's own wasn't the issue and can't be discriminated against in CA), but who also had bad credit. She offered her mother as a co-signer and who was also their current landlord (mother and child). All things I normally denied for - relative for a reference and bad credit.
But, she offered her mother as a co-signer, who no doubt wanted her grown daughter and the kid out of her house.
So, daughter moves in, mother pays the rent on time. And then, Baby-Daddy moves in and the couple have knock down, drag out, screaming, violent fights, with the police showing up and multiple other tenants complainingSo, did the co-signer make sure the rent was paid on time?
Yes. Was that the only issue? No.
I had to promise my good tenants that I was working on getting rid of the problem tenant (with the co-signer), so that I didn't lose my good tenants.
And I gave 30 days notice to the tenant to move, because of multiple calls to the police department and complaints by other tenants. Ironically, she didn't even argue with me.
When we went in to clean the apartment, there were also lots of cigarette burns everywhere, including the carpet which had to be replaced. It's a miracle they didn't burn the place down, as it was apparent that they just dropped cigarettes regularly, that just burned themselves out on the carpet.
So, did the co-signer change the risk/behavior of the tenant who wouldn't qualify without one? Nope.
Taking co-signers is a crazy risk in my experience. And you can never prevent any of them from including you in a bankruptcy anyway.
So, just look for tenants who have a great track record of their own. If they don't - and you take them thinking a co-signer will make things okay, odds are that you'll be sorry.
Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
10y
We hold co-signers to a higher standard than an applicant with regards to credit score and income. They need to have a credit score high enough that shows that they care about their score, and enough income to pay for where they live, plus the place the are cosigning, at 3x at least. And we require they be in-state. So far, when we've explained to people that their cosigner needs to meet a higher standard, we never hear from them again.
Flipper/Rehabber · Monterey, CA · Member since 2014 · 193 posts · 117 votes
10y
Thank you, @Account Closed! I feel confirmed. Another thought I've had is: Even if both the tenant and the co-signer are very fine people, if the tenant can't afford the rent and "something happens to" the co-signer, things could get unpleasant for all.