Should I accept this tenant?

General Landlording & Rental Properties
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Should I accept this tenant?

Ryan Cheung
Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes

Hello,

I am currently in the process of finding a tenant for my home. We have had one month vacancy while searching for a new tenant, so I am looking to fill the home as soon as possible. A tenant who is interested in the property is offering $200 below my asking price, and his credit is not that great. However, his brother, who will NOT be living in the home, will be a cosigner on the lease, and his credit is good. Although they are offering a lower price than I asked for, should I wait to find a tenant and have another month of vacancy, or should I rent to this tenant who seems somewhat risky for a lower price? Any input would be of great help. Thanks!

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Nicole A.Pro Member
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
10y

You would run the actual tenant through SmartMove. I would not rent to this tenant. Vacancy is better than a bad and nonpaying tenant.

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  • Ryan Cheung
    OP
    Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes
    10y

    It appears as if his brother's name will be on the lease (not as a cosigner). Is it unwise or even legal to have someone's name on the lease who does not live in the property?

    0Reply
  • Account Closed
    Vendor · Fort Worth, TX · Member since 2016 · 66 posts · 12 votes
    10y
    Have you done a criminal history check?
    0Reply
  • Ryan Cheung
    OP
    Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes
    10y

    @Account Closed Yes I have. I ran his brother's name through SmartMove, and everything seemed to have checked out.

    0Reply
  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    10y

    You would run the actual tenant through SmartMove. I would not rent to this tenant. Vacancy is better than a bad and nonpaying tenant.

    3Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    I would not rent to this person. A, it is way below your rate, which I assume is market if you've had no trouble filling it before, and B, they are a crappy tenant besides. 

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  • Ryan Cheung
    OP
    Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes
    10y

    Thanks for your quick responses!

    What if I were to run the actual tenant through SmartMove and he did not qualify, and have his qualified brother as a cosigner. I would also ask for 2 months security deposit instead of 1.5 months, as well as 3 months rent upfront. Do you think that would help negate the risks? It seems that I was a bit over market value, which is why I was having difficulty renting the place out.

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  • Varma Adduri
    South Plainfield, NJ · Member since 2015 · 72 posts · 23 votes
    10y
    200 less per month times 12 =2400$. Is 1 month vacancy cost you 2400? If you find a good tenant paying full price next month, that will cover up the yearly loss of 2400$ That's your answer right there
    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y
    Originally posted by @Ryan Cheung:

    Thanks for your quick responses!

    What if I were to run the actual tenant through SmartMove and he did not qualify, and have his qualified brother as a cosigner. I would also ask for 2 months security deposit instead of 1.5 months, as well as 3 months rent upfront. Do you think that would help negate the risks? It seems that I was a bit over market value, which is why I was having difficulty renting the place out.

     If you are over market value, then you have 2 separate issues:

    1. Properly pricing your unit.

    2. Finding a suitable tenant.

    I wouldn't rent to anyone that I needed that much from. You are in essence asking for the equivalent of half a year's rent. Price your unit properly and market it properly, and find a suitable tenant. If the unit is in a bad area, you may have to accept bad tenants, in which case this guy might actually be a good tenant. You're not going to know unless you have more people to pick from. 

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  • Robert P.
    New Bedford, MA · Member since 2015 · 361 posts · 114 votes
    10y

    I would not rent to anyone who is haggling me on the rent. What's next? Pass on them.

    0Reply
  • Stephen E.
    St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
    10y

    Any tenant that needs a cosigner is a weak tenant. That is a given. Then the tenant wants you to take on their risk of default and cut rent $200. You would have to be desperate or inexperienced to take on such a bargain. Are you undercapitalised? You must be if you cannot stand two month's vacancy.

    I would separate out the two questions of the tenant and the price. The tenant is a non starter in my view. You choose the kind of tenant you end up with. Make unwise choices and you end up with weak tenants, poor payment history and evictions. If you are willing to wait for better tenants then you will find them.

    The issue of price is a different question. You pose it as whether you should lower rent for this one tenant while the better question is whether you are overpriced and should lower the price for all prospective tenants, potentially attracting better ones to your unit. Have you taken a cold hard look at what others are charging for comparable accommodation in your area? If you overcharge you are liable to attract very weak tenants who are willing to sign on for any price because they know they can't or won't pay anyway. If you are pricing yourself over market you are eliminating good tenants because they know the market and know they can get a better deal elsewhere.

    So I would look to make a deal with a better tenant, not this one. Focus your energies on determining the correct price and market like crazy to attract prospects and reduce vacancy.

    3Reply
  • Ryan Cheung
    OP
    Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes
    10y

    Thanks for all of your responses. Very helpful!

    So I have lowered my asking price to $3000 per month. The tenant in question is offering $2900. My house is in a pretty high income area in Bergen County in New Jersey. I could definitely take another month of vacancy and have the funds leftover to cover the costs, but my main dilemma is whether I want to sacrifice $3000 (vacancy) or $1200 ($100 lower than asking x 12 months). However, it seems that the majority of people here are saying that it is worth taking the loss in order to find a better tenant.

    I will run the actual tenants history through Smart Move and if it comes back very weak then I will have to deny them, even though they have a strong cosigner. Is this is the best course of action, or should I just deny them outright? Thanks!

    0Reply
  • Luka Milicevic
    Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    10y

    There's something wrong if you have been vacant for an entire month. Either you are over priced or the property is in a condition that no one wants. 

    I would do some research and make sure you are in line with market rents. Maybe get the property in better condition before trying to rent it out. 

    Being vacant for a month and not getting much traction means you have to do one of the above steps, or perhaps you aren't marketing your listing well enough...

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    The only exceptions I make to cosigners are for college students in our smaller units that are not really well suited for families. I don't take cosigners for grown adults. Anyone who needs a cosigner at $3k/month isn't worth renting to. What is your rental history on the unit? 

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  • Account Closed
    Everywhere · Member since 2016 · 63 posts · 26 votes
    10y
    I would not rent to this tenant, no matter how desperate I am. He wants to pay $200 less than what you are asking for and has to have a consigner. That's a very bad sign.
    1Reply
  • Ryan Cheung
    OP
    Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes
    10y

    @Luka Milicevic We have been fixing it up during this month and we have lowered the rent today, so hopefully we will start getting more interest. With regards to fixing it up, we replaced the old fridge and dishwasher with brand new stainless steel ones, and removed the old carpets from the bedrooms which have nice hardwood floors underneath. I personally think the property is quite nice, but we will see how future prospective tenants react.

    @JD MartinWe have only recently started renting out this home since last year. This used to be our personal residence until June of 2015, and we found a tenant who paid $3200 per month, but unfortunately had to leave after only one year. However, finding new tenants with the same price has proven to be a challenge, and with the end of summer coming, it seems that our window to rent out the property is closing due to schools starting soon, forcing us to lower the rent to $3000.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    10y

    Do not rent to this tenant. If you do not have a applicant that can qualify by their own standing then reject them immediately. At $3000/month you should not accept anything but class A applicants.

    You need to raise your standards and hold out for a quality tenant.

    0Reply
  • Kevin Hill
    Real Estate Agent · Hackensack, NJ · Member since 2014 · 321 posts · 412 votes
    10y

    As a landlord in NJ, the maximum a tenant can pay for a security deposit is 1.5 months.

    I rather have another month of vacancy than take a tenant with bad credit. 

    Lower your list price another $100 & hopefully that will get you more applicants to choose from.

    0Reply
  • Alice K.
    Investor · San Francisco, CA · Member since 2015 · 306 posts · 211 votes
    10y

    How good is the property relative to others on the market?
    Is he your only bite?
    Is it at market rate?
    What's your gut?
    Honestly, I would wait assuming the rent you're asking is comparable to other places in town.

    1Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    10y

    Lower the price to market,  fresh pictures, fresh ad.  Market it well.  You want to see what  the tenant competition is at the price this tenant is offering/or the price you are dropping to.  Maybe you get a better tenant at the same price he offers assuming that is market.    If it is a large family oriented property then your chances are better before school starts but maybe it is that you did not have it at market. 

    When you say credit not that good did you run it? or he said it is not good? Tell him the market price and you are not negotiating.  If you decide to accept the application run it like any other.  The other thing is you can say available immediately and see if you get mid month  move in.  

    0Reply
  • Carin Kveton
    Investor · Lake Villa, IL · Member since 2013 · 29 posts · 9 votes
    10y

    Your situation can be tough. We had a weird/bad patch where we had both units of a duplex (which had been newly remodeled), empty for a couple months. Long story short, we did get a prospective tenant that wanted to rent one of the units, but had a horrible credit score, plus a prior eviction, AND a couple shoplifting strikes against her! I said a big "NO"!. The agent she was using to help her find a place to rent asked if they were to put up an additional months rent, AND increase the security deposit, would I consider her then.... I said "NO"!. If he was willing to do that, I told him he should consider renting to her! Anyhow, I'm glad I held my own. Very shortly thereafter, I got another tenant who was qualified, and the following month, another tenant for the second unit. They have paid their rents on time every month, and have had no complaints about the property, or each other. While the short term (getting it rented sooner) sounds great, it could end up costing you more in the long run. He doesn't sound as bad as the applicant I had, but, go with your gut instinct. If you are concerned about his credit/ability to pay, etc... reconsider if your asking rent is reasonable. (I use rentometer.com - and it has been very helpful in my area, in figuring out reasonable rents , based on area and number of bedrooms). Good luck!

    1Reply
  • Sudesh N.
    Investor · Palatine, IL · Member since 2015 · 4 posts · 0 votes
    10y

    I agree with most responses out here that it may not be a good idea to rent to this tenant. Remember SmartMove may not uncover all the red flags in a tenant's background. Sometimes it is worthwhile to ask the potential tenant for references and start calling the references yourself. I have found that you can get a wealth of information by talking to the tenant's past landlords. It might even help to put your mind at ease that you are not missing out on a good tenant. Good luck!

    0Reply
  • Ralph R.
    Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
    10y
    Ryan Cheung It's best if you don't force things. I know you need to get the thing rented but you destroy all purpose to being an investor when you lower your price you can't make any money if your renting below market. All you are doing is pulling the market down and loosing money. A prolonged vacancy is why you allow for vacancy in your pre purchase due dilligance. You are also telling that guy you are willing to allow him to set the rules even though it's YOUR rental. It won't stop there. It will continue till he is gone. When you lower your standards by leasing to a non qualified person your setting yourself up to fail. Why would you qualify his brother than rent to him. Might as well qualify me. First impressions count and this guy is not giving a good one. If you rent to this guy and he don't pay the 2nd months rent it's another month to get him out and the unit cycled. Your trading 3 months time for a discounted months rentThat's 2 months lost rent just to get back to where you are today. Plus the amount you lowered the rent. Better to stay the course my friend and Remember never cheapen your product or lower your standards. RR
    1Reply
  • Jeremy Shepherd
    Rental Property Investor · New Martinsville, WV · Member since 2012 · 105 posts · 44 votes
    10y
    Ryan Cheung I learned the hard way to choose tenants based on business decisions not emotional decisions.
    1Reply
  • Ryan Cheung
    OP
    Fort Lee, NJ · Member since 2013 · 27 posts · 4 votes
    10y

    Thanks for your responses everyone! It seems that you all have the same decision, so I will pass on this tenant. Thank you for all of your guidance and support!

    0Reply
  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    To answer one of your questions regarding putting the brother on the lease as a tenant and not a co-signer - if you did that, then he would be a tenant, and he could move in.  

    I learned that co-signers are worthless.  Really.  A co-signer does not guarantee good behavior, or zero damage, or zero noise, or zero people parking on the lawn or smoking in the house, or bringing in pets or having loud parties, on and on.  They do not guarantee any of this.

    All a co-signer gives you - is someone else to sue after you evict the tenant.

    A landlord's only real leverage with the tenant/occupant - is the threat of eviction and of hurting their credit.  If there is nothing for the tenant/occupant to lose in that department, they have no incentive to behave.  

    So, you spend a ton of money evicting the tenant, then suing them and their co-signer.  And hope the co-signer still cares about their credit and/or doesn't file bankruptcy.

    Like I said - co-signers are worthless.

    So, as others have said, you need to have tenants qualify on their own.

    I didn't even accept co-signers for students, because I didn't want mommy interfering.  I had separate criteria for students - that they did not have to prove income, but they had to prove they were full-time students in good standing.  Then, I only put them on their "grown-up" contract.  They were responsible to get the rent to me, even if mommy wrote the check.  And if they didn't, they got kicked out.  And if they misbehaved, they got kicked out.  And I could ignore any calls from mommy.

    I actually only had to kick out one undergrad for relentless parties, regardless of warnings.  I'm sure Mommy helped her find another apartment, but I didn't have to talk to her lol.

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