Run Cosigner Through Normal Application Process?

6 Replies

Hey guys, quick question: I've got 3 girls who seem great and responsible applying for a unit, but their income is just barely too low. They all have parents who can cosign. Do I need to run the cosigner through my normal app process or do they just need to show proof of income and sign the lease?

@Art Maydan

Firstly, if this is a student rental, I would recommend that you have the parents be guarantors and sign a separate guarantee which references the lease {i posted a sample in the BP file space a few years ago}.

If the parents are signatories to the lease, then they have all the rights of a tenant including the right of access.   If they are a guarantor, they have the right to know if their daughter is meeting her obligations under the lease and the privilege of opening their wallet if she is not.

Little is harder on household social cohesion than walking out into the kitchen in the morning to find helicopter mom or over-protective dad sitting at the table.  Besides, having the kids as the only signatories to the lease helps them along their path in life.

Now, to answer your question.  Put your guarantors through all the fiscal checks of your screening process - credit history, income verification, etc.   If you are insistent on having them as signatories to the lease (aka a tenant), then screen them to the same degree as any other tenant applicant.

If your talking about a Chicago property, your lease is subject to LTO, that more or less nullifies both common sense and common real real estate laws outside 606. There is an old saying look at girls mom, when the girl is 20 and you will see the girl at 40, credit often follows same trajectory. 

No, no, no. And for those sitting in the cheap seats, NO! Ask yourself some questions and follow it through:

Question: why do I have an income requirement?

Answer: to ensure the applicant can afford to pay rent every month.

Question: Do these applicants meet my income requirement?

Answer: No.

Question: is there a good reason to deviate from my requirement?

Answer: No! If they can't qualify with three of them, what do you think will happen when one of them decides to move in with her boyfriend or transfer jobs or whatever? If they can't qualify with three, they sure as hell can't handle it with just two.

When three or more unrelated people rent together, it is an increased risk. The odds of them staying together are slim. The more likely scenario is that they won't get along or their life situations will change and one (or more) will want to move out and the remaining tenant(s) won't be able to afford the rent. Things get ugly from there.

In my early days, I used to accept multiple unrelated tenants as long as it didn't violate my occupancy limits of two adults per bedroom. However, I quickly learned it was a bad idea. In my experience, around 80% of those situations ended up creating a lot of headaches for me and costing money.

If you accept more than two unrelated renters, there should be higher qualifications because of the increased risk. Some have great success using co-signers, particularly for college kids. In my area, co-signers are nothing but trouble so I don't accept them. If I have three unrelated people wanting to rent together, I require each individual to make 2x the rent, which means a total of 6x the rent combined. Even if one tenant moves out, the other two can easily afford the rent. 

I just had this happen where three guys wanted to rent a $1,500 home with five bedrooms, 3 baths. Each one of them made over $3,000 individually and able to qualify. Two years ago I had another group of four friends wanting to rent the same unit. They had a combined income of $5,000 which would have qualified, but one of the tenants made over $3,000 and the other three tenants made less than $2,000 combined! Can you imagine what that would look like if the earner decided to leave? No thanks.

Take Nathan's advice. Trying to make unqualified applicants work is a sure sign of a unqualified landlord. If you have standards stick to them otherwise don't have standards at all.

You are operating a business not a welfare office. 

"I've got 3 girls who seem great and responsible"   How do you know. They are total strangers and all you know about them is what is on their application. Unfortunately for them they do not qualify....PASS.