So I am pretty sure I know what the answer here is going to be, but here is my first dilemma as a new landlord. Took a few applications the other day. Two qualified groups of tenants. Both groups of 4 young adult roommates for a 4 bedroom house.
Both groups have comparable, good credit scores and clean background checks.
Group A live in town and have various low paying jobs, but between the 4 of them have a >4:1 income/rent ratio.
Group B are similar, but make considerably more, for a 7:1 ratio.
The catch: they are moving here from a smaller town nearby, and only one is keeping their job. The other three have service jobs and will need to find new employment. One has a side gig lined up for minimal pay, one swears he could get a restaurant job from a friend if nothing else works out. I feel like I'm rolling the dice with this group, but their job/landlord references all have the most positive, glowing reviews of them all, "responsible," "hard working," etc. They all have some savings to last a few months, and their average credit score is a hair higher than group A (by less than 10 points)
If credit, criminal, eviction issues are not there with group A I probably lean towards taking them. You don't want to underwrite the Group B folks based on jobs they don't have.
With that being said, use your instincts. I still remember moving back to my home town after getting married. I was filling out the application for a small $700 per month apartment and I was denied because I had a part time job making $600 per month and that was it. Obviously, I had no income, but my wife and I had masters degrees and 20k in the bank. The idiot land lord in a C class market could have had two tenants with 800 fico scores, but she didn't even ask for a co signer...
If Group B just seems like a better group, try to quantify why.
@Robert Drach I assume Group B wouldn't make the minimum income requirement with the jobs they have lined up? If not, I would lean towards Group A. Two main reasons:
1) If Group B have indicated they will no longer be holding the same jobs, I wouldn't include that income in my calculations. If they included that income on their application, I would just make sure that you have it documented why you didn't include it (ideally with written communication from the applicants that they wouldn't be employed there if they got the place).
2) The fact that Group B is applying for a rental knowing that they don't have sufficient jobs lined up in the area doesn't line up with the glowing review of "responsible."
That's what I thought you would suggest.
One final defense of group B and their job prospects: I don't think they should have trouble getting wait/bar tending jobs in the current job market...
Thinking I'll reach out and ask if they could get a co-signer. Their references/credit scores make me feel like they deserve a shot.
My first instinct would be to continue looking. Both groups are transient and you will constantly be having to rescreen new room mates as they rotate in and out. If you do accept one group make sure each is aware that they will be held responsible for the entire rent payment. This way when one or two leaves the remaining will continue paying full rent. Make sure you only receive one payment for the entire group. Do not allow each to pay you individually. I would expect that at some point rent will stop when someone leaves. You also risk having them move in new tenants without informing you. You should also expect to have issues with pets as the ccupants change.
As I said I would not approve either but if you do I would choose group A. B clearly does not qualify without full employment.
This house is near a university, and I always expected my tenants were likely to be transients (students). I am prepared precisely for the situation you described! These are the two most qualified applicants.
Are these students or not. If they are students you screen their parents as guarantors and do not worry about the students income.
If they are not students then you treat them as any other applicants. Non student applicants, 4 unrelated indivulaes, are extremely high risk and will be very high maintenance which is why I do not rent to unrelated indivulaes.
These applicants will add considerably to your time and management as a landlord. You must do regular inspections, quarterly at a minimum.
My gut says Group A, but use yours.
Thanks everybody. May sound crazy, but I went with the job-seeking bunch (group B) after getting a rock-solid cosigner. Really couldn't get past how positive all of the employer/landlord referrals were. Will let y'all know if I made a huge mistake.
Good luck to you, Robert. You got Papa Bigbucks to cosign. That's what's important.