Tenant/Sublease issues: What would you do?

Question

So I have a strange one. I have a tenant that moved out - his lease ends 07/31. He's paying the rent and his uncle in town is looking for a person to sublease. They found a prospective tenant that falls under the credit cutoff (she's at a 512, my cutoff is 550). I will allow a co-signer to average up the score (in my area it's necessary as I have a lot of low or no credit renters - usually students) but her cosigner has apparently gotten cold feet.

The uncle is now asking if he can be the co-signer. I'm leaning toward no for two reasons: I think it speaks to her risk profile if she can't find someone in her personal life to be a co-signer, and it would leave me at the end of the lease term with a tenant I wouldn't normally rent to (assuming she wants to renew). I have no written guideline for this situation, and the decision here would dictate what I write up, so I want to be sure to get it right.

Any experienced landlords have an opinion.

Thomas S. · Answer

I would be looking at this from the perspective that you already have a paying tenant.  I would never compromise my screening for a tenant wanting to sub let. Whom ever they find must qualify. I would probably pass on this applicant although you are not at much risk. Your existing tenant is responsible for the lease till it ends with a sublet in place. He is your guarantor.

Having said that if your credit requirements are only 550 I do not see a 512 as being much different.  Your existing tenant on lease will ultimately be held responsible for the rent for the duration of lease if the sublessee fails to pay. It behoves him to insure they find a reliable person or they will pay the price. Make sure you inform your tenant of this fact. The optimal way to do it is to have the sublease tenant be your tenants tenant and you continue collecting rent from your original tenant.

Your tenant would draw up a lease with the sublease and you would provide a letter of authorisation allowing him to sub let till the end of his lease. At that time the sublease would vacate or be approved by you to stay.  This way your tenant takes the majority of the risk.

John Underwood · Answer

@Shawn Q. What about if you limit your risk with some form f prepaid rent or a larger security deposit?

This would allow for an exception, eliminate turnover where you will possibly loose a months rent and likely have to spend money getting house ready for a new tenant.

Larger deposit or prepaid rent is a better to me than a cosigner. If the cosigner doesn't have a 750 or better credit score than they and the tenant may not care that they have a ding on their credit and it is hard to get back rent from someone you have to evict.