I just received applications for our first tenants ever. They have passed all of our screens (criminal, credit, etc) and in general, I feel good about it. But there are some quirks:
• It is 4 people total. A couple, plus two others that are not related. I think they may all be friends from "back home" This is in Denver, btw.
• They are young. 23, 23, 24, 24 y/o and working entry level jobs. A few of them are college grads, and a couple may have dropped out. Not 100% sure. Collectively, I think they cover 4x-4.5x rent amount. We are trying to get another guarantor, like a parent, especially if they are still in school.
• All have Good+ Credit but one, who is still currently behind on surprise med bills in collections. He wrote quite an authentic letter, and has recently worked out a payment plan with them, but was still late Dec/Jan bills. Seems like a good person that had some bad luck. I've actually been in the exact situation before.
My PM likes them and without having met them myself, I feel like it should be ok. We plan to rent to the under one lease, so if one goes down, they are all still responsible. That said they are young, and our house was completely renovated 2y ago. So part of me is terrified they will turn out bad and f-up my place. Always a risk though I suppose!
Would you lease to them? If you did, are there any caveats? Any tips, or specific legal clauses, or lease structures you recommend to keep my best interest protected?
Thanks in advance all! Cheers!
@Josh Thomas the biggest concern that I see is "the couple". Are they married? Engaged? Or just boyfriend/girlfriend? Anything other than married would be a red flag for me. I would feel better if it were 4 friends. Other than that, nothing would be a "no" from me.
Not at all… The problem with putting four people on the lease says if you ever have to do an evection if you have to affect all four people and there’s a separate fee for each one.
Hard pass. Too unstable. Four different lives means four X reasons for the lease to be broken. I can imagine what will happen when their friends visit or damages are assessed. Not slamming all 20 something year olds. I was one once and I remember...most of it lol. If it were a beat up Class C, ok. Not a newly renovated house though. BTW, your PM will likely rent to anyone that passes a screen and can fog a mirror.
They sound OK. Did the PM say what they drove up to the showing in and if the car was a mess?
Is the home big enough to house four people?
I don't mind two roommates if they both individually make 3x the monthly amount. But multiple family groups under one roof I won't do.
Wow guys thanks for all of the great feedback so quickly. Let me try to answer these questions for everyone.
@Jason DiClemente Not sure, think just dating. I had the same feeling, but felt I couldn't judge that without meeting them.
@Terrell Garren This is my biggest fear, I can't imagine what could have happened if I was 23 living in this house.. haha!
@Sean Lambert No, but I will have to ask. he said they seemed nice, well-mannered, and clean. Yes, it is. 3 x 1.5. 1700 SqFt.
@Bill S. The income is another big concern for me. If the couple decides to take the hit and leave town, the other two will be at like 60% gross income going to rent, which is not really doable. It is 1700 SqFt, and 3 x 1.5
Thank you everyone else for your thoughtful answers. This post has only been live an hour or so and it seems the overwhelming majority is a "No" or "Probably No"
Would you guys change your mind if a parent were to join in as a secondary guarantor?
Like almost everyone else who has responded, I would not rent to them. I have been a landlord for many years, and I won't rent to roommates. I don't want to discriminate, but roommate situations change too quickly and are too unstable.
One of your goals when you rent properties is to minimize your vacancies. Roommates might rent for only a year, or something happens, and one or more move out. Families tend to stay for years. This will cause you to lose out on rent while you find new tenants, and it will increase your costs to prepare the property for new tenants. All my tenants stay 4+ years.
Even if a parent cosigns, I still wouldn't rent to them because all that does is give you someone else to sue.
Sometimes you can't get great tenants, so you have to settle, so if you rent to these people, I would first of all, meet them in person. Do not rely on the PM. Their goal is to get paid and not to look out for your best interest like @Terrell Garren said. You can get a good sense of their level of maturity, responsibility, etc.
Second, I would ask for a very high security deposit to cover some costs associated with eviction, preparing the property to re-rent, vacancy, etc.
I like to make these decisions based off of the criteria I set for the property. If they meet the criteria then they get the house/apartment.
Implementing a quarterly inspection helps ease the fear of damages. Any actual damage can be charged and fixed right away, and it really does alleviate a lot of potential damages as well.
Hope this helps!
The roomate thing does not bother me but the income would.
4 working professionals should make more than 4x a monthly rent amount in take home income though. That sounds low to me. The only way I would consider renting to them is if they each had rockstar co-signers who would go on the lease along with the tenants.
@Josh Thomas I would not rent to them. The couple could break up and/or the other friends could partner up with someone else and move out. The income of the tenants is not high enough to cover the rent if someone moves out. If they could cover the rent with a roommate moving out I may have but without that they are a hard no.
Also I would talk to the previous landlords of each tenant if you are still considering them. If they do not have then I would definitely say no for a renovated property since you are taking a chance.
Keep advertising and see what other applications you receive.
Awesome everyone. Thank you so much. It is highly likely that I will need to rent to them anyways. As @Mary Aviles mentioned, I am at a point to where we have been vacant for almost 3mo, and I am paying for a place in dallas and denver. The house is fantastic, so its likely due to the time of year we have been on the market, but that doesn't change the mortgage :)
We are giving it through the weekend to see if we get any more bites before making a decision.
If you ABSOLUTELY had to rent to these guys/gals, what would be your terms?
Adding a guarantor or cosigner just complicates the issue even more. Will that guarantor really take care of financial obligations if their child is not the one failing to rent? Unlikely.
My policy is to not accept three or more unrelated people. The reason is that they will pool their money together to afford something they otherwise couldn't. This is fine until three months down the road when they get tired of Tenant B living like a slob or Tenants C and D lose their job or Tenant A starts sleeping with Tenant D even though she moved there with Tenant B...you get the point. It happens far more often than not. Then you will see one or more of the tenants leave and the remaining tenants can't afford the rent so they either scramble to plug in another roommate or they all leave. It is not worth the hassle.
I only accept three or more unrelated people if each individual makes 2x the rent on their own and has a credit score of 650 or higher. I also take a double deposit.
Parent and child households tend not to move this time of year if that is your prefered occupant. If you accept these occupants and get gaurantors that tells you the parents will back up thier child, i worry when they wont because if they wont trust thier kid, why should I. Do inspections, have a no more the x days visitors. Do not allow pets and make sure thier repondsibilities e.g. garbage lawn etc are clear. One check every month. Make sure the lease makes them jointly liable. particulrily for young tenants show them how things work in the house. Roomates can be tough but be clear you dont do roommate negotiations. Solve it themselves.
Each and everyone qualify individually or none qualify. "Collectively" is never a good approach.
It seems complicated, but there are a lot of moving parts here. You need to keep in mind that, as a professional PM, a huge part of your job is insuring that you, and by default, the property owner, are following fair housing guidelines. There are some gray areas here- such as "are they married?" It's illegal to reject a tenant based on familial status. This is why any PM worth their salt has income, criminal and credit requirements for tenants- they give you information about how reliable an applicant is without touching on any protected classes. If you have concerns about their income being too low or their credit not being great, talk with your PM about changing your personal rental criteria. That said, when you make that criteria more stringent, you should prepare for longer vacancies.
I tend not to want to rent to a series of roomates. Also, younger people may have a shorter tenancy than older people.
@Josh Thomas I mean it really depends on the area and the rental. I would probably say they should each qualify on their own. If they do that, then let them in.
I’m basically the same age as these potential tenants AND landlord. How old are we supposed to be before we can just rent on our own lol? I’ve been renting (and paying my own rent) for almost 5 years now. I’ve lived in 5 different apartments in 3 states and I’ve never had an issue with this sort of thing.
@Jason DiClemente I wouldn’t tell him to use Marital Status Discrimination as a criteria for a red flag. You managed to pick the one thing that shouldn’t be relative to his selection criteria
@Steve B. Marital status is not a protected class under the fair housing act
I like the criteria that @Jessica G. mentioned. non married people 3x rent individually. That makes it so in case there's a break up or whatever the case may be, that whoever stays in the house can still cover rent.
So are you a by default investor/landlord? Why not sell the place before the market crashes next year? I'd only do it if they had 1st month, last month and a deposit. I'd also want to know what their current living situation is, references from the landlords and - my favorite - condition of their cars. If the car isn't well maintained the rental won't be either!
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