Fire Time Landlord: Would You Rent to These Tenants?

79 Replies

I've rented to roommates and I've rented to couples - some also in their 20's. It's hard to predict what's going to happen in their personal lives and there is no way you can get a "feeling" about it either - almost doesn't matter. If there is a lease involved, someone is paying rent whether they need to get another roommate or not. Develop solid rental criteria and stick with that. If their individual income and or credit doesn't meet the standard, the answer is no. There might be people who will work with them, but you have no guarantee and it doesn't sound like you're that person. If a couple breaks up or a roommate leaves, they can be replaced whithin the group - but rent must still be paid in full, however... If the couple in this case is sharing a bedroom, and being able to afford the place depends on all four people being there, there's a risk and it has nothing to do with being friends or there being a couple. It's simply a fact of income. If they break up and the girl moves out, what's the dude going to do? Go get another girlfriend to move in with him? No. They could probably find a friend to share the room but going down any of this rabbit hole mess is over thinking it. It is not your job to decide how they could make this work or how they could damage your house - your job is to stick to your standards, perform background checks and due diligence, and collect a deposit. Does theirr income and credit qualify?  Could the remainder afford the place of one of them moved out? 

Define your criteria and stick to that, either way. You do not want to deny them on a feeling or worry or on thoughts planted in your mind by posters... Otherwise you could get into fair housing trouble. 

Discuss this with your property manager and look over the rental criteria to see where you might be able to improve it. Have a solid criteria, solid standards, and rely on them

@Josh Thomas . As for financial qualification I would look at something along these lines IF you decide these folks meet your basic checks, Criminal, job stability, employment, etc.

Any combination of 2 of the tenants would have to meet the minimum income requirements (whether that is 3 X Rents, 4 X Rent - whatever your criteria). For Example:

A + B = 3 X Rent.

A + C = 3 X Rent.

A + D = 3 X Rent.

B + C = 3 X Rent.

B + D = 3 X Rent.

C + D = 3 X Rent. 

it sounds good to me, but then it's not my money on the line 😇

Being married as opposed to "living together" doesn't matter in this day and age because getting married is what people a century ago called "dating".  Can 3 of them pay for the rent if one person leaves?

Can the building handle 4 adults? Are you on an aging septic system that can't handle 4 adults?

Maybe I'm wrong, but I thought it was common for laws to forbid aggressively limiting the number of people who can live in the building. i.e. if you have 3 bedrooms and 2 people can fit in each bedroom then you have to allow 6 total residents.

I would put only 1 person on the lease so that you only have to perform legal action against over person should anything go wrong.

Diagonal from one of my properties is a house that has to have at least 6 millennial living it. It might even have more. I peeked in the windows during its renovation and the layout was weird and some rooms were tiny like 8x8. The tenants seem so stereotypical: my tenants complained that one squawed at them for having an old truck, I smell pot flowing from the property a lot, they rarely do yard work so it looks bad, act like a much of hippies, and have a rock band! Another neighbor got in a screaming match with them (but she's like that 😄) So I hope yours aren't like these!

@Josh Thomas I rent to groups like this all the time. If they dont have 3x the rent in income I ask for a co-signer 

The fact that they are young does not bother me. 

I only do leases where they are all collectively and severally liable for the rent/apartment and it has worked out really well. 

Good luck! 

I also want to add- more than half of my rental units are these types of groups. In oregon the limit for number of tenants is 2 per bedroom plus one. 

In my situation the kids who rent from me have mostly been super tenants. If one person or couple moves out the group asks to qualify a new roommate and they fill out an application,  get screened then added to the lease. 

I honeslty dont understand all the negative comments being made -

Do these folks not rent in urban settings??

I did this once with two room mates when I was on military orders. The landlord split the lease and rent into thirds and there was a clause in the lease agreement that stated that if any one of the three couldn't pay, moved out, or had to leave due to a change in orders then the remaining two would cover the difference. 

@Josh Thomas

Hello what a great question.

First of all not all property managers just rent to whoever applies some of us care about finding the best possible residents for their clients. I would ask if your PM if he/she personally interviewed them and see what his/ her impression was and if you are still unsure ask to meet them yourself if he/she feels confident in their recommendation that should not be an issue. And lastly if they qualify financially and a fair deposit is agreed upon I don’t see why you shouldn’t rent to them,we shouldn’t discriminate under any circumstances. Best wishes to you..

@Rex T. What is your definition of " stable family"? and "related"?  At one time those terms were innocent enough. However; this is a new day, and they no longer have a place in the conversation on housing. Some people say they find them offensive. (not me)  Did you see the list of words that are frowned upon in my previous post? 

Hi Karen, those words I use are for the benefit of practical advice for investors, of course we cannot discriminate protected classes but we are legally able to rent to folks that meet our company policy, which should be written, as long as we don't discriminate. Stable means exactly that, job history, rental history, criminal backround, etc.

Bets of luck on your development endevours in the beautiful North West

I love how many people are hating on the age factor! What if they were in their 30s or 40s but still not related!? Would y’all still be so against? They make 4x the rent I believe was stated earlier and that’s over the landlord’s requirement, so I don’t see the problem.

I’ve been with my fiancé for 7 years (engaged for less than a year).. so don’t judge a book by its cover. We own a home together and an investment property and have a dog... without the government saying we are official married!!! So they aren’t married but maybe they are like me and would rather invest their time and energy in their careers and financial future rather than plan a wedding :)

Maybe... how many other qualified candidates do you have and how long are you willing to wait to rent?

They don’t sound horrible. If they are the only people currently interested, and the only qualified candidates, and they have passed your screening... I think I would rent to them.

How long the place has been vacant, and how many serious applicants have come in wound weigh into my decision

I personally would see no issue in renting to them. If you have a worry, you could take a larger security deposit in order to cover any damages which you feel are necessary. I also like to sit down with people and interview them. Getting a good feel from them as a group should ease your mind and be good to go. 

@Josh Thomas

based on you're description, I would rent to them but increase the deposit. in my state, I can max out at 2x rent for a 1 year lease. I have done this several times. it provides a level of comfort knowing i can conver 2 months rent or some additional in damages. it also requires the tenants to come up with more cash so they are more vested in my property.

Horrible people? No.

Unqualifiable tenants? Yes

What are your Property Manager's written standards for tenants?  (Probably nothing)  Are you paying him the usual rate? One month's rent plus 10% of every month after?  Well then, of course, he wants to rent it to them, he's worked threee whole months FOR NO MONEY (/sarcasm).  "They seem like nice people" is an unacceptable reason to rent to them.  Why the nicest people I meet are the ones trying to rent from me when I have an opening.

I think you need a better PM if your property has sat vacant for 3 months.  I don't care if it's your sibling/cousin-FIRE him.(If the PM is your mother you can keep her.  Just make her do a better job.)

Here's how I rent property.  After I place an ad on Zillow I'm swamped with calls (30 first day last June) I set 6 appointments in a 3 hour window and call back starting 1 hour before the first appointment.  People who fill out the app before leaving (4) get processed.  The ones who want to email it back to me? Yeah, I'm still waiting for those 2. LOL  The first applicants(2 guys in their 20s) met my requirements and therefor got the house(1st in line). And they are my youngest and slowest paying tenants.  (Despite having 4.5X the monthy rent in income. Verified in writing.) If they're late in February (sort of like betting on the Patriots to make the playoffs.), they are getting a non-renewal notice for May 31st.  They will then be someone else's problem.

And the property will be re-rented out within one week.

Landording is only as hard as you make it. Find the way to make yours easier.

I am currently house hacking bedrooms to unrelated young professionals and grad students. So far it has been great, but I don't think I could do it without personally meeting them and also living with them!

The turn around is yearly, not having a tenant for more than a year at a time, and it also brings up some issues during the summer when they look to sublease.

If the tenants see the rental as more of a room plus shared space then I would be concerned about maintenance and cleanliness. I would include a section regarding cleanliness of the shared spaces. You could also include something about reporting maintenance issues as soon as possible.

The bigger pockets landlord documents have lease that covered quite a few good points!

I think it would be best to rent to atleat two people than put four people on the lease. So I would screen all but only put 2 on the lease. For the one that is being late, that would disqualify the entire thing.

Make it a master lease with their portion or rent for each tenant but all are liable for entire amount.

Make the parents co sign for these with bad credit or no credit. If they deposit their money separately - increase the rent by 5-10%. If one is late, ALL of them pay late fees - it makes 4-times late fees.

So, let's say, you have $1600/mo rental - then each has to qualify for 3-4 rents income on their part $400*3=$1200 with good credit.

If they choose to deposit separately - it's $440/mo. Young people are very good with apps on the phone - they all deposit with CashApp, for example. If on the first you don't see one of the $440 pending in your CashApp - text all 4 of them that they ARE ALL being late on Rent and late fees for EACH will be $40 as of 4th or whatever the day on your lease.

There are landlords who work only in that niche and renting very expensive houses by room, extremely updated - to students, flight attendants, resident doctors. They are having twice more income than our regular SFR rented to a family......once you step out of your comfort zone - you might not want to get back

@Josh Thomas

Just a thought but have you thought about renting the rooms out individually? That way there is four different leases and it could theoretically increase your overall cashflow. I'm doing that with one of my SFR and it's very profitable.

Hi! 

I would recommend that you take the one person with the best credit out of all four of them, and make the lease in their sole name. Leave the responsibility on them to ensure that the full rent gets paid every month and for the entire duration of the lease term. I would also stipulate in the lease that they are not allowed to have " guests" past a time frame of maybe a weekend/week without notification and approval in advance. And that they are not allowed to sublet their lease/ individual rooms without prior notification and approval. The tenants might need to share the rent to make it affordable and I get that. And as long as you have good people in there, its not a bad idea. Shared homes are a necessary thing especially if you have a larger home and want to maintain occupancy without going vacant for months looking for a " true family" to front the large rent. But don't make it your responsibility to obtain rent from each tenant. Make it the one persons with you retaining right to reject their choice in room mates if someone decides to leave or break up or <insert random college aged problem here>.

Good luck! 

This thread and the many opinions expressed is evidence of why there are Fair Housing laws. 

Every landlord should research the laws for the state where they own rental property, and craft a rental policy for themselves. Having a written, concise policy that you adhere to consistently , listing your criteria is the best way to avoid a lawsuit. 

In regard to the original post, it may be better to ask "What legally sound reason can you give for not renting to this group of tenants?" 

Hi Josh!

Congratulations on your first applications!  This is a big step and one of the most important factors for your property.  I recommend to have a set criteria of your qualifications for all of your applicants to reduce any potential discriminatory lawsuits.  Example:  Income 3x rent (gross income), maximum 5 collections, no evictions or bankruptcies in last four years, employment at least for 6 months, etc.  I know in California that Fair Housing is very strict and pro tenant.  Fair housing is drilled in our heads for property managers.  But if you have the same criteria for all of your applicants that will reduce any lawsuits for discrimination.  If your applicants meet all your criteria that is what you should go by.  The most important part of running an application is to find any fraud.  Ensure to verify residency the past five years (phone and post marked mail) and verify all income (documents and over phone).  Also check their identity in person or with a notary.  I have seen fraud pay stubs and friends confirming employment for applicants.  And people using fake social security numbers.  Make sure you have a strict application process to avoid any fraud.

Also, lease signing is probably the most important interaction with your tenant.  Make sure to sit down (or property manager) with the tenant during lease signing to explain all rules and lease requirements such as 30 day written notice before move out.  If you are concern of a sticky roommate situation be very clear during the lease signing that all listed on the lease (including any co-signers) are equally responsible for rent.  That doesn't mean who pays the rent but they are all equally responsible.  And take hundreds of photos of your property before lease signing.  Judges for small claims go by photos from my experience.

Let me know if you have any further questions.  I have 7 year property management experience in Southern California.  Good luck.

@Josh Thomas I don’t see any major red flags based on what you’ve written. I personally like having more people on the lease because more people share the liability. Someone wrote that you have to do 4 separate evictions, but assuming they’re all on the same lease, only one eviction would be necessary.

@Josh Thomas

I strongly agree with @Nathan G.

I know paying for a vacant place for 3 months in another market is eating at you and your wallet and who could blame you, but dont rent to these tenants on a emotional decision of being 3 months vacant and not wanting to go a 4th month vacant. The wrong tenant will make 3 months of vacancy seem like a walk in the park. 

If I were you i would take Nathans advice. His bullet points for why you should not rent to them, are much stronger and realistic than any other reasons why you could, or want to in my opinion. 

I suggest you FIRE your property manager and use BP to find a new one who has a waiting list of qualified renters who could occupy your place next week with qualified 2x income and have it be one signer not 4 20 somethings who are much higher risk. 

Remember as a landlord, look at the situation from a realistic and logical approach. Never make a decision based on desperation or emotionally driven scenarios which is what your in. Your pain is the vacancy of 3 months and its motivating you to make an emotional decision to rent to these kids, that's not a logical one. 

Fire the property manager or get out of the contract your in with them. A good PM wouldn't allow a property they have under management to be vacant for 3 going on 4 months. That is BS!!!

@Josh Thomas Josh the fact that you posted here even though I know you're new at this says to me that your gut is saying no. So tell your gut to tell your head no. What I'm saying man is go with your gut like other people in this post I would say hard pass. Why are you trying to talk yourself into taking the first tenant that comes along there's got to be more tenants right? your market, it's got to be better than that right? Hope that helps.

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