I recently listed a rental and got an offer from someone to pay $250 more per month than what we listed for. I want to be ethical and legal, and haven’t found anything that states otherwise, but wanted to check with all of you experts and get your thoughts.
I do believe we have listed it too low, but we have had trouble with this rental property, mostly due to our newbie mistakes, and thought we would severely limit our tenant pool if we went any higher (already in a small rural town). He has a criminal history (from 10 years ago) and says his credit is not good, but is trying to rebuild it to buy a house in a couple of years. (I have not run credit/background yet to confirm to what extent). He also would like to sign a 2 year lease. He tells me he is willing to pay this higher amount to save him money from what he is currently paying in rent, and also was aware of the interest the house was getting. He has fulfilled his previous lease and is currently month to month. The rental pool for tenants in this area is not great, so we have never had squeaky clean backgrounds/credit, but also have a lot of turnover and lease breaking- literally the past 4 out of 5 tenants due to the couple splitting up. We decided we were going to be stricter on criteria this time around to break this cycle of turnover, but are considering this offer. Would you give this guy a chance? Are there any repercussions for accepting him as the tenant simply for his offer of higher rent despite the red flags with background/credit? I’ll add, he is also willing to pay a larger deposit, and I will check references and with current landlord.
It's usually not a good idea to bend your guidelines in exchange for a little extra cash. A lot of people will tell you it won't work out. However, in this business you have to take some risks (I just signed a lease on an A property with someone whose bankruptcy completed a couple weeks ago and they are currently waiting for the Sheriff to knock on their door and tell them to get out of their foreclosed home).
You say you listed it too low. How much too low? Is the extra $250 he is offering just bringing it to market or is it bringing it to above market? If it's just a little over market, I would pass. If a lot over market, then the risk can be worth it.
Assuming he doesn't have any recent delinquent payment marks against him, his current (and ideally prior) landlord confirms he paid on time, and the security deposit is large enough that you can get him out via eviction before the funds run out, I would say give him a shot. I would not do a two-year lease in the beginning. Perhaps consider a month-to-month and if everything goes well, tell him you will offer a one-year lease after six months.
@John Teachout Thanks for the reply, you’re so right. It’s been tough to determine what our criteria needs to be in that area, unfortunately. We were actually considering selling it, but decided to give it one more shot, and here we are.
The background check will tell a lot. Our first rental had an applicant with a sob story and would pay more to live in our house because she loved it. A lot of the negative things she self disclosed turned out to be smoke screen for the things the credit bureau told us. If he's par for the course in your area, then that might just be what you have to deal with, but hopefully you can find someone you are more comfortable with.
@Greg M. Thanks for the advice. I agree with you on the 2 year lease aspect- I was trying to decide if that was a good thing or a bad thing. As far as market rent- it’s hard to determine in that area. There’s not a lot to compare to and there are 2 electric providers- one inside he city limits with astronomical rates and one outside of the city limits with average rates. Just makes the comparison a little more complex. Luckily this house is outside the city limits which is the main selling point. Zillow has the zestimate at 1300, but we’ve been on a rocky road asking 950. I guess I’ll let him go through with the background and credit check and go from there. Thanks again for the advice.
@Todd Rasmussen eek! That’s what I’m afraid of in this case. Thanks for the input!
There's lots of info on these forums regarding establishing tenant criteria. These should be determined in advance and used to filter your potential tenants. If you don't have established criteria to apply to all applicants, you're opening yourself up to potential discrimination accusations. For instance, did you deny the applicant because their credit score was "bad" or because they were from Nepal? You can say it was because their credit score was bad but if you have no consistent "number" you're using, it's ambiguous. Establish criteria, apply it across the board and it'll help you to sort the applicants. Are you willing to rent to a smoker? Someone with a criminal history (felony, misdemeanor, sex offender, etc)? There's lots of areas you can discriminate in and also many you can't. Make sure you know your laws regarding this.
I don't believe the tenant is raising their rent offer because you have the property priced under market. Most likely, they are trying to get you to focus on the money and overlook some glaring issue that would keep them from being accepted by most landlords.
@John Teachout Thank you for your insight, really appreciate that. Yes, we really need to get our process down pat, and I am concerned about all of those things you mentioned. Appreciate all of you!
Be sure they aren’t a child molester or have four evictions on their record
@Sara Ratliff The conviction was 10 years ago, so depending on what it was for; I'd be inclined to give him the benefit of the doubt (again, depending on what it was for). I wouldn't do a 2 year lease, but would do a 1 year lease assuming he meets your criteria. I know a few places where people will offer more than list price for rent if good rentals (or just rentals) are hard to come by.
@Sara Ratliff Is there any reason why you are waiting to run the background check? Did he have to pay an application fee?
@Sara Ratliff are you going to break the cycle or keep making the same mistake?
You never pick your renter, then pick your criteria. Always have criteria and make sure the tenant matches.
That $250 is intended to get you to look past criminal and credit problems. In my experience whatever a tenant discloses, it is always worse when you run the reports. Tenants look for mom and pop landlords who will not run background or credit reports. He is banking on you taking the money and looking the other way, which sounds like what you normally do and why you have had problems.
Someone who can't manage money will agree to pay any amount of money for a rental. It is your job to determine if they have capacity to pay (income) and are responsible to pay (credit payment history).
Personally, I would tell the tenant, I don't need extra money. If you meet my criteria, you will be accepted. If he is high risk, charge an upfront risk mitigation fee. That way you get the money before he moves in.
@Anna Sagatelova I was waiting to decide if I was even going to consider based on the information he provided.
Dealer: What's your thoughts on the new corvette? It's a good deal.
Buyer: I'll take the red one.
Dealer: Great! We can get the paperwork started.
Buyer: You know what!.. I'll pay $250 extra because you're a good guy!!
Dealer: Okay....? Works for me.
@Sara Ratliff I see - well it sounds like everyone is steering you in the right direction.
Having a tenant screening PROCESS cannot be overstated. We screen everyone after they complete an application. Incomplete application (like not providing proof of income, or landlord references) = no screening. No screening = no tenancy.
@Joe Splitrock thank you for your advice. I agree with that.
@Anna Sagatelova Thank you for your advice! I definitely realize I need a solid process. We are still pretty new to the arena and figuring stuff out! Thank you!
Still review the criminal background or applications. I will not sign a two year lease knowing it may be tougher to get rid of. May be 6 month initially and change to yearly.
I have only once asked for $50 more as I had appointments with 35 other applicants. She was first, ready and willing. She said it was still cheaper than her apt rent.
@Sara Ratliff look into mysmartmove.com I use all my tenants to screen thru Mysmartmove. They charge $40 per application, you just register preferred tenant on their website with email address & they get link to fill an application. They would check their Credit & back-round check. Very seamless process, hope this helps.
@Sara Ratliff I would take the money while you can. The extra $250 per month adds up quick. Make sure to keep an eye on him. Make sure he is paying you in full on the day he is due. Just my thought.
I’d take him month to month. Perhaps 6 months lease would work too.
Ten years is long enough to have pulled his head out of his hind end. He may have just gotten sneakier though.
Buy furnace filters and swap them out each month. He might be legit, he might be growing 420 in the rental.
If you decide to take him, you could offer a shorter lease (which allows you to get him out if necessary) but also give a guarantee to not raise the rent for 2 years (to help satisfy him).
Thank you all for the tips, I really appreciate all of the insight!
Hi Sara, this is typically a huge red flag. However, if they pass all of your screening criteria and still want to pay more in rent then that's their decision. I'd definitely make sure not to skip over anything in the screening process though. Be sure to check in with past landlords, employers, and references as well and if all checks out maybe it will be a good fit. At the end of the day, it's what you're comfortable with and in my experience, sometimes people genuinely do odd things like ask to pay above the listed rent rate.