Advice for acceptance and holding fee- newbie question

3 Replies

I'm brand new to REI and being a landlord. This is my first time posting although I've been watching and listening to the podcasts for several months. I've been talking to friends in the business and reading a lot (most recently The book on Managing Rental Properties). I just closed on a townhome in my area about a week ago but advertised the home about 2.5 weeks ago. I'm currently renting back to the previous owners till the 24th. I've shown the home to 1 family and have 2 more interested people scheduled later this week. I've screened many through text and phone and honestly only 10% seem to qualify for a showing which I've gathered is fairly normal. The family I just showed it to is a single mother with 3 kids. Seems to have a stable life and down to earth. I ran a credit and background check and got pay stubs. Here income is 2.8 times the rent price and her credit score is a high 814. She does have some car and student loans totaling 54k. I will call her employer to verify income employment. I know the income is just shy of 3 but it's very close and her credit and loan history are near perfect so I'm thinking it's a go from that perspective. Do others agree?

The unit is available on the 25th and she wants to move in on Dec 1st.  She wants the unit.  I'd like to move forward with signing a lease and take it off the market in the coming days.  I'm thinking of asking for the security deposit of first month's rent ($1790) and an additional $500 holding fee that will be applied to the first month's rent on Dec 1st.  Does all this seem logical/reasonable?  I'm very open to other thoughts and recommendations.

@Matthew King  Does she have any rental references you can check? That can be the most telling thing you can check on. If her background check is good, credit score is great, she has the security deposit and a good reference from a previous landlord, it sounds pretty good, especially if you don't have other qualified prospects. One more little I sometimes do is walk them to their car and peek inside while saying goodbye. If it's super dirty inside and full of trash that's not a good sign.

@Matthew King Hi Matthew, Lori Greene is giving you some good advice, and I want to add to that. 

First of all, I would make the security deposit a different number than one month's rent. People will confuse it with their last month's rent and may tell you to apply it that way which would leave you with nothing to pay for repairs and any damage caused when she and her three children move out. Make the security deposit a different number even if by just a few dollars so it is not to be confused with last month's rent. Have her fill out a formal application which gives you all the informaiton you need to conduct your background screening processes, including the contact information of all of her previous landlord references. It is best to talk to the older landlords first vs the one she is leaving now. The previous landlords will be honest with you about her payment history, why she left and the condition in which she left their property. The current landlord may not know what condition the unit is in until after she leaves, and could possibly give you misleading information in an effort to get rid of a problem tenant, although she sounds like she may be a very good tenant, you still want to verify. Ask previous landlords if they had to decuct anything from her security deposit when she left and what it was for. Also ask them if they would rent to her again. Ask the current landlord if he has been inside her units since she moved in and if so how long ago was it? How did the unit look? Does she pay on time? Have there been any disturbances that required any sort of intervention? Does the current landlord have a security deposit of hers in his possession? 

Also in addition to the credit check and employment verification, you should check for a criminal history and prior evictions. Don't assume anything. 

Stipulate in the lease or rental agreement that she is not to sub-lease or allow anyone other than her three children to move in or occupy the unit without your prior written approval and a thorough screening of the prospective additional tenant. I also add a cluase allowing for inspections of the unit every six months for general repair and maintenance purposes. Also, tenants are not allowed to make alterations or changes to the unit if those changes are permanently affixed in any way, which included paint, window coverings, fixtures, floor coverings, etc. Do a walk through of the unit with the tenant, having the tenent make written notes of any existing damage, dents, dings, stains, cracks, ect so you both know what condition the unit is in upon her taking possession. That will make it easier for you to compare when she moves out and document the additional damage, without blaming her for something she did not cause. 

I hope this helps. I agree that she sounds like she will be a good tenant, but do not make assumptions. Put a tenant screening policy formally into place with a written policy and then follow it to the letter, without exception.

Originally posted by @Jan Kerr :

@Matthew King Hi Matthew, Lori Greene is giving you some good advice, and I want to add to that. 

First of all, I would make the security deposit a different number than one month's rent. People will confuse it with their last month's rent and may tell you to apply it that way which would leave you with nothing to pay for repairs and any damage caused when she and her three children move out. Make the security deposit a different number even if by just a few dollars so it is not to be confused with last month's rent. Have her fill out a formal application which gives you all the informaiton you need to conduct your background screening processes, including the contact information of all of her previous landlord references. It is best to talk to the older landlords first vs the one she is leaving now. The previous landlords will be honest with you about her payment history, why she left and the condition in which she left their property. The current landlord may not know what condition the unit is in until after she leaves, and could possibly give you misleading information in an effort to get rid of a problem tenant, although she sounds like she may be a very good tenant, you still want to verify. Ask previous landlords if they had to decuct anything from her security deposit when she left and what it was for. Also ask them if they would rent to her again. Ask the current landlord if he has been inside her units since she moved in and if so how long ago was it? How did the unit look? Does she pay on time? Have there been any disturbances that required any sort of intervention? Does the current landlord have a security deposit of hers in his possession? 

Also in addition to the credit check and employment verification, you should check for a criminal history and prior evictions. Don't assume anything. 

Stipulate in the lease or rental agreement that she is not to sub-lease or allow anyone other than her three children to move in or occupy the unit without your prior written approval and a thorough screening of the prospective additional tenant. I also add a cluase allowing for inspections of the unit every six months for general repair and maintenance purposes. Also, tenants are not allowed to make alterations or changes to the unit if those changes are permanently affixed in any way, which included paint, window coverings, fixtures, floor coverings, etc. Do a walk through of the unit with the tenant, having the tenent make written notes of any existing damage, dents, dings, stains, cracks, ect so you both know what condition the unit is in upon her taking possession. That will make it easier for you to compare when she moves out and document the additional damage, without blaming her for something she did not cause. 

I hope this helps. I agree that she sounds like she will be a good tenant, but do not make assumptions. Put a tenant screening policy formally into place with a written policy and then follow it to the letter, without exception.

Matthew, Jan is a property management specialist and she's given you some great advice.

 

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