Brooklyn, NY · Member since 2018 · 28 posts · 0 votes
I have a property in NYC that I plan to rent out for the first time. Unfortunately, the rental market is ice cold now.
My broker said that there are 2 roommates whom recently graduated college, recently found jobs, and have cash in the bank. They don't meet the income requirements, however. They plan to sign with guarantors.
Is there crafted language you use in a lease to serve the purpose of the guarantee (payment of rent) and to protect the interests of all parties when guarantors are involved?
What happens if the roommates to not make payment (e.g. job loss), and the guarantor(s) refuse to make payment?
Are there other risks involved with signing a lease with a guarantor?
Any other pearls of wisdom with regard to vetting out these potential tenants to make sure they will be reliable down the road?
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
In my view language alone won't pay the rent if things don't work out. I'd keep looking for better candidates. Guarantors only work if they are related by blood-like a parent or sister, etc. And well enough off that paying monthly rent for someone else won't even be noticed. I'd much rather have an empty unit than one filled with a marginal or worse tenant. Yes you want the language to be accurate, but words on paper don't carry the same weight today, depending much on where you are.
I would speak to your real estate attorney and get their thoughts. Possibly have them draw up an addendum or modify a boilerplate one they already have.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
In my view language alone won't pay the rent if things don't work out. I'd keep looking for better candidates. Guarantors only work if they are related by blood-like a parent or sister, etc. And well enough off that paying monthly rent for someone else won't even be noticed. I'd much rather have an empty unit than one filled with a marginal or worse tenant. Yes you want the language to be accurate, but words on paper don't carry the same weight today, depending much on where you are.
Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
6y
NYC is having issues with high vacancy but that is only part if the issue. At least you aren’t loosing money with a non paying tenant who won’t leave and there isn’t much you can do. With that being said if they recently graduated with cash reserves and if their guarantors are parents with strong finances I may consider.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
6y
If the guarantors meet the credit and income requirements, I'd do it (and have).
Sounds like you will have two qualified (guarantors) and two unqualified (tenants) to go after if the rent isn't paid. That's pretty good odds of getting your money.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
6y
With guarantors, the strongest will be guarantors who own real estate - and even better if the real estate is in the same county (court system) as the rental. Because a well drafted personal guarantee will mention that you can lien their property with a judgment if there is failure to perform. Make sure ALL parties on title to any real estate sign on as guarantors so that your promise to lien has teeth ;)
If the guarantors do not own real estate, then you have weaker guarantors; in this case you have to make sure the guarantors have enough income to cover their own living expenses plus the rent. Renters usually aren’t up for qualifying for this ...