We have listed the property for 2 days and have 6 completed applications, and have scheduled about 10 showings. I am happy to have a lot of interest, but I need help navigating this specific tenant scenario.
We have at least 2 sets of renters who are very well qualified. Tenant 1 needs to move because the current owner is selling. They have stayed in that rental for more than 3 years and I think is more likely to be long term tenants. Tenant 2 has expressed that they will do whatever they need to in order to ensure they get the tenancy, but I think they are 1-2 year renters maximum.
I want to be fair to whichever tenant we end up going with but this is also an investment, so we are looking to position acccordingly. My current idea is to propose to tenant 2 that in order to seal the deal, increase the rent by $100 and sign a 2 year lease. Is this fair, or a bad practice? Or do I just tell tenant 1 and tenant 2 to give their best offer (like realetors do when they sell houses) and choose the best offer? Is there a better way to handle this? Any insight is appreciated.
Depending on the state you are in you may have an obligation to take first qualified. However if that is not true and you have a choice I would pick best qualified who has the earliest move in date regardless of what they say about length of tenancy. That said previous length of tenancy can be an indicator of a longer stay and looking for a house is generally an indicator of a shorter stay. Military and students are also usually a shorter stay as well.
Longer leases bind you, tenants will walk when they want so I would not do a two year lease. However in answer to your question I generally do not do higher amounts if it is competitive. I have relisted at a higher rate when it seems I missed on the price but that is usually at the calling stage. Is there something about the other renters that put you off? Is the second prospect better in some way?
Thank you for the feedback. First, I am in Nebraska and I can't find a "first qualified" clause with quick google. We are currnently in the house, so the move in date for both tenants is the same.
As far as the 2 year lease, as I understand it, they are responsible for fulfilling the lease unless I can rent it during the months they are moved out. For example, if they sign a 2 year lease in October but want to move out in July, they are responsible for paying August and September, unless I can rent it for those months. Then I would credit them back the rent they would have paid.
What do you mean the "calling stage"?
Nothing about either renter is off-putting thus far. Just that the second is really motivated (not desperate) to rent our house specifically as it is close to their family.
First question I’d be asking is why is tenant 2 so eager to sign a lease. Is it because they’re unable to sign a lease elsewhere? Because their current landlord is not renewing? Because they’re breaking a lease early and need to find a place ASAP? Perhaps none of that is true but it’s something to look into. Whatever additional rent you are able to get out of them may not be worth the hassle in the long run. And as Colleen said, look into whether or not you are legally able to solicit bids for different terms in your area
@Mitchell Bell it is in the pacific northwest they typically have that first qualified requirement. I am just pointing out a two year lease is no guarantee someone will stay that long. As for the obligations in a 2 year lease you are correct but if you find the tenant to be someone you don't want to keep you are obligated for 2 years. It happens. I don't go more then a year in case things go bad.
By the calling stage I mean if I am getting a ton of calls with interested tenants I have relisted at a higher price.
@Mitchell Bell Much as @Russell W. mentioned, applicants who are aggressive tend to make me nervous. Sometimes it's a matter of a very competitive market and they have lost out on several other properties. Other times, it's because they are being pushed out by their current landlord and are desperate to secure something else. And just as @Colleen F. said, a 2 year lease is not ideal right now. If the the first prospect meets your criteria and seems like a longer term tenant, why not proceed with them? Either way, go with your gut, it won't steer you wrong.
Some questions that might help your decision between the two:
-Which one had better references?
-Which one has a better credit history and background check?
-Does one have a higher monthly income?
-Does one have pets? Depending on your stance on pets, you could charge a non-refundable pet deposit, or monthly pet fee.
You could also just be candid with each one, and explain you're trying to decide between the two. See if one will make themselves more appealing. Best of luck and let us know what you decide!
Just wanted to follow up here.
First, thank you for all the feedback. It is hard to give all of the context in a short forum, so I'll try to be succinct.
My first observation was that it was obvious which applicants we might have problems with and who wouldn't as far as collecting rent goes. The two groups were those who just couldn't fathom missing a payment (you could tell by their credit and demeanor), and those who were trying to convince us they could pay the rent on time.
We ended up with three really good tenant options within a week of listing. Of those three, the first got an extension from their current landlord who was going to sell the house but changed his mind (must have been good tenants). The second, signed a lease just before we were able to show the house. The third we signed with a 24 month lease, we did not attempt the "rent bidding," and I'm happy we didn't. **The lesson being that the good tenants go fast!**. Most of the other applicants fell into the "may or may not pay rent on time" category but were good people.
The two year lease is a bit of a gamble, if the tenants are bad. But I'm sure they aren't and its guaranteed income for 2 years. Being in the military, enough life change happens every year and to not have to screen new tenants in 12 months is perfect for our situation.
We are overjoyed to provide a great couple with a great home.
Go with the one that you think is best. Remember applicants will lie and tell you what you want to hear. I would go with the first applicant as turnovers cost time and money and if their last landlord gave good references a long term tenant is often better.
I don't have time to read the other responses, so there may be some repetition here.
First, you probably have six completed applications in two days because your price is too low. When you're priced appropriately in a hot market, you may get a lot of calls/showings but only a couple actual applications.
Second, it's rare that you receive two or more applications that are equally strong. If you have defined standards, one of them should stand out with better/longer Landlord references, stronger credit, longer time of employment and better income, etc.
When you play the game of collecting applications, screening, and then trying to choose the best one, you open yourself up to complaints of discrimination. For example, you have a really good applicant that happens to be a single mom, but you decide to go with the single male because you think he'll stick around longer. They both met your criteria (3x rent, XXX credit score, or whatever) so it gives the appearance you discriminated against her parental status.
You can bump the rent and see who takes it, but I wouldn't bother with a two-year lease because the majority of renters never really know how long they will stay and are more likely to break the lease. Stick with one year at a time.
This is great feedback. Yes, I maybe priced low, and I probably should refine my criteria, and will consider doing a year lease after this experience. Feedback received. You all rock. I love this forum!