Tenant Advice: A. Great, B. Good, C. Hmmm...

[Katy Schlueter]

Hi everyone,

I'm currently processing my first ever application for our rental property.  Three guys want to lease for 1 year: Guy A great credit, makes 2.5X rent, no eviction/crime/lien record.  Guy B credit meets our requirement, with a little digging I believe he could prove that he makes at least the other 0.5X rent, screenings clean.  Guy C no credit, no income, claims to be on disability unable to work and has been living for free for two years on the other guys' dime, screenings clean.  I've met the first two guys who at first meeting presented as responsible young adults.  I did not meet the third.  

Questions: Am I within my rights to request they leave Guy C off the lease?  With no credit or a job, he doesn't qualify.  He's fine to live there, I just don't want him to be under contract with me to provide the rent payment.  Am I making sense?  Am I missing anything?

Also, am I within my rights to ask more about his disability?  Can I ask if he poses harm to others?  (If it's a mental disability, the place is a duplex and I'd want to ensure the safety of the other tenants.  If it's a physical disability, the property is what it is, we can't afford to put in ramps, etc.)  Would I ask him directly or Guy A/B?  Or am I walking a fine line for discrimination?

Anyone have any advice?  What would you do?

Thanks so much!

[Bruce Woodruff]

I would pass on this entire group....you can do better. Why take on a potential risk?

Just my .02....

[Gene Hacker]

I would want to make sure each of the other two guys could afford and qualify for the unit on their own.  Roommates and couples often split on each other. It is much easier if whoever decides to stay can afford it.  If they can only qualify when their resources are pooled then move on. 

[Katy Schlueter]

@Bruce Woodruff  @Gene Hacker  Thanks so much for your answers!  If Guy A qualified and was willing to be the sole signer on the lease, would you still pass?  We have been listed for over 2 months, slowly dropping the price.  I've screened 60+ people, shown it to 20ish of them, received 2 partial applications that we denied and now this is the first completed one.  I know that accepting a tenant when you're desperate is unwise, but I'm not sure we can do better given the history and we'll only become more desperate as time goes on.

[Brent Hasse]

@Katy Schlueter I'm not sure from a legal side but practically speaking - I think you're on the right path. You could put just the 1 or 2 guys on the lease, they are responsible for the payment and condition of the house.  Even if you have the 3rd guy on the lease, the other 2 are still just as responsible but it could be a little more messy. 

[Nicole Masters]

Quote from @Katy Schlueter:

@Bruce Woodruff  @Gene Hacker  Thanks so much for your answers!  If Guy A qualified and was willing to be the sole signer on the lease, would you still pass?  We have been listed for over 2 months, slowly dropping the price.  I've screened 60+ people, shown it to 20ish of them, received 2 partial applications that we denied and now this is the first completed one.  I know that accepting a tenant when you're desperate is unwise, but I'm not sure we can do better given the history and we'll only become more desperate as time goes on.

This would be my go to, have one (and most qualified) guy on the hook for the lease. I'm not sure this is the best solution, but if you're having a hard time finding someone to rent the place. This might be your best bet?

[John Warren]

@Katy Schlueter as others have said, passing on this group may be the best thing you can do since they are so marginal. They have quite a few red flags to be honest. Here in Illinois, leaving someone off the lease does not somehow make it less risky for you. If this goes bad, it takes the same effort to evict an unknown occupant as it does to evict someone with a signed lease. The only advantage on the signed lease is that you can get damages and you can serve them a bit easier. I hate to say this, but the lease mostly protects the tenants and not the housing provider in these scenarios. 

[George Skidis]

Not telling you to rent or not rent. 

Here are some things to consider. A & B could be a front for C. They could move him in and never step foot in the place themselves. If one moves in, they all sign the lease and agree to the terms and conditions. Don't want the local code enforcement saying you falsified the residents. If you need to evict it is easier to evict named tenants as opposed to "Any and all known and unknown residents of 123 Mains Street Anytown, USA.

So "IF" you decide to accept all three have all three on the hook for damages. 

If one resident asks to be released from the lease, DON"T! They may be the only one with any assets after the destruction of your property. "Mr A you are free to move at any time. However, you are responsible for the rent and damages until both of your friends move out and surrender the premises."

As to the disability. You can ask for proof of income, but I would never ask what the disability is. My background check would be heavy on research into incidents involving the police and their outcome.

Good Luck and Good Investing!

[Jonathan Klemm]

Hey @Katy Schlueter - If this was a section 8 situation in Chicago completely different story, but you are in prime time Naperville.  Definitely just move on and find some more tenants.  Have you been having trouble filling the lease?

I am still curious about your questions about the potential tenant's disability though, likely @Mark Ainley, has these answer....

[Paul De Luca]

@Katy Schlueter

I think you should directly ask Guy C more about his disability. It's your investment and if you're allowing someone to occupy your property I think you have a right to know their situation. Assuming there are no red flags there, confirm that Guy A & B meet the 3x rent income requirement. Call their employers and previous landlords to verify those things. Make sure their paystubs are legit by googling their employers, their office addresses, and call the office phone numbers if available on google. Review their social media accounts if you can find them and google each of their names too. On the credit report, check to see if the previous addresses match their current or previous addresses too.

Everyone living in the apartment should go on the lease. You want to make sure each of them are bound by the lease terms.

[Mark Ainley]

@Katy Schlueter it is has been a week since your first post and curious of how you proceeded but keep a couple of things in mind.  Thanks @Jonathan Klemm

1. For Guy C you are t walking a fine line.  The word disability is often used around other claims of Fair Housing Violations.  You may not feel like you are doing something wrong but if a husband and stay at home wife applied you would not be questioning their family decision of why she is not working or her plans to get back into the work force once her kids are old enough.  Sounds silly but that would be someone's defense.  You have two potential issues here.  You are not treating every non working person the same and not qualifying someone based on the source of income(new to Illinois recently) if coming in from of disability checks.  Not saying your way of thinking isn't common just have to beware.

2. I would look at the group as a whole vs breaking them down.  You always want everyone over the age of 18 on the lease for just in case legal reasons on the backend.  Most HOAs require this so not a bad practice.  Keep in mind if one can afford it it is up to them for the other two to carry them per the lease.

3. If you feel this is higher risk then you do have the right to ask for higher deposit or ask for 1 months sec dep and last months rent as terms of the lease.  This might just help you sleep better at night.  

4. Make sure you are considering there debt to income ratios when figuring their 3x rent...they can make 3x rent but if they have 60% of their income going to revolving debt the 3x becomes less relevant.  

5. I am sure I am too late for this comment but it is Naperville and there is no shortage of quality tenants if you are priced right and show well.  Keep in mind if you are over priced even by $100 you will be attracting less then ideal scenarios because the best scenarios/applicants gravitate towards the best priced and best looking places and get approved the quickest.  

Feel free to reach out anytime via DM.

@Shea Murray

[Mark Ainley]

@Katy Schlueter @Jonathan Klemm @Paul De Luca I am actually hosting a webinar next week (11/15/22) thru Chicago Housing Authority(CHA) on the topic of "Finding The Right Tenant For Your Property" and it is free so register and if you cant make it you will get recording of it too.

https://attendee.gotowebinar.com/register/5623557099215296271?source=Webinar

@Tom Shallcross @Shea Murray @John Warren @Jared Kott

[Crystal Smith]

Quote from @Katy Schlueter:

Hi everyone,

I'm currently processing my first ever application for our rental property.  Three guys want to lease for 1 year: Guy A great credit, makes 2.5X rent, no eviction/crime/lien record.  Guy B credit meets our requirement, with a little digging I believe he could prove that he makes at least the other 0.5X rent, screenings clean.  Guy C no credit, no income, claims to be on disability unable to work and has been living for free for two years on the other guys' dime, screenings clean.  I've met the first two guys who at first meeting presented as responsible young adults.  I did not meet the third.  

Questions: Am I within my rights to request they leave Guy C off the lease?  With no credit or a job, he doesn't qualify.  He's fine to live there, I just don't want him to be under contract with me to provide the rent payment.  Am I making sense?  Am I missing anything?

Also, am I within my rights to ask more about his disability?  Can I ask if he poses harm to others?  (If it's a mental disability, the place is a duplex and I'd want to ensure the safety of the other tenants.  If it's a physical disability, the property is what it is, we can't afford to put in ramps, etc.)  Would I ask him directly or Guy A/B?  Or am I walking a fine line for discrimination?

Anyone have any advice?  What would you do?

Thanks so much!

You would not be walking a fine line if you ask about his disability. You'd be clearly walking over the line.  The decision on whether or not to rent to this group should be based on if their combined income & credit exceeds the minimum threshold you've established; there are no evictions within the timeline allowed by your state law and background checks are clear.  Anything you do beyond that is set up for being taken to court.

If you want to know if any of the tenants have special needs then I recommend you develop a pre-screen questionnaire or a pre-move-in questionnaire where one of the questions could be whether there any special needs or modifications needed.  To keep you on the right side of the law the same questionnaire should be given to every potential tenant, not just this group.  

[Katy Schlueter]

I just wanted to thank everyone again for their feedback and help.  I am, obviously, very "green" in this very complicated and seemingly "gray" world of property investing and renting.  It's really nice to have a place to come to for a sounding board.

@Jonathan Klemm I live in Naperville.  The property is actually in Downers Grove - not all that different of an area, although there are a lot of new apartments going up.  Yes, both units have been listed for six weeks.  Like I mentioned above, we've been slowly adjusting the price and our expectations.  The other unit is still available.

@Mark AinleyGuy A started a new job on Nov 7 that qualified him to sign the lease outright.  He wanted Guy B as a co-signer, so we agreed as he had some income and met the credit requirements.  Guy C went on the lease as being permitted to stay in the premises, but was not a signee.  (Perhaps our mistake, but at the time and prior to many of the comments, I assumed us allowing Guy C to sign the lease as meaning we'd accepted him as being responsible for the rent, when we were well aware that he couldn't afford it.  Side note: If there's more info available on leases, I'd really appreciate better understanding what they really hold each party to.  Many here have claimed that guy C isn't responsible for damages since he didn't sign, but guy A and B as signees are responsible... why should that matter to me?)  We ended up signing a lease with Guys A&B for a year on Nov 4.  10 day report - so far, so good.  They've moved in, transferred all utilities and paid all dues thus far.  

With great respect for you and also as a stay-at-home-Mom (former Chemist) myself, I doubt that a SAHM would claim her work status as a "disability."  She would state her circumstances as they are and as long as someone else qualified for the income, there would be no more questions asked.  In light of your example and thinking more on my now tenants, I don't understand why Guy C didn't simply state "I do not work," as the other guys qualified to cover him and had already been covering him for years.  He had no income from disability checks which otherwise would have been a clear reason to share.  His adding the disability without being asked or needing to, made me question whether he was being overly honest or trying to intimidate me.  Which is why I asked this group my second question.  Do I have the right to ask more questions if I'm having trouble deciphering information that the applicant provided - what if that information is sensitive?  Instead, I never talked to him out of fear of being sued and now I get to wonder how safe I really am when tending my own property.  

Perhaps a broader set of questions: In general, what stops a bad person from claiming to have a disability in order to hide behind the potential of a lawsuit?  How would I screen to prove they're being honest in order to protect myself and other tenants?  

Thanks for the information on Tuesday's webinar.  I'm looking forward to it.

@Crystal Smith We have a screening questionnaire that we send every lead prior to scheduling showings. We are specifically using it to eliminate leads who would not qualify.  I fear including a question about special needs/modifications would feel outright discriminatory to those who have/need them.  Like I said in the paragraph above, thinking back, my concern wasn't specifically about the disability, more so about his intention in sharing it with me and whether he posed any threat to other tenants/myself.  

Thank you all again for your help.