Hi there,
We had a REALTOR reach out to us hoping to place his clients in our rental home. The tenant(s) are employees of a big foreign company that we've all heard of. The agent tells us that the company will guarantee the tenants. They also want to pay more than asking and lock it in for 1.5 years with the option of extending at the same rate. (We are very much okay with the higher rate for five years if they'd ask.)
We will supply our ACH and W9 from our LLC to the company and they will pay us like a vendor.
What are the pros and cons of signing a lease this way? Sounds like the agent has done this before. (The agent is registered on NAR and checks out).
Thanks!
Lacey
I would say go for it. I have one property where a company pays their employees rent and it's great. Now it's a much smaller company, so our lease agreement didn't change at all. That would be one thing you would want to check. Are they wanting you to sign their own agreement? If so, make sure you review it very thoroughly and ideally with an attorney. Also, make sure it's the company is signing the lease as a guarantor not just the employees. Sounds like it could be a great opportunity. Just make sure you review everything thoroughly.
We recently inherited 2 units with a similar situation to this.
Pros: Rent is always paid on time and by auto draft 5 days early. We were able to increase rent to a premium for these units as well over our others in the same area.
Cons: Cannot screen specific tenants actually living in the property. Communication can be slow/difficult when working with a corporation. Staff turnover, business hours, etc. Your tenants likely will not be personally responsible for the deposit/damage so how well will they take care of the property? How many tenants will they have living there? Employer has significantly more resources in the case of a legal battle if it came to that.
I would say it is highly dependent on the qualifications to be hired at said employer. Are their requirements strict enough for you to feel comfortable having any of those employees as tenants? Do they do thorough background checks/screening? What type of employees does this employer attract? Our units are in a rural area and the employer is a large scale pig farm contractor. Again, they came with the property so we didn't have a chance to do any of this research ourselves before renting to them and wasn't a big enough issue for us not to purchase. All tenants are immigrants so I am unsure of what screening is done by the employer other than they've obviously been approved for a visa.
Just a few things that we've had to deal with so far that would be things to think about:
- When we toured the property prior to purchasing, one of the units was actually vacant and the employer had not moved anyone in yet. We obviously locked the door when we left the property. I got a call about a month after closing stating the employer was locked out of the unit as the only set of keys was sitting on the table inside. They had left it unlocked, vacant, with the keys inside since they took possession 5-6 months prior. Left us pretty open to squatters, vandalism, etc.
- Maintenance requests can be slow to be communicated. For us, the tenants communicate with a rep from their employer who communicates to our contact who then communicates it to us. Since tenants are immigrants, they either don't speak English or very limited English so direct communication isn't always possible. Tenants will let their employer know about maintenance issues and it's sometimes been weeks before it is communicated to us. Creates tenant frustration. Also concerning from our perspective as a landlord if there was a true emergency like a major plumbing leak or furnace failure (frozen pipes) that could cause significant damage if not addressed quickly. Think weekends, holidays, vacations, etc. for your contact person with the employer.
- We've learned that this needs to be outlined when/if the lease is renewed but the employer does not communicate when/if new tenants are moved in or how many are living there. So far we just have 1 per bedroom (2 bed/1 bath units) but just my issue is there's zero communication about this to know if we see people coming/going if they are actually supposed to be living there.
- Originally a W/D was not provided with the unit but there is not a laundromat in town and the tenants don't have vehicles. Employer asked if we could provide one. We worked out a deal where we provided a W/D for one unit for a steep monthly fee. We have since learned that they are having all tenants from both of their units use the single W/D. 3-4 adults working on a pig farm when we were accounting for 1-2. Luckily we priced the W/D at a rate where we'll come out okay considering the maintenance/repairs but again, something I didn't think to stipulate in the paperwork when we established this. Also complicates things with the tenants of the 2 units from a privacy perspective. Do they know each other? Do they communicate when they are coming over to do laundry? One tenant has expressed some concerns and requested a lock on her bedroom (employer paid a fee to have this installed).
Overall we're learning a lot about what needs to be in the lease for this situation and learning that the premium rent is needed for the extra risk/hassle. I would be hesitant at signing a super long term lease (5 years as mentioned) so you have the option not to renew if you decide it isn't working out. Maybe a 12-18 month one would work and then you could extend long term if things are going well for you.