Would you accept this prospective tenant?

Question

I have a brand new house for rental. 2200 sf, 3 bed, 2.5 bath, 2 car garage for $3250 monthly. One of the applications came thru zillow, income to rent is about 3.2, single source of income, 3 people, no pets, credit score 710 but they have $3900 monthly payment for other loans already. No criminal or eviction records. Would you consider accepting it? I haven't called the employer or the previous landlord yet. Any opinion will be greatly appreciated.

Daniel Miller · Answer

That on is pretty grey.

Is the 3.2% gross or net?  If it's gross, that's a tight month.  If it's net, you're probably ok.  Either way, check references for sure.I'd also just have a conversation with them and ask, or see check the credit report to see...Anything getting paid off soon?  How much longer is the $3,900 a factor?Rent will likely increase next year, as an increase going to be a problem for you?Do they have any bonuses coming in over the next few months?

Alison Brenner · Answer

What kind of debt? Student loans? Medical? Some prop managers view student loans differently than CC debt, for example. What's their current monthly rent? If it's within ballpark of your asking, that's reassuring. If they will be going from $1500 to $3200...that's worth a pause for thought.

Bill B. · Answer

$3,250 times 3.2 is $10,400/mo

$10,400 minus $3,250 is $7,150, minus $3900 is $3,250, minus say $1,000 for state and federal income tax? Is $2,250.

3 people (hopefully one’s a child/baby?) splitting $2,250 for utilities, insurance, car payment, gas, food, etc seems pretty tight. But It’s certainly doable. I guess the 3rd person could be another child (daycare costs?) or an adult that will be getting a job?

Gustavo Delgado · Answer

Do they meet your rental criteria (3x income, credit, rental history, ect..?) If they do I don't see the issue. Are they making their payments for the $3900 on time, look at the credit report to verify. If they are checking off the boxes that you are looking for and you have communicated this then take them. Don't walk a fine line of the appearance of discrimination.

Jaron Walling · Answer

@D.Y. Lee Call the employer and previous landlord first then make your decision. Ask if they made any late payments. If they just started a new job that's a little suspect, but if they worked there for 5 years that shows more income stability. That's just my opinion.

Jonathan R McLaughlin · Answer

debt on loans is one of the lower risk debts from your perspective. I've never heard of anyone not paying rent to pay loans instead. They make over 125K a year with 710 credit? Should be fine all things being equal assuming the references check out.

Colleen F. · Answer

@D.Y. Lee  if it  is student loan debt they may have a choice about the payment amount and if they are opting to pay at a higher rate that isn't an issue. If they get tight they can lessen the payments.  The question I would ask is what is the debt payment for ?

Jonathan R McLaughlin · Answer

Oh, just thought of something...that 3900 in loans may be an overpayment from a couple driven to pay them off early. Find out what their minimum payment is. Also if this is a doctor with a temporarily depressed income before finishing residency/fellowship I wouldn't worry either.

Joseph Pietrzak · Answer

What kind of work do they do? Is it a salary or commission based that could fluctuate month to month. Who are the other 2 people that will be living there? Are they dependent minors or just people without income at the moment?

Linda S. · Answer

@D.Y. LeeIs the 3.2x income/rent before or after that $3900 payment?

If it's after, I'd consider if it there job was incredibly stable (ex: nurse), but if it's before that-- No, that's a lot of loan payments that will likely get paid before rent.

We always use the most conservative approach-- after taxes/fees/etc-- what's the net or actual amount they take home, that's what they can control to pay rent with.

Would you accept this prospective tenant?

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