Potential tenant and NC rental law question (real estate, rentals)
Raleigh, Durham, Chapel Hill, CaryThe Triangle Area
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We are renting out our townhouse. There is an applicant that saw the unit this past weekend and is very interested as it is ideal situation.
Applicant is in process of filling out application so we can run credit check, but already informed us of poor credit and past bankruptcy all accredited to divorce several years ago. Applicant can show substantial income, and past bank statements, to show more funds flowing in than flowing out. Applicant even offered to pay 4 months rent upfront.
If we still decide to proceed, what is the best terms we can set?
Ideally we would like to set the 4 months upfront rent aside in some sort of "escrow" so if tenant stops paying rent and we need to evict, then we can tap into this escrow.
Is that legally possible? I don't think we can declare this as deposit since NC may have limit to deposit amount.
Also, how is someone with good credit any less risk? They can decide at anytime to stop paying rent as well and force us to go through eviction process.
Have a standard criteria that gets applied to all equally
at the top of that list is financial capacity
If he can show/prove he is currently very financially capable, and that his credit history and banktruptcy is due to his past divorce, do I still hold it against him?
If he can show/prove he is currently very financially capable, and that his credit history and banktruptcy is due to his past divorce, do I still hold it against him?
I think a lot depends on where the townhouse is. If it's in a hot town where people are knocking down doors for rentals, then why risk it. If otherwise, then you have to weigh the pro's and con's.
If the credit check backs up his story (i.e. you can see exactly in his history where this happened and you can equally see that since that time he has paid his bills on schedule), he can show income and bank statements to support the financial obligation of paying the rent, and he's willing to put down 4 months up front then I wouldn't exclude him from consideration.
You will need to work out the details of what the 4 months up front means. Is it a security deposit to be held until final termination of the lease? Is it prepayment of the first 4 months' rent at which point there is nothing left for an ongoing security deposit? Is it something in between--e.g. could it serve as security deposit for the initial term of the lease and then be partially rolled to prepayment of the initial portion of a lease renewal with some remaining part retained as security deposit?
Wow! Tough crowd! I was in a similar situation for a while. Bad credit from a really bad divorce. Then my husband got sick and we have a mound of hospital bills...paying them off a little at a time. Doing the best we can. We pay our bills every month on time and never late with the rent (most times we are early). We have had two different landlords here in North Carolina that have been very understanding and have accepted us as tenants despite our not so great financial history. We also have great references and that helps.
Sometimes life deals you lemons. Im glad there are people out there that gave us a chance.
This is a tough crowd as well. I have been in that situation with a bad divorce and my credit score in the low 500's four years ago when I moved to a different city for a new job. I was able to prove to the property manager and the landlord and show them that my bad credit was because my divorce and that it will be rectified. That I had the financial capacity and a brand new job to afford the rent. While on top of that I paid first, last, and security deposit just to get in the apt. I am still in the same apt four years later and never missed a payment, and now my credit is back up to Good. Also I plan on moving back to NC this year so all is good.
OP, I would say that it would all depend how you feel about the person honestly and how the credit report looks. If the person feels good and can verify his story then go ahead. If he is kinda squirrely then no don't rent it.
You will need to work out the details of what the 4 months up front means. Is it a security deposit to be held until final termination of the lease? Is it prepayment of the first 4 months' rent at which point there is nothing left for an ongoing security deposit? Is it something in between--e.g. could it serve as security deposit for the initial term of the lease and then be partially rolled to prepayment of the initial portion of a lease renewal with some remaining part retained as security deposit?
Would like 1 month to be security deposit, and the remainder 3 months to remain in some sort of "escrow" that can be tapped into if tenant ever is late or stops paying rent for any reason. Because it normally can take 2-3 months to evict. I don't know if this means all of this has to be considered "security deposit".
Or maybe you gave me an idea, it can be setup to be initial portion of lease renewal, or tail end of current lease.
If you want to be a LL you should familiarize yourself with LL-tenant laws (which I believe can be found on C-D's real estate forum, which might be a better place for this question) and you should have an attorney who can help you parse these details instead of a bunch of "maybe they know, maybe they don't" people on the interwebz.
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