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I am a first timer that will be renting out a condo - my wife and I are moving to a new house and decided to rent out our place instead of selling it. We have a couple that is offering us a full-year's rent up-front to overcome their poor credit history. I am using a real estate agent to go through this process, and was just sent the application along with the credit report. Neither of the two renters (a couple) make a substantial income, and both have several instances of the credit cards being closed and charged-off in the last 2 years. Their credit score is 565. They are relocating to move closer to a relative to whom one of the renters is the caregiver of.
I am unsure of what to do. Obviously I will be protected with the up-front rent. My state has a restriction on the security of 1.5 months. My concern stems from the possible instance of the couple falling on additional financial troubles and would gut our condo's appliances. Any thoughts or recommendations would be highly appreciated.
When I lease out a property I always hope to get a tenant who plans to make the place home and settle in for a while. I typically get tenants for 2-5 years. If an applicant did not have a consistent employment history and a job with a regular paycheck, I would doubt if that applicant would be able to continue paying rent following the year's upfront paying of the initial lease term amount. I have leased to folks with shaky credit in the past but I always obtain references from past landlords. I also get criminal history and run a sex offender check.
In your case, I would only rent to them if the monthly rent is not greater than 30% of verifiable income for the household and you can obtain solid income verification. If they are going to be caregivers for a family member, how can you verify the income? What can this applicant provide as proof of job history?
I would be very careful......
If you are using a real estate agent, does that mean you have to pay a commission? Have you tried to advertise the place on Zillow or Trulia and then use Transunion or one of the other landlord services for credit/criminal history?
I would only pay a commission to a realtor for a premium applicant with great credit and a sterling history of landlord references. Also, don't let the realtor do your reference checking for you.....do it yourself.
Thanks Squirl for the thoughtful reply. One of the renters has a job with our state and has worked there for 8 years, so it appears to be a relatively stable income (though low). The other is completely undocumented - I am assuming (though have not verified yet) that this is the caregiver. They were at their previous location for a year and a half (that location had a monthly rent $150/month lower than ours) - they are moving since the owner of that location sold. I clearly still need to do the background check/criminal history check/reference check.
I am using a realtor that is a friend of the family. Yes, I will pay a fee...since it is my first time renting, and I work a job that is about 70 hours / week, I figured I don't have the time to run with the full process myself. I am hoping when I speak to the realtor tomorrow that she has advice on the situation - otherwise, what am I paying for...?
Number 1 - you need to know the law as it applies to you. Clearly you do not, so become educated promptly before you become a landlord.
Regarding your applicant - forget it now. These people are nothing but trouble for you. Let them find something that they can afford. A FICO of 565 is very low. insufficient income is a no-brainer. One year rent up front sounds great until you find out they're trashing your unit or causing problems with neighbors. Does your state allow you to demand rent in excess of 1 month at a time in the first place? (mine doesn't, so I ask) Can they walk in and demand the unused portion back and you have to give it to them? What is your state's law regarding security and other deposits?
Second problem, and it's a huge one. Your realtor somehow got their credit report and actually sent it to you? Holy cow that's not allowed! We can't even tell an owner what their FICO is let alone let them see an application or the credit report. I think you need to hire a realtor who actually knows what they are doing in regards to property management.
...my wife and I are moving to a new house and decided to rent out our (condo) instead of selling it.
Any thoughts or recommendations would be highly appreciated.
Seriously reconsider this decision to be a landlord.
Sell. Take a loss if you must.
Renters will offer a lot of cash up front to dazzle the landlord and make him forget to do the screening. Offering a full year's rent up front is a huge red flag.
So..... Where did these tenants get all that cash, with their poor credit and low paying jobs? If they have a bunch of cash, why are they not paying off those debts on their credit report? A full year's rent at one time is a lot of money.
It's possible that they have other income that is not legal, so they don't want to declare it and don't want you to know how they will be using your house to generate that income.
Offering to pay a full year up front is nothing but a huge red flag!! Do you have any idea how hard it would be to get them out if you let them pay the lease up front? I'm not saying they're deadbeat tenants, but those who offer to pay in full usually are.
As for your agent, find another one. Find one that doesn't have a personal attachment to you or the property. This a business and needs to be run as such.
The credit score wouldn't bother me so much if they had a good income with a steady job, good rental history and the background came back clean. However, their charge offs are too recent.
Offer to do a 6 mth month to month with the option to renew with a 12 mth lease if there are NO problems.
Red flags all around the biggest mistake I see new landlords make is renting it to quick, they worry that it will not get rented and yes get a new agent.
I am a first timer that will be renting out a condo - my wife and I are moving to a new house and decided to rent out our place instead of selling it. We have a couple that is offering us a full-year's rent up-front to overcome their poor credit history. I am using a real estate agent to go through this process, and was just sent the application along with the credit report. Neither of the two renters (a couple) make a substantial income, and both have several instances of the credit cards being closed and charged-off in the last 2 years. Their credit score is 565. They are relocating to move closer to a relative to whom one of the renters is the caregiver of.
I am unsure of what to do. Obviously I will be protected with the up-front rent. My state has a restriction on the security of 1.5 months. My concern stems from the possible instance of the couple falling on additional financial troubles and would gut our condo's appliances. Any thoughts or recommendations would be highly appreciated.
You should watch this movie "Pacific Heights" first and then decide.
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