Who's A Better Tenant!!
Okay,
Here's the situation. I have two prospective tenants for a rental property. The first is a young man who moved out of his parents home 3 years ago. He has two roomates and a dog. I have run checks on ALL three young men and verified that they make enough income to easily satisfy their share of the rent and also the whole rent (if necessary).
The next prospective tenant is an older man, his wife, 3-yr old son and their cat. This gentleman has recently made a career transition and can't make he full payments on his current income alone. I have suggested that he applies to see if he will qualify for section 8. I haven't had a chance to run checks on him, but from what he tells me, the picture is pretty bleak.
I am tempted to go with the second fellow just because he has owned his own home in the past and I feel that he might take better care of the property than the three young men. I might even be willing to accept some negative cash flow if necessary.
What do you think is a reasonable approach here? In your opinion, which of these to scenarios would make for a better tenant situation?
Thanks for your insight.
JS.
I think if I was in your place and I could afford a little negitive cash flow, I would go with the older family. They form a tighter union. I believe they are less likely to throw a large party or thrash your home.
The man has been up front with you about his financial situation and hopefully will respect your property even more because of the sacrificed rent you are forfieting. 8-)
Personally,I would take the 3 single guys who are more financially stable. Set strict rules and charge a high security deposit if you are afraid of damage. Would you rather depend on 1 or 3 incomes!
Sorry, I forgot to mention that the three guys have a dog. Their previous Landlord says the dog wasn't a problem but you never know.
Thanks,
JS.
The three objectives of landlording -- Positive Cash Flow, Property Appreciation, and Tax Benefits.
Your property will appreciate with either tenant set. Your tax benefit may be higher with a negative cash flow, but you are taking more money out of your pocket than your tax savings will put back.
Only a positive cash flow puts money in your pocket while you are holding your property. Only a positive cash flow gives you the future reserves for major repairs and replacements. Landlording is a business. You don't often make money being a social worker, though it often appeals to our humanitarian instincts.
[ Edited by DaveT on Date 04/21/2004 ]
The waiting list to get on Section 8 is often many months, if not years (2 years in my area). I wouldn't bank on that.
I'd make a point to stop by the home where the 3 single guys are living. Get in the door to ask em a few more questions, ask for a drink of water, and use their bathroom. If you like the way that they're taking care of the place they're in now, take them. Otherwise take the family. I'd set it up in a way so that they can pay it every month. You'll be fighting an uphill battle if you move them in for more than they can afford. Perhaps you can have them put other utilities in their name, maintain more of the property (mow lawn, paint, etc) than they would otherwise. Have them in for 800 per month for the first 6 months, and then 850 after that.
That said, I don't think either of them are ideal. I'd keep your eyes open. The perfect tenant might be 3 days away.
Good comments from DaveT. Three young guys doesn't automatically mean party central. Set firm rules. Be fair. They'll appreciate being able to party elsewhere yet going home to a nice quiet well maintained apartment. Then again, I'm a month away from 32. So maybe I'm just getting old.
[addsig]
Well just a couple of thoughts.
I'd pull the families credit and see how bad they've been and for how long. You're saying the father just changed jobs, is that part of the issue here?
Another factor in r/e profitability is turnover and maintence. The young guys are likely to move on in a year. The family may stay a long time.
I'd probably try to see if the family man has time and skills you could use on the side to help pay the rent.
I would not be willing to rent to them at less than my cost of doing business.
I agree about RE being a business. But any business that is run only to maximize profit is boring. Do not allow your tenants to take over your life but its not a bad thing to help out a guy down on his luck. Here you also have to trust your instincts though. Does he seem like a stand-up guy? Are his current difficulties beyond his control or of his own making? If the later I'd probably pass.
I wouldn't even consider the family. If things look bleak now, it will most likely look even more bleak a few months from now. It is very common to have someone who looks like they can squeak out the payments, but who gets buried after a few unfortunate expenses pop up. If this guy doesn't even look like he can afford it to start with, I would put a conservative estimate of there being a 90% chance he will be unable to pay the rent within a year. It doesn't do the tenant or yourself any favor to get into a stressful situation for both of you. The three guys would probably not be too bad. Even if you don't quite get it right when you check them out, I doubt they will tear the place up. Most likely they won't do anything that a little paint, a good carpet cleaning, and a shovel couldn't take care of.
Why are the 3 guys leaving where they are now?
I am a new college grad, so Im in the age group you are looking at bringing in. Me and my friends tend to be the type of guys that fix stuff ourselves instead of hassling the landlord every time there is a minor problem. We are all hot on the dating scene and therefore keep the place clean 95% of the time in case our ladies stop by or we find some to bring back. And personally, I think cats are more of a problem than dogs.
Ryan
Hey,
Let me explain how to select tenants: you create a set of rules and you then apply these EQUALLY to all prospects. You can set whatever rules you want (as long as they are not illegally Discriminator). Some examples of some good rules are: earnings are 3 times rent, good/decent credit rating, no bad references from past landlords, etc. Some examples of stupid rules are: must be able to juggle, most know all 50 States and their capitals, must drive a blue car, etc. Your rules are your rules.
BUT once you have set the rules, you can not change them to fit the tenant.
Once a prospect meets your rules, you HAVE to make them an offer. If you do not, you are asking for a lawsuit.
You can NOT turn someone down because you THINK they might not be a good tenant.
If the three guys meet your rules...we have a winner.
Bruce,
Thanks for the heads up. I would not want to run afoul of any legal or local requirements. Question; Is it okay to set a limit on the number of adults in a home or is that not allowed?
Thanks,
JS.
We are renting to 3 young gentlemen and they keep the place looking good.
Now of course we do announce we are doing inspections, but hey.
Bruce has some excellent comments. Never try to "figure out" your tenants. I single file my tenants. I work with the first one who gives me a completed rental application (including zerox of driver's license), $20 rental application fee, and the $??? holding deposit. That tenant(s) is either approved or rejected. I never weigh one tenant against the other and try to cherry pick.
My criteria is (1) decent credit - disregard all medical and anything more than 5 years ago (2) household income 3x the rent (3) rental history. No magic or mathematical formula.
Two people per bedroom is a rule of thumb. Never ask the ages of anyone or where anyone will be sleeping. Simply ask how many adults over 18, because they must complete the rental application, and how many total will be moving into the unit.
Brenda
I agree that you need to stick with the rules.
I am also a recient College grad, and would have hated to not be able to rent my house just because we were college students. My roomates and I have taken good care of our appartment, and the house, and have stayed pretty long term. We lived in the same Apt. for 2.5 years, and then got another roomate and moved into the house that I'm currently renting, 2 years ago, and we just painted the beedrooms, because the paint was getting old.
My Landloards are Realtors, and we have a very good repor, I personally hand them the rent check the 1st of the month, and haven't missed one (I've even been early a couple months), It would have been pretty bad for them if they had the same opotion that you are in and picked someone that was unstable over us.
Quote:
On 2004-04-22 13:59, joel wrote:
We are renting to 3 young gentlemen and they keep the place looking good.
Now of course we do announce we are doing inspections, but hey.
"Inspections" sounds like Big Brother. Instead, let the boys know that you'll be coming over once a month to change the air filter. This gives you a monthly excuse to enter the premises and keeps the air filter clean (the #1 cause of air conditioning problems).
I also agree with Bruce. Set the standards and then pick the people.
Good Luck
[addsig]