Would you Lease or Not to Lease?

Question

Hello BP,

I am looking for some opinions on whether I should lease to an applicant or not. Here is the scenario:

The unit is a 3/2 duplex unit for $1550 per month with a $3100 Refundable Deposit.  The unit has brand new paint and floors. The applicant(s) involve a Father, Mother, 31 year old daughter and 7 year old son.  The Father and Mother make roughly $3800 per month from SSA.  The adult daughter makes about $1600 per month. The Father works in construction project management consulting and can make about $5000 per month over the course of a year; however, it is cyclical and currently does not have a contract. He is anticipating a contract in the next quarter or two; however, not guaranteed.  He is also an owner of a duplex. His long term tenant recently moved out and is about to rent it to his adult son, who will be paying him enough to cover the monthly expenses.  No rent roll for this new tenant.

The property I am renting is in a new state for them.  They are looking to make the move to join up with the adult daughter and so their 7 year old can go to the local school district, which has good ratings.

I also learned that the adult daughter is looking to move from her current apartment which is in the midst of a bed bug infestation.  Apparently, that unit is being treated for the issue and involves her leaving her belongings (bed, furniture) within the unit to be treated.  She also has an older dog that has a low level of urinary incontinence.  The floors in the unit are tile and vinyl planking throughout.

Based on the above, the applications were denied.

The Father applicant responded by offering 6 months of rent upfront (even the entire year) and is willing to provide 3 months rent of refundable security deposit for the additional dog risk. They would also start making rent payments immediately (if he pays for 6 months upfront) to show ability to pay.

One of his bank accounts shows $15K, another just a few thousand.  He is also using a HELOC to pay for the turnover costs of losing his long term tenant and making it rent ready.  He said that will be about a $30K rehab.

I am only considering this because the unit has been listed for about 20 days and so far 10 inquiries have not resulted in good options. This one is at least willing to pay up front; however, I am concerned about bed bugs being brought in and the dog issue.

What would you do based on their willingness to pay up front?  How much concern should I have about the bed bug and dog situation?

Thanks in Advance for you input!

Theresa Harris · Answer

Multigenerational situations are tricky, but the dog and bed bugs would throw me off.  If they want to move up, why not sell their duplex and buy themselves a new home?

James Mc Ree · Answer

All great advice above.

Consider accepting the tenants if they pass your screen, deny the dog, require a certified clean bedbug report for their current home and belongings and a separate bedbug deposit to cover future treatment if needed. Consider requiring them to move in with all new belongings and no current anything to further mitigate the bedbug risk.

The certification will delay their move-in a few months which you can partially cover by requiring a higher rent from them to hold the property. It will be better to choose someone else rather than forego a few months rent, but this will provide you with more security if you are stuck on them.

Check your landlord/tenant laws to determine if you can have a separate bedbug deposit and for how long. An insurance policy is a possible alternative if you or the prospects can find one.

Colleen F. · Answer

@Hector Bermudez  The honesty on bedbugs and dog is commendable. I am not sure if I would rent to them.  Have you met them or is this an email exchange.  I would consider previous landlord references important too.

Michele Fischer · Answer

In their favor:

As homeowners and landlords they should be more reasonable and take better care of the place.

Steady income with SSI and willing to hustle when they need more.

They are motivated to make it work, offering more and reasonable concessions.

If there is no carpet there would be less impact by dog or bed bugs, if either go worst case scenario.

Not in their favor:

They may be renting as a temporary situation until they can find where they really want to live long term, so they may not be a long term tenant.

They are not familiar with the neighborhood, other than school district quality, so they may not be a long term tenant.

What I would look at more:

How long have they all lived at previous addresses?

Is there a reason they are willing to be so accommodating to get this property, is everyone turning them down.

Can the concession be a combo of pulling payments forward and paying higher rent, like pet rent.

I would say stick to your gut and your criteria, but consider the gray areas to see if any criteria or reactions need adjustment.

Hector Bermudez · Answer

Thank for your input Nathan! All good points.

Nathan Gesner · Answer

Lower your price, but never your standards.

I would be a little more open to it if they pay everything up front, but that is an example of "lowering your standards."

This is all predicated on knowing their credit score, landlord references, and other categories you don't address. Based on what you've shared, I would pass.

Hector Bermudez · Answer

A friend conducting the showing was able to glean this information from the daughter. A good reminder to have someone with good interpersonal skills to ask the right questions.  I spoke to the Father over the phone. He seemed willing to do whatever to get the unit, putting up all the money for a year and extra security deposit, but he did sound a little "car salesman" so that didn't work in his favor.  Ultimately, decided against it! Thank you!

Hector Bermudez · Answer

Thanks for the breakdown of suggested Pros/Cons. I agree he would likely be more sensitive to taking care of the unit as a landlord himself.  I felt they were probably looking for a temporary situation and the possibility of moving back if things didn't work out for them, so not probably long term. The family has lived in their current place for many years in their own home.  Ultimately, I decided the risk of dealing with the bed bugs and dog incontinence was too risky and didn't feel they would be there long term.  Thanks for your input! :)

Hector Bermudez · Answer

I decided the bed bug and dog situation, coupled with them likely not being long term, was not ideal to move forward. And they were looking to move in the next week or two.  I wasn't wiling to feel rushed with these concerns.

Hector Bermudez · Answer

Thanks for the breakdown of suggested Pros/Cons. I agree he would likely be more sensitive to taking care of the unit as a landlord himself.  I felt they were probably looking for a temporary situation and the possibility of moving back if things didn't work out for them, so not probably long term. The family has lived in their current place for many years in their own home.  Ultimately, I decided the risk of dealing with the bed bugs and dog incontinence was too risky and didn't feel they would be there long term.  Thanks for your input! :)

Would you Lease or Not to Lease?

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