My first tenants?! Advice and guidance please!

Derek Johnson · 2014-04-02T00:52:34-07:00

We're currently trying to rent out our first property. We are asking $900/mo + utilities, and have two interested roommates. They don't want to lease until May 1, but we are signing it Friday. I have a few questions. Do I ask for all the money now, since I won't be giving them keys until after walk through inspection checklist on May 1? It will be $1800 (900 rent, 750 deposit, 150 pet deposit). With having two roommates for tenants, can I require only one pays me and avoid a partial payment that way? We'd like to deal in either cashiers check (which they likely wouldn't want to) or bank deposits. We are all members of the same credit union so I think they could just give my name to deposit, but I'm also wondering if I could let the bank know not to accept it if it's less than $900? They had good credit (both 760+) and gross over $2,600/mo. My minimum requirement is set at $2,700/mo based on BP recommendations. One of them has no debt and the other has a car payment of 422/mo that he hasn't missed for 2+ years. I personally don't like that, as I think it's a waste if money. But if he's only paying $450 for housing and driving a new car I guess it's ok. No criminal charges. They paid the application fee to smart move within minutes of emailing and I called the supervisor for one and had a great recommendation. I tried the other and they don't divulge the info, gave me a 1-866 number to call which I did and set up an account but couldn't figure it out. I have a months pay stubs from each of them. Would you rent to them? I think it's a solid first set of tenants but I have never been a landlord and would appreciate any insights. They are friends, have been with their girlfriends awhile (2+ years, I facebook snooped) and seemed very well kept when we met, although they are young. Before this they both lived at home. Any feedback would be appreciated!

Kyle Hipp

Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes

12y

I don't see any red flags with the descriptions you gave. I would have charged $900 for security deposit and an initial pet fee of $150 with an additional monthly pet fee depending on type of pet and number. If you are comfortable with waiting until may 1st then I would at minimum get the $900 in deposits first. I would probably state that you want it rented immediately and would continue to advertise for sooner occupancy. Maybe leverage that into them moving in early like the 10th - 15th and getting their name on utilities and having them pay rent from the 15th - 20th with the 5 days prior as a move in special of sorts.

At the end of the day they sound like good prospects so try to get everything at once but settle no less than $900 for deposits.

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Jerry W.Pro Member

Moderator

Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes

12y

@Derek Johnson when you are leasing to more than a single family the rules are very different, and your lease agreement needs to be very different. You might try to get the kind of lease that folks use for college students set up for multiple occupancy. Your lease can either be set up for just one of these guys who must pay all or it can be set up for each pays half. If it is each pays half you can only evict the non paying one if rent is short.

If you are holding the apartment for a month get all of your money up front. Good luck

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Andrea M.

Real Estate Investor · Hampton, VA · Member since 2012 · 562 posts · 109 votes

12y

@Derek Johnson They sound like solid candidates. At a minimum, I would request the security deposit deposit which will further secure the tenant & the rental with the first months rent payable on or before the agreed upon move in date.

I would also put a clause on the receipt stating something along the lines of

" If tenant fails to move in within (certain amount of time-7 days of agreed moved in date, due to no fault of the landlord/owner/management, ( a percentage, 1/2) of deposit will be forfeited "

This way, if for any reason if the tenants doesn't move in, you don't lose time/money and you get compensated for the time the property wasn't on the market. Regarding the roommate situation, I would also request 1 point of contact for maintenance requests and rent payments.

I have heard many stories where landlords/owners have taken properties off the market and tenant changes their mind and the landlord have to start from scratch in marketing and screening for a new tenant.

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Jarrett Harris

Calumet City, IL · Member since 2014 · 312 posts · 49 votes

12y

I agree with what the other posters have said. You should get at least half of the total move in amount now. Yes you can write the lease so that you require one full payment every month. I would also ask them to put the utilities in their names prior to them moving in. Other than that, they look like good candidates.

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Aly W.

Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes

12y

With roommates, I have in my lease that one roommate will be responsible for paying the full rent to me. They have to deal with the split themselves; I do not want to get into a situation where one roommate says they have their share of the rent and the other does not. One roommate is responsible for paying, and they work it out among themselves, although they are both on the lease and responsible for the full rent payment.

My lease also states that the security deposit will be returned to one tenant only, and they need to agree on that upon lease signing. They can divide it up themselves. Again, it's to avoid roommates pointing fingers at each other later, saying this one or that one did the damage and who should get how much back.

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Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

12y

Sounds good. Sign the lease and make a deposit, the deposit is non-refundable even if they back out. Your lease should state that.

The credit union is not going to go for not accepting half the money. They won't get involved. Just tell the tenants it is direct deposit and you would like one of them to make it. They can deposit 2 checks at one time and it's all the same to you. In my opinion cashiers check is over the top but it may differ by where you rent

I don't do a walk through at move in. I get the rent check and then give them keys. They hand back the inspection checklist in a couple days , less work for me.

Good move to check facebook on young renters, helped me rule out people in the past. I would comment that when you look at finances etc you will see lots of things you don't personally agree with but you got it right it is about the ability to pay and keep the place nice. Read up on fair housing laws and be careful about what you say to prospective tenants. You want to be sure that what you say can't be misinterpreted as discriminatory even though you did not intend it to be.

Good Luck!

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Derek Johnson

OP

Investor · Waterloo, IA · Member since 2012 · 82 posts · 13 votes

12y

Thanks everyone, great suggestions and advice.

I forgot one thing, we are going to cover the water/sewer bill. Can we put in the lease that we'll only pay up to said amount, say $170/quarter so they can't just leave the water on constantly knowing we're paying? Kinda paranoid, I know but just wondering?

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Chris Adams

Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes

12y

@Derek Johnson Congratulations on getting your first tenants!

The best thing you can do when starting out is create a set of hard rules for move in, and move out requirements.

I require 1st, last and 1 month sec dep. (3 months total) to move in my SFR's, I will on occasion work with people, allowing them to pay the sec dep over a short time period.

Once I approve a tenant for my property, I require 1 month, non refundable deposit to hold the property until move in date, the balance needs to be paid prior to move in. This 1 month deposit prevents them from changing their mind and walking away.

As to the roommate part, @Jerry W. may correct me here, but make sure all adults names are listed on the lease. And that your lease has this clause "If this lease contains more than one tenant, each tenant shall be held jointly and severally responsible"

When it comes to receiving rent payments, I would look into one of the online payments systems rather than having them make deposits at the credit union. In some states the laws on eviction can be effected when you allow tenants to make deposits, since you can not prevent them from making a partial payment.

I use IPN which is part of quickbooks for electronic/online rent payments.

I will also highly recommend that you do move in walk thru inspections with your tenants, this will give you an opportunity to answer questions and discuss the difference between damage and wear and tear with your new tenants. Plus as a new LL you will gain experience and insight.

Good luck and if you need any forms like move in/move out forms just let me know.

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My first tenants?! Advice and guidance please!

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