Would You Rent To Them ? Need advice quick !

[Westin Hudnall]

Rental amount $1175/month with $1000 deposit

Clients Financials : 

Husband - $2500/month before tax

Wife - $355/month in child support. Stay at home mom (they have 3 kids. Age 2, 6, and 8)

They own 2 vehicles (07 Chrysler 300 and new 2014 Durango)

Husband inherited land from a relative ; sold part of it to pay the 2 cars in cash so there are no car payments.

I need to make a decision in 24 hours :

Thanks everyone :)

[Dawn Brenengen]

Do they have good credit?  Do they have good references from previous landlords?

[Westin Hudnall]

I will run their credit tomorrow. They rented from a brother in law for the past 2 years at $1000/month. I have not verified anything yet

They have no pets

[Elizabeth Colegrove]

What is the background check? Who do they work for? When do they want to move in versus when it is available?

Honestly without talking to them, just seeing the details you listed. I would rent to them.

[Westin Hudnall]

husband works 50-60 hrs/week for a landscape company. Looks like he makes $10-$12/hr. (Not thrilled about this)

The property was available starting today and they would take possession any day now as the property they were renting is being sold

[Jon Klaus]

Not enough income. I want income of 3X rent, or better. 

How much in savings?

[Dawn Brenengen]

They are cutting it too close in income. I would prefer to see 3x rent myself, and I would be nervous that his job is not stable. Landscaping is very seasonal and unsteady work. Unless they had some really awesome qualifications besides this (like an 800 credit score or 20k in the bank), I think I would pass. 

[Westin Hudnall]

I agree @jon klaus  and @Dawn Brenengen 

However they own land that was inherited thats worth good money.

Does this make up for the difference in income ? They recently sold part of this inherited land to buy a 2014 Dodge Durango in cash

@Jon Klaus undefined

[Jon Klaus]

That helps, but if the get behind on the rent, are they really going to sell land to come current?  In a timely fashion?  Getting a double deposit would help. 

[Jaime Frausto]

Negative I would not . Be patient. Better being vacant then bad tenant. No tanent = no rent income. Bad tenant =no rent income and legal fees for eviction.

[Jon Klaus]

"Bad tenant =no rent income and legal fees for eviction."

And another make ready. And more aggravation. 

[Westin Hudnall]

@Jon Klaus 

What are good business practices to follow when you do rent to someone with an iffy situation ?  Make them use direct deposit ?

[Jon Klaus]

Good tenant screening is paramount. Don't take the iffy tenant. Get the best possible tenant, even if you discount rent somewhat. 

BP's tenant screening guide

[Benson Lai]

How long was this property last rented? It's better to wait a few extra days than to hurry and rent it immediately based on the first offer you get. I usually tell my applicants that it'll take a few days to get their application through and if I really feel good about then I let them know immediately, but if I don't like them at least I have bought myself some extra time...

[Westin Hudnall]

ok I understand --

What's a good site to use to run a background check quickly?

[Jon Klaus]

BiggerPockets recommends https://biggerpockets.mysmartmove.com

I haven't used them. 

[Michele Fischer]

Quality background checks take time, to search nation wide criminal.  Cool your jets, what is driving the urgency?  If they are pressuring you, that is a red flag.  If you are pressuring yourself, you're setting yourself up to make a bad decision.

I would put this applicant in a holding pattern - keep verifying stuff, don't turn them down, but don't actively accept them either.  They aren't bad enough to not qualify, but aren't good enough to invest a lot of time or energy in unless they are the only interest for weeks.  As you keep digging on your time frame, things will start to look better or worse and a decision will be clear.  Or they will withdraw and your decision will be clear.

I think selling property to buy a nice new car is financially irresponsible.  But, then, they would likely not be renters if they were wise.

[Branden Chhuor]

I wouldn't rent to them. They fail the income test of 3x monthly rent.

If you do rent to them, I would require them to pay me 2-3 months of pre-paid rent. If they can't front that cash, then move on.

Be patient and screen the tenants. You as landlord want the least amount of headache as possible.

[Dawn Brenengen]

@Westin Hudnall I wouldn't take an iffy tenant. I would show the home for another week and aim for someone more qualified. Do you have reason to believe this is the best applicant you will get? 

I used to use National Tenant Network to screen tenants, and now I use Resident Research, although RR may be geared more toward PM companies. 

[Steve Babiak]

No.

As others already mentioned, insufficient income.  3 times the rent is the normal requirement for pre-tax income;  in some situations going as low as 2.5 times the rent is considered permissible.  But it's clear they don't meet one of the requirements for that lower income, which happens to be a verifiable good on-time payment history (at least 12 months) of rent equal to or greater than the rent for the unit under consideration, and no reduction in income from that period of good payments.

The next two points have not been mentioned yet, so read on.

Since they are "renting" from a relative, there is really nothing verifiable unless there are some cancelled checks to prove rent was actually paid.  i always consider these as not renting unless they prospect can prove otherwise with no doubts whatsoever.

And of course, @Rob K. gets credit for having landscapers as an unwanted occupations.  Seasonal work means no income during the off season for that type of work; no income means you can't expect to get the rent paid ...

Now, if their land was so wonderful, they can go pitch a tent there or get a double wide or RV and park there.  Advice you've been given here is to prevent you from having a bad experience with a renter, by understanding how similar renters have given landlords a bad experience.  But maybe you want to experience that yourself?!?!?

[Marcia Maynard]

No.  

Red flags:  Being in a rush, recently renting from family, not enough income.  (That's just based on the scant information you provided.) 

The key is your established minimum criteria to rent and using it in evaluating all prospective tenants.  If you have not decided ahead of time what your criteria is, it will be difficult to move forward and you will be taking on too much risk.

For us, we want to see a minimum of 3x rent as income.  Sometimes we will consider 2.5x with additional security deposit.  They don't even meet that.  Their success in being able to pay all of their living expenses, especially for a family of five, is doubtful.  I would have informed them of our rental criteria and would let them know that unfortunately it appears they would not qualify, before accepting their application and application fee.  Save them their time and money, as well as yours.

Always be prepared to verify rental history, income history, credit history and legal history.

[Rob K.]

Do not rent to them! The husband gets paid weekly (very weakly!). They don't have enough income and the deposit is too low. As @Steve Babiak mentioned, landscaping is seasonal. You will get a call in November that they can't pay the rent "until it snows".

The fact that they would buy a new expensive vehicle, when they have a very small income, is a very bad decision. How many other bad decisions do they make?

I would move on. Anytime I have someone iffy (these people don't even qualify as iffy), someone better always comes along. There's a lid for every pot. Hang in there.

[Rick H.]

I'm in agreement with other posts. My voted us thumbs down, although the OP seemed to want to get yes rather than the unanimous no's he received.

Here's my take: additional non-cash collateral might make up for deficient security deposit, but that's it. Here in legally-sensative California, I've had no problem using a "performance trust deed" to compensate for an insufficient security deposit, however it's always been on marketable real estate. A vacant parcel? That means I've got to do an awful lot of extra work to get my money and I do not have an Rx to cure my allergy to unnecessary work.

As for an income problem? A co-guarantor (co-signer) with provable income and a house with equity that I like could work but, like above, if I've got to become a "rent stalker" to get paid, that's not really solving the problem. I want a paying tenant not another project on my list.

[Jason Eyerly]

Originally posted by @Michele Fischer:

Quality background checks take time, to search nation wide criminal.  Cool your jets, what is driving the urgency?  If they are pressuring you, that is a red flag.  If you are pressuring yourself, you're setting yourself up to make a bad decision.

I would put this applicant in a holding pattern - keep verifying stuff, don't turn them down, but don't actively accept them either.  They aren't bad enough to not qualify, but aren't good enough to invest a lot of time or energy in unless they are the only interest for weeks.  As you keep digging on your time frame, things will start to look better or worse and a decision will be clear.  Or they will withdraw and your decision will be clear.

I think selling property to buy a nice new car is financially irresponsible.  But, then, they would likely not be renters if they were wise.

 Because if you're renting a property, you are not wise? Wow. Guess being an investor doesn't make you intelligent, either.

[Westin Hudnall]

I'm denying them. Thanks for all the feedback everyone.

I was being way too aggressive . Problem is this is the first time I let someone else handle the screenings and showings so by not qualifying them right enough ; and not meeting them myself; it made it hard to want to turn away an excited tenant handing over a deposit.

We have 2 showings set up tonight for candidates that make 4-5 times rent each :)

[Michael Noto]

Without even knowing the info from the background check, for the standards we use they fall a little short income wise.

We look that they take home 3x the monthly rent for an apartment that has tenant paid utilities. 

Also, you mentioned that the guy is a landscaper, does he only work seasonally?  What does he do in the winter months for work?  You might want to consider that as well.