Prospective Tenents Running a Daycare

[Nick Leamon]

So I am currently in the process of re-renting a property, one of my potential applicants is a couple who run a day care out of their house. They are licensed with the state and have been for 4 years, they have provided 2 years of Tax returns, and carry extra insurance to cover their liability. They make over 2.5x rent per month, but not quite 3x they were in their previous rental for 4 years, the rent was $150 more than mine is, and they always paid on time and were never late. if you were in my shoes would you rent to these people?

[Travis Lloyd]

I don't know about your area, but in some of the towns around me, in-home day cares need to get approved variances from the zoning board, and that usually comes at the expense of "safety" improvements required for the home.

Also, depending on how you financed the home - take a quick read through the language of your mortgage and make sure there are no limitations on in-home businesses and/or day care.

[Nick Leamon]

Thanks @Travis Lloyd

I know there are other day-cares in my neighborhood, but I will definitely look into those things you mentioned. assuming they are non-issues though, what would you do?

[Ian MacIntyre]

It's all about the best chance to pull in consistent payments...how do your other applicants compare?

[Jennifer L.]

@Nick Leamon  You should contact your insurance provider to make sure that they would not require additional coverage on your landlord's policy before making a decision.

[Travis Lloyd]

@Nick Leamon assuming they were non issues I would rent I them. But I would assume that they ARE issues so I would research, then I would add an additional rent for the trouble. Maybe 100-300, nothing major. 

[Dawn Anastasi]

I don't allow daycares due to extra liability and if their income isn't 3x the rent amount gross per month then I don't allow them in.

[Jason Bott]

@Nick Leamon 99.9% chance your current insurance policy will exclude coverage for this or deny a claim as this would be considered a "material change".  Meaning, what the insurance company initially underwrote the policy for is now a completely different risk.  Give your agent a call to estimate the possible additional premium you may take on.

[Elizabeth Colegrove]

Heck freaking NO!!!! Not worth the lability, not worth the headache and not worth the potential wear and tear. I am nothing other than an experience aka jaded landlord. 

[Nick Leamon]

Thanks everyone for all your input.

@Jason Bott

@Jason Bott thanks for the advice, I called my insurance company and they said they wouldn't even write me a policy for it, that i would have to get commercial coverage.

This is why I love BiggerPockets, you all got my back! And probably saved me a large headache.

Thanks again,

Nick Leamon

[JD Martin]

Good job.I wouldn't have rented to them, I don't want anyone running any business out of my house.

[Rich N.]

I know you made the wise decision thanks to the advice of others, but also wanted to mentioned potential cost for water/sewer too if you provided it.

Also, some daycares may make more during winter months, but when some comes around they might be pulled out for other activities...just mentioned for others that are thinking about it.

[Tim Booz]

For me, it depends on the odds of finding another tenant. Has it been vacant for a while? Are you getting above market rent - or do you think you'll have additional applicants that are more traditional? For me,  I'd rather not have the extra liability. Also, if they're not hitting the metric you use for rent vs income, that's two strikes.

[Chuy Gonzalez]

Hell no!