Screening process for organizations interested in rentals

[Bryan Drury]

Hello BP,

I have a sports organization that is interested in renting a SFH from us to house some of their players in.These are semi- professional players in the 25-30yr old range.The organization will pay for rent,utilities,security deposit, and damages.We have a system in place to screen ordinary applicants but not this situation.I'm thinking about what I need to do to thoroughly check this opportunity out. I'm thinking it's similar to college student housing in some ways but a little different.Not sure how to vet the organization,players,and situation.Players may be rotating thru housing as some will be permanent and some temporary.Any advice would be appreciated. Thank you. Bryan

[Curtis Bidwell]

@Bryan Drury I rent 2 of my units to Community Youth Services, they in turn rent to youth at risk and rotate them anywhere from about 3 months to a year.  I get full market plus for these units.  

Start by googling the organization and learning what you can.  Next go to the Secretary of State and check their business license, incorporation date and if they are current.  I have a business entity application that gets this info, plus the corporate officers info.  Get a resolution or meeting minutes that allows for renting your space.

In my case I run an application on each resident and then go over a set of rules and other disclosures when they move in.  CYS covers any damages as they occur.  I also reserve the right to deny any possible tenant and remove them if needed.  Overall It's been a great relationship.  

Also, Be sure to do a very thorough move in inspection including detailed pictures and/or video.  

[Bryan Drury]

@Curtis Bidwell,Thanks for the advice on screening the organization.I'm in the process now.From what I have found so far I think it might work out.Why do you advise getting meeting minutes on leasing from us?Thanks in advance,   Bryan Drury

[Curtis Bidwell]

@Bryan Drury You just want to be sure they have the authority to engage in a lease.

[Account Closed]

I like the ideas @Curtis Bidwell has given you.

A few other comments.  Since the organization will in the end be responsible, I'd want to see information on their finances.  This would include an income statement, which I would go through so that I had an idea where the money was coming from to pay your rent.  Make sure that their net income is 3-4 times minimum your rent per month.  I would also check their balance sheet.  This should give you an idea of how solid this organization is in case their are damages.  It should also give where their bank account is, and if it doesn't I would want that information.  

I would want to know how long the organization has been in business.  If its brand new, your risk in renting is going to be higher than if they're an established organization with ongoing income.  The newer they are, the higher my deposit...just understand that your deposit needs to protect you.  If it's a new organization, that may also effect the quality of that income statement.  Again, the newer, the less reliable.

I would want some business references.  Someone they had done business with on an ongoing basis that showed a favorable pattern of payment.

 I would not give up my right to screen tenants.  In other words, it's fine if they're responsible, but you still need to know who you're renting to. 

Finally, if this is a new organization, I would want a personal guarantee from one of the principals.  And I would get all the information on him, and screen him so that I know my guarantee has some value.

In short, I would require many of the things a bank might require, a similar sort of criteria.  I'd use common sense, something the bank is sometimes short on.  But you need to check this organization out just like you would an individual.  In the case of an individual, I was to see check stubs.  In this case, I want to see the income statement.  And in either case, I want to know how long, because length of time in business is going to tell you a lot about stability.  Most businesses fail in the first few years.  This is why in the first few years, a bank is typically going to require a personal guarantee.

BTW, I want to see who the financial statements are prepared by.  If it's by a well known accounting firm, that one thing, but if they're preparing them theirselves, you might want supporting documents, for instance, a couple of months of bank statements.  Those bank statements ought to show the flow of money through the account that would be consistent with the income statement they prepared.

Good luck with it.