Should I rent to this family?

Question

I have a new rental that I just invested a good amount into. The renovation will be completed next week (I have not yet advertised the rental). However, a couple that inquired about one of my other properties reached out and would like to rent this property. The situation goes as follows.

This couple owned a home. Both lost there jobs and they fell behind. There home went into foreclosure and they moved in with there parents (they have 2 small children as well). They have been living with his parents for about a year and each of them have found a new jobs. She is making $28,000 yearly and he is making $54,000, the rent is $1595 not including utilities. There credit is a 612. I ran there application through E-Renters and they passed that portion of the screening, but failed the credit screening. Areas of concern are the foreclosure, credit, and his job since it is very new (just started 2 weeks ago).

I am considering them because they are able to move in November 1st, and it may be more difficult for me to find tenants for a Decemeber or January move in date, due to the holidays. If I would rent to them I was considering proposing the following.

My normal security is 1 month rent. I can charge 2 months rent and do a 6 month rent agreement (essentially a trial period). If all goes well, in the spring when the 6 months is up I can offer them a 1 year.

Any advice would be appreciated. Would you rent to this couple?

Nicole A. · Answer

You verified their income too via seeing pay stubs? I know you said the guy just started, but by 2 weeks, he probably has received at least one paycheck?If you do decide to rent to them, I agree that perhaps require a larger security deposit...and a shorter lease. In fact, if you can just do month-to-month, I'd choose that over 6 months.

Russell Brazil · Answer

@Chris S. What is dragging the credit score down? If it is mainly the foreclosure I would rent to them. I typically ask for a 620 credit score or higher.....but I give some leeway for between 600-620 if the root cause is a short sale, foreclosure, or collections more than three years old. If there are more recent things like late payments in the last 9 months, then I would probably pass.

Garrett Beecher · Answer

@Chris S. This is definitely an interesting situation. If I were you I'd be stalking their social media to see if you can get any additional insight into what they are like as people. Often times I think in this business it is easy to get lost in the numbers. That being said, the numbers are encouraging because their monthly income is 4x the monthly rent. Also, if they turn out to be good renters they are likely to be around for a long time because they have family in the area and young kids that force folks to start putting roots down. I'd check on his employer and if it looks like a stable company with projected growth combined with all the other info, your plan for a larger security deposit and a 6 month lease seem prudent.

Jerry Bruckenheimer · Answer

I would be very frank and upfront with them, "I have concerns about your credit, let's sit down together, pull up your credit file and talk about it" Have THEM log in to Experian, Equifax, or Transunion in your presence and look at the full credit file, see every account, every late, every derog. On one hand, this is intrusive, but if they want your place and have been honest this shouldn't be a problem and they well know that their credit is going to be a barrier to many rentals they might pursue. Your willingness to look deeper in an attempt to qualify them should be looked at positively versus an automatic no they might receive elsewhere.Having said that, a single foreclosure and its associated lates CAN have a very dramatic impact on scores....

Jeff B. · Answer

Forget FICO scores - - their history of paying bills is far more indicative.I would take them and make the lease 3 months, renewable to m/m.

Steve Babiak · Answer

A full credit report (not just a score) will have a list of accounts, payment amount for any account, balance owed for the account, addresses they lived at when credit applications were made, whether accounts are current or delinquent and by how many days, etc. You read that full report to figure out where their credit problems stem from. I would be concerned that they are not accustomed to paying for housing (foreclosure and living with parents are "free" housing to them). I would be concerned whether they can get utilities in their name. If you do select them, keeping the rental duration short is a good idea; getting higher security deposit can also be a good idea, but keep in mind that in PA you can only have two months worth of rent as the amount of security deposit during the first twelve months of any lease with you (after which it drops to one month's worth).

Steven Wiltz · Answer

visit where they live now - that's what your house will look like. Also, why a lease? Month to month rental agreement, and if it doesn't work, you can give notice without being bound I to a lease. A lease doesn't protect you; it won't stop them from leaving if they want to leave.

Brianna H. · Answer

I agree with your approach. It looks like they just fell on hardtimes. I would call both employers to do some digging. Since he has only been there 2 weeks, maybe you can dig a little deeper even...has he been a GREAT worker in those 2 weeks? etc. If they have been living at home, they probably have money saved up so 2 months security deposit shouldn't be a big issue. 6 months agreement is a good idea so you can get back on track for a spring agreement! Goodluck!

Chris S. · Answer

Just a follow-up here.. We did rent to them. We got 2 month's security and 1st month's rent. Also, we went w/ a 6 month lease. We did search around town and found some common friends and they vouched for them saying that the husband "just fell on hard times" and that "he's a great guy". We'll see how it plays out, but we have a good feeling about it. Also, we asked if he was considering buying any time soon and he didn't seem like it, so this could actually work out better than a person with excellent credit... if they pay on time, etc. If you don't hear from us, it worked out.. ha. If it doesn't work out, I'll be sure to post on this thread to help everyone out that helped us. Thanks for the advice everyone!

Andrew Halbert · Answer

We just rented to a tenant with a somewhat similar situation. Credit was a disaster due to a foreclosure over 5 years ago. However, all other backgrounds checks came in ok, income verification was good, employment history was good and the tenant's former landlord said they were a great tenant and hadn't missed a rent payment in the 5 at their former residence. They also could move in on Nov 1st, where most of my other leads could not move in until 12/1. The last thing I wanted was a family moving into my unit during a winter in Michigan. HOWEVER, I did insist on a 6 month lease and they agreed. Drama free and rent on time for 6 months means we can renew again in the spring.