What to do with inexperienced (young) applicants

Question

I have three applicants (wanting to live together) for my single family home that are very inexperienced.  They moved away from their parents last year to move to another state and are moving back to this area (home).  They have new jobs at very good employers and make well beyond three times the rent.  They have 500-600 credit scores due to lack of credit as opposed to bad credit.  Their only landlord from when they moved away says they are great and wishes they would move back so he could rent to them again. Says they take very good care of the property.  Here are my questions:

1. Two of them are a couple and have been together for only a year.  How should I handle it if they break up and one leaves.  I know that they are all still responsible for the rent but specifically what do I do?  I've never had a situation like this to handle before.

2. Should the low credit score and lack of previous landlord references concern me?  The one they had made them sound ideal so I don't think it should be an issue but curious of your thoughts. BTW, I used a tip I learned here:  when I called him I said I wanted to speak to him about his rental property on "x" street.  I could tell he was legit!

Thanks for you help!

Nicole A. · Answer

I definitely second what Aly just said. Have them notate in writing who you will return the security deposit to once they all move out. How they divy it up is their problem, not yours.

Your lease should name all the tenants, which makes them all responsible. You don't care if they split the rent in thirds or whatever. That's their thing to figure out. You simply collect 100% of the rent each month.

If the couple breaks up, you aren't required to do anything. Rent is still due. All of it. Not 2/3 of it. If one person moves out, it doesn't matter....they're still on the lease. Sometimes these couples make up anyway. But the take-away here is don't let their problem be your problem.

Be sure they pay you the full 1st month rent and security deposit before they sign the lease. I will count out the cash right there at the table before letting them sign anything. No personal checks...they could bounce. Cash or money order only.

Aly W. · Answer

If it's not too late, get an extra amount for the security deposit.

Here are some tips in dealing with roommates.

1. Make one of them the point of contact for all maintenance calls, so you're not getting different calls/stories from different tenants.

2. Make sure the lease states that the security deposit will be given back to *one* of them, and that person can divvy it up at the end of the lease. This avoids the "well, he punched the hole in the bedroom wall, or she's the one who spilled paint on the rug, so I should get back my share". Let them figure out it among themselves.

3. Collect the full rent from one of them, not separate amounts from all 3 of them. This avoid a similar scenario, where the tenants will tell you that Tenant B hasn't paid their share yet, so they don't have the full amount. You don't want to chase individuals. Let them collect the whole amount among themselves, and one person pays you - and if it's not the whole amount, make sure they understand you'll file a Pay or Quit no matter who didn't pony up.

Good luck!

Galen Bricker · Answer

Thank you for your help!  I have gone ahead and accepted them even though their credit ratings are low due to lack of credit.  They have no debts and their past landlord gave them a great review.  I really do appreciate having a place to ask questions like this and get feedback from other experienced investors!  I love BP!!

Michele Fischer · Answer

You may want to consider co-signers or an additional deposit to help cover your risk.

We take into account how long they have lived at previous addresses, how long they have had their jobs, how deep their roots are to the neighborhood/area, etc. Be careful not to make decisions on any discriminatory factors, such as their relationship with each other.

We have had good luck with renting to this demographic, but be prepared for roommates to move in and out.  Set up clear expectations for what happens when someone moves out and someone new moves in - that there are no refund of any deposits until everyone moves out, that new applicants need to pay the screening fee and go through the process, etc.

We normally put everyone on the agreement, but designate the strongest applicant as the primary tenant. This helps us to know who to work with and keeps us out of the drama.  Our clauses:

In the event that Tenants decide they no longer want to live together, ___________  will be considered the primary Tenant to make decisions about modifying or terminating tenancy.  Deposits will not be returned (full or partial) until all tenants move out.

Anyone moving in must get prior written consent of the Landlord prior to moving in.  Each prospective new tenant over the age of 18 must complete an application, pay a $20 fee, pass a background check, and sign the Agreement. Landlord must approve all overnight guests staying more than 7 consecutive or 14 total days.  Adding a roommate, even if on a trial basis, is not considered a guest and needs approval prior to move in.  New tenants are not allowed to move in prior to six months after move in.

Donald Capwell · Answer

Hi, @Galen Bricker.  I had a problem with this when I started renting.

First, get everyone on the lease, and include a clause that there will not be any other residents besides those on the lease (check legality in your area).  I had a few "extra tenants" move in that did the bulk of the damage to my property!  Also, you need to know who to evict, if it ever comes to that (which it won't because you are being careful!  :)

Next, make sure you check ALL references, for ALL tenants, including employer and personal.  Get references from employer, at least one close family member, at least 2 non-related, and all previous landlords.  It wouldn't hurt to get previous employer, too...  (You'll just be verifying the dates of employment, wage at time of leaving, and ask whether they are eligible for rehire.  Most places answer these questions without issue)

It's up to you if you want to run a credit / criminal history, but if you have any doubts, it will be worth the small fee if you are going to invite them into your home.

There are a lot of posts about tenant screening here on BP, so check it out.  My wanting to help out some young people (the first time) resulted in police on site for domestic abuse, social services checking on child welfare, non-payments and about $2500 in damages after they finally left (holes punched into walls, damaged carpets, etc)

I'm not saying don't take a chance, but make sure the rental rate is not lower than the market (which attracts undesirables at times), and do your due diligence!  It's not personal, it's business...

Good luck!

Jeff B. · Answer

ALL unmarried applicants, or applicants that need to pool income to qualify, SHOULD submit a full application and pass your qualification standards.

ALL will need to sign the lease

Each will be responsible for the lease, regardless of who's the last person standing.

Account Closed · Answer

Not a chance in the world I would rent to this dynamic.  This game is tough enough without adding this level of grey to the equation. Sorry, I offer quality properties, provide excellent service, and pass up these type of potential applicants all the time in order to find the "vanilla" candidate that I can fully investigate, and know what I'm getting before they get the keys.  Hope is not a strategy that works for me.

Rick Bassett · Answer

Our history with first time renters is that most do not know how to live in a rental house. They tend to break things more (faucets and the like) and let the maintenance slide more then experienced renters. So to cover those issues and those mentioned in previous posts we require first, last and 2 months sec deposit.  Screening is also important but they usually lack any landlord references.

Rick

Tom Ott · Answer

I agree with Nicole. Everyone who lives in the unit are separate tenants and should be treated as so. If someone leaves, then the rent doesn't change and the same people who signed the lease STILL owe the same amount of rent. Nothing should change.

Your tenants signed a legal and binding contract and they should be aware of that.

Tom Ott · Answer

Happy to help! Good luck to you with your new tenants!

What to do with inexperienced (young) applicants

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