Advice Needed - Accept this tenant or move on?

Question

Hello, I am a new buy and hold investor and this is my first time to post so please forgive me if I don't do something right.

We currently have a house available for rent that we have marketed locally on FB, Craigslist, etc.  for about a week now.  Do not have it listed with a realtor yet.  I have had several parties contact with interest but only one family has come out to see the property.  They love it and want to sign a lease ASAP.  Now here is where it gets sticky.

1.  They are selling a home and building a new one.  So they would live in the rental while their new house is being built (builder says 7 months from foundation being poured).  They have asked to sign an 8 month lease at full rent price and then go month to month with a 30-day notice at which time they will pay an additional $50 month.

2.  They wouldn't move in until March 20.

3.  All of this is contingent on the current contract on their house closing as planned.

I am unsure how to best handle this.  On the one hand, they are the only applicants so far.  On the other, if I keep my house off market and then something doesn't work for them and they pass I am SOL and have to start all over.

They have already filled out an application (which looks GREAT and I am confident they would be great tenants).  I told them we wouldn't move forward until their option period is over.

Solutions I am considering:

1.  Upon execution of the lease (after option expires on their home), they provide deposit, half of which will be nonrefundable if they have to cancel the lease before moving in.

2.  Hold tight, accept other applications and decide which applicant is most advantageous.

3.  Move on completely and tell them their timeline just doesn't work.

Appreciate any and ALL advice including options I am not thinking of.  I HATE the idea of letting them go only to not find another great tenant.  But would also like to start collecting rent ASAP.  Thanks!!!

Shawn Thom · Answer

One of the most expensive things is tenant turn over.  You are setting up a design that creates turn over.  If they were paying you double rent, that would be one thing, but they aren't.

Unless you are having a really hard time renting it, i'd say you don't accept anything shorter than a 1 year lease and hope that makes them move on.

Kelly N. · Answer

I'd probably move on in favor of someone who would move in sooner and stay for a year.  But that's in my market, so yours may differ.

If I did allow them to rent under those terms, I would want a (nonrefundable unless I was unable to rent to them) holding deposit to take it off the market, I'd probably try to get them to start their lease earlier than that, and I'd probably want $50 more per month for the short term lease, and maybe 2 months notice instead of one month since that would give me more time to find the next tenants.  Or I might consider a 12 month lease with the understanding that they would pay XX (half a month's rent?) to break the lease early and have to give me 30 days (or 60) notice.

Kimberly H. · Answer

My thoughts:

- No way on your lease contract and holding deposit being contingent upon them selling their own house. Contracts to sell and buy houses have contingencies like that, but not rental lease arrangements.

- Holding deposit needs to be at least one month rent for you to hold the property for them, and it's non-refundable.

- This is a tougher time of year to get a tenant. If this was spring or summer I would just wait to get someone else.

- If this is a custom home being built, good chance it will take longer than the builder says.

- Do you want to rent upfront to someone that you know for sure will move out in year? We always do 1 year leases but most stay 2 yrs at the least.

-Month to month I believe should be a premium more like 10% additional per month. And accepting a shorter term than a year should be at a premium as well. When insurance companies need to place people they pay a premium for short term leases.

Mike F. · Answer

^^ Ditto.

I'd never set myself up for failure knowing I'm signing up a short-term rental, we are averaging 5 year renters on our properties, signing up somebody knowing it would be for 7 months would be like putting hot pokers in my eyes.

Just imagine the scenario of them moving out and the place is a fricken mess, you  spend a bunch of money cleaning it up and it's off the market again longer than you  plan, really a crappy situation.

Like Shawn said, there must be a greater reward for the risk. A massive security deposit and a large upcharge on the rental rate just to consider it.

Scott Weaner · Answer

@Rebecca Clark How long have you had it on the market? I always hope to find tenants that may actually stay for a few years. I would keep looking.

Jacob Sampson · Answer

If you are taking it off the market you need to be collecting rent.   I might hold, with a deposit, until March 1 but after that they need to pay rent.  I would not be feeling worried about getting it rented after only 1 week.

Advice Needed - Accept this tenant or move on?

Most Popular Reply