Picking the right tenant / % of income.

[Justin Sheley]

My wife and I are currently in the process of finding our first tenant to fill a vacant apartment. We own two multi-family but have been fortunate enough in two years not to have to find a new tenant since we purchased properties with existing tenants. 

I have had some good candidates, but have narrowed it down to two.

The first is a married couple with two children that have a gross monthly income of $6,250. My concerns is that they are going to be looking for a home in the Rockford area during the year they rent the apartment. Also, they have two children and it is a 2 bedroom apartment. They are used to living in the setup out in LA, but I am concerned that realistically the apartment is too small and will cause them to be even more inclined to move out after their first year. However, their income far surpasses the 25% rule that I am trying to follow in the income to rent ratio.

The second candidate is a young single girl with a stable job at a manufacturing plant in Rockford. I believe she truly loves the apartment and could be a long term tenant. My concern with her is that her cross monthly income is $2400, meaning the rent is 33.3% of her income. 

I would feel comfortable with both individuals, and they actually both are willing to pay rent in May to hold the apartment although they cannot move in until June. Would anyone here have any opinions on which one may be a better fit, and why?

[Rajeev Kotyan]

@Justin Sheley: Specific to lease timeline. If your criteria is to have a 1 year lease, then stick with it. For my rentals: All leases are one year long with an automatic annual extensions, unless I provide them with a notice to terminate the lease atleast 45 days in advance in writing. I clearly state to the tenant that just as much as they cannot predict the future, nor can I, hence as a business I have decided to have leases run for a year. 

Note and Caveat: This is my business model, and each one here should have their own. There is no harm in having 10 month leases, or even month to month. Your criteria should be dictated by numerous factor, your business, your goals, your rental property location, local real estate trends, types of tenants you want, etc..