Renting to Tenants With an Insurance Loss

[Bob H.]

I am considering renting to a couple who say they had a house fire. They say their insurance company will pay the rent. I see some red flags, and I'm wondering what other investors' experiences have been in this kind of situation.

The potential tenants seem reluctant to apply. The wife first said she didn't want a credit hit from a screening service's inquiry. (I need to check with my service to see if their inquiry constitutes a soft or hard credit check.) Later, she said the providers of furnished housing she is considering do not require applications. I presume some of these short-term furnished rentals are more like an extended-stay motel or an Airbnb accommodation. She also said that, because she works for a school -- something I would need to verify -- her background already has been checked for her job. I would not want to rely on someone else's background check.

I have not spoken to anyone from the insurance company, which supposedly is going to make a decision on allowing its clients to rent from me or rent a furnished place. Although my house is unfurnished and therefore less convenient, it is closer to the potential renters' home, making it easier to keep up with the restoration work.

The potential tenant also wanted me to include utilities and TV service in the rent and mark it up accordingly. She said she did not want to have to open accounts with the utilities and wait for reimbursement from the insurance company. That comment made me wonder what I need to worry about in that regard. Do insurance companies pay rent on time? Do they pay the usual security deposits required of renters? As for the utilities, I have to wonder how much the tenants would waste utilities when they know they aren't paying the bills.

I also wonder who is on the lease in this situation. Surely I can't rent just to the insurance company; if I didn't get paid I suppose that would make it harder to evict the tenants.

Despite these complications, I recognize that, if this and other insurance companies have a ready supply of clients with a need for temporary rentals of a few months, that could fit into my plans for this house, which my wife and I hope to use ourselves, but only in the summer.

I'd appreciate some suggestions.