Should I Use a Co-Signer or Guarantor?

[Derek Johnson]

Hello BP,

We are closing on our 4th rental property today in Waterloo, Iowa. (Keyword alert, Iowa landlords I could use some input). It's actually right down the street from our primary residence. It is in excellent shape. We paid $83,700 for it (foreclosure), and it recently sold for $120,000. We are asking $1,050 for rent. We actually have tenants lined up already, but it is a situation I haven't come across before so I would like some input on how to proceed.

We use the 3x gross income rule, so the tenants need to gross $3,150 to qualify. The tenants we are looking at are 3 college age girls. Two of them meet this income qualification by themselves from their jobs, the other said she is going to be a student and her mother would be paying her portion of the rent.

In this situation would you sign the lease with these 3 girls, since two of them meet the income requirement, or would you still go ahead and ask the mother to co-sign or guarantee the loan (which I've never had to do, someone with student rentals feel free to chime in). My thoughts are that it is better to have as many people on the hook as possible, so I'd like to have the mother sign a guarantor agreement (don't have one to use). But is it worth the hassle to take the extra steps and check the mothers income and credit/background when the two other girls already meet the income requirement? $350 per person doesn't seem like it would be too hard to handle. Any input is appreciated, and if you have a co-signer / guarantor agreement form, all the better.

[Max T.]

Yes include mom.

No need for a separate agreement. Just add a clause to your lease.

Guarantor: the guarantor for this lease is ____ who resides at ________ and has drivers license _______ and SS#________. The guarantor is responsible for all financial obligations of this rental agreement including but not limited to rent, utilities, late fees, and damages. The guarantor does not have right of occupancy, entry, or possession of the property.

Make sure they initial each page and sign at the end.