When do I require a co-signer on rental application?

Question

Hello BP family,

I am new and still learning about the rental business.  Can you please let me know in what situations I will need to require a co-signer on the lease?

My property is in a college town so the chance of renting to students/roomates are high.

Appreciate all the information you can share.

Penny Clark · Answer

@Sarah Nguyen, make sure co-signer also goes through your screening process (credit check, income verification and rental/mortgage payment history) In answer to your question,  I always require a co-signer for any of the following situations:

- If credit score is below minimum set by rental criteria. For example, a score under 600

- If income is less than 3 times that of the rent

- If the applicant does not have an established rental history both current and previous. For example, he/she is currently living with friends or family

If you will be renting to students, it may be wise to get parents to co-sign anyway, particularly if the applicant falls short of the criteria listed above or this is their first experience away from home. Depending on the laws in your state, you may also be able to ask for a higher security deposit to compensate the risk.

Thomas S. · Answer

A co-signor would only be required if renting to students. It is a "guarantor" not a co signer that you want. With students you only screen the guarantor since you already know the students will not pass screening. This is special consideration for student rental businesses.

Any other applicant that does not qualify or pass your screening standards should be rejected. Assuming you adhere to your set screening standards you never require a co-signer you reject any applicant that can not pass on their own merit. That is the purpose of screening. If you are seeking co-signers in order to qualify applicants there is not much point in bothering to have standards.

Kenneth Garrett · Answer

@Sarah Nguyen

When it comes to student housing I require the parents to co-sign.  I run credit checks on them as well.  I have accepted co-signers for my rentals (not student housing).  I think people are all entitled to a second chance.  Its my business and I elect to take all of the factors into consideration not just credit, income, financials.  It seems I end up with a fair amount of single parents with children.  Some are divorced recently.  I have the parents co-sign if there are challenges.  As along as they check out I'm okay with it.  It still is based on a number of factors.  After you have all of the information then you can decide.

I would say in life we all can use second chances.  Remember when someone else helped you out at some point in your life.

Good Luck.

Sarah Nguyen · Answer

Thank you everyone for your information and  advices. @Kenneth Garrett yes, I would believe with you that people are entitled a second chance in life.  I will keep that in mind.  Thank you for your thoughts on that.

Sarah Nguyen · Answer

Thank you eveyone for your thoughts & ideas.  I am so glad I found this place.  You all are so helpful.

Ryan Murdock · Answer

I generally require it for poor (or general lack of ) credit or income. This is often the case with college students as they just don't have a lot of history. Having a parent or other qualified co-signer on the hook gives you added security if things go south. Don't hesitate to notify the co-signer if rent isn't being paid or damage is being done to the unit. More than once I've had a co-signer step in and remedy a situation to protect their own credit.

Penny Clark · Answer

@Kenneth Garrett, You would only need the co-signer if the primary applicant didn't meet your rental criteria. Start with credit, then income verification, then rental history. The reason why many here recommend you do an automatic co-signer for students is because most applicants in this category may not be able to meet the minimum criteria due to a low or no credit score, lack of sufficient income or no previous rental history.

Thomas S. · Answer

People already are entitled to second chances through the legal system and possibly their chosen deity.

I understand that some investors choose to mix charity with business. I do not as I consider it a unnecessary risk..

Sam Shueh · Answer

underqualified applicants.

Ryan Sajdera · Answer

@Andrew Johnson @Penny Clark @Deanna McCormick

So if i have 6 applicants, do you require a background check on all 6, plus their parents totaling 12 background checks?

Thanks!

Ryan

When do I require a co-signer on rental application?

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