Applicant A or Applicant B?

Question

Wondering which tenant application looks less risky financially?  Neither have rental history as both owned...

Applicant A: Retired Couple

Income to rent from social security & workers comp = 3.7x

Income less debt payments = 3.3x

Credit score: High 600's

Concerns: Foreclosure several years ago

Applicant B: Recently Separated Mother

Income to rent from job / child support = 3.3x

Income less debt payments = 2.6x

Credit Score: Low 700's

Concerns: Only a few months on the job; slightly lower income to rent but slightly higher credit score

Scott Hawks · Answer

If they both meet your criteria for being approved, i would rent to whomever submitted their application first. Keeps thing clean and neat from a legal standpoint.

John Koster · Answer

I would also agree with Scott Hawks.  If both tenants qualify, go with the first applicant.

Hypothetically speaking, application order not withstanding, I can see why a lot of people would pick A, but other than the other negatives (lower credit score/past foreclosure), the retired couple's income situation is potentially not as superior as it seems.

The retired couple's income will most likely not increase since they are retired.   The separated mother's income can increase over time.   Salaries generally rise with inflation.  Fixed incomes, with the exception of Social Security, do not.

Both have costs that the other probably does not.  Child care, age related health etc.. Whose situation is likely to improve?  Who knows?  There are a lot of unknown variables which could affect both of these tenants positively or negatively, and their income ratios could flip flop overnight.

Hypotheticals can make your mind spin though, so it's best to just go with what you know for sure.  The retired couple is technically in a better financial position as of right now, but ultimately I would pick B because, who is more likely to walk away from a a financial responsibility?   The tenant who has already done so before.

Brian Garlington · Answer

I'd go with A all day long.............they have the "homeowner" mindset even though their home was foreclosed upon that was years ago. They most likely will not be having wild parties at the house as well.

Bob Collett · Answer

CJ

There were lots of good opinions offered.  I would tend to go with A because of the higher income and stability.  However, before selecting either, I would always get a criminal background check and and evictions report.  Foreclosure is one thing... an eviction is something else.  The criminal background check will likely make your choice obvious.

What do your written tenant requirements say about credit score?

Also, keep in mind that "recently separated mother" is a protected class by virtue of children.  Don't even think about using that as a deciding factor or consideration in weighing the merits of two prospective tenants.

Bob CollettRemax Trinity Property Manager, Cleveland OH

Zachary Ray · Answer

Scott Hawks is right, you want to keep anything clean. Once you get in the mental mode of who should I select you are all wrong. The idea is to find a qualified applicant and approve them, not approve a bunch. That is where liability will creep in because now you have to justify the reason everyone else wasn't selected, it can be done but it just creates unnecessary strain.

Maria S. · Answer

I would go with B. A is judgment proof, and have a foreclosure. No skin in the game as far as I can see.

Chris London · Answer

Dear Applicants,

We now have 2 applications on this property, please let me know by end of the day tomorrow if you would be willing to either sign a multi-year lease or make a higher offer?

Sincerely,

CJ C. · Answer

Thanks all for your thoughts!  Really appreciate the color and it sounds like Applicant A is unanimous.  At first I was a little bit concerned about the foreclosure on Applicant A - but it sounds like not a big deal. Also wasn't sure if income to rent was more important or credit score - but it sounds like in this case, not a big enough difference in the credit score to outweigh the higher income. Luckily, Applicant A was also the first to apply - so no issues from a legal standpoint there. Thanks again!

Adam Martin · Answer

I’d also go for A.  As others have said lower debt to income ratio as well as they have guaranteed funds.  Person B looks good to and I would have accepted her most likely as well if it was the only option.  I’m not sure what others think but child support payments always worry me if they are relying on them.  If the father stops paying that will most likely put a large strain on the finances of a single earner.

Applicant A or Applicant B?

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