college kids in apartment - but parents on the lease??

Question

I just put my first rental property - a duplex - up for rent. I have an application in from two college age boys. One of the boys father's is the one who wants to be on the lease and be responsible for rent payments. (He lives in Florida, my rental is in Pennsylvania). He has offered to pay half the rent up front. I wanted to see what you would do with this situation? Should I require the other boys parents on the lease as well? Or should I put the boys on with the parents as co-signers? What are your thoughts - thanks?

Callie King · Answer

Thanks for the feedback! This is not a "college town" area, so I didn't expect this situation.

Both families are coming into town this week, so I will be meeting with them to view the property and will likely go a lot off my gut what kind of people they are.

And if I do go forward I will certainly be using all your good suggestions for how to set things up! Thanks!

Steve Babiak · Answer

Make sure you establish some (written) criteria for the guarantor to meet in order to qualify.  The guarantor will be paying housing costs in two places, so they need better qualifications than just a tenant with a job.  Search the forums here, there is already info posted on this sort of thing.

Personally, I don't like renting to undergraduate college students ...

How close is their college to your rental?  Will college students be more common in that area as tenants than other types of tenants?

Lynn McGeein · Answer

Just wanted to say that when I co-signed my daughter's college apartment (her roommate's parents also co-signed or I would not do it), I specifically required I be on the lease as a tenant, not just a cosigner.  Then I told both of them I would be stopping in when I was in town and if I saw any sign of damage that I could be liable for, I would personally move in, be there every chance I got.   Just saying I wouldn't rule out a parent wanting to be listed as a tenant, as it gave me a lot of leverage with the girls I wouldn't have had otherwise.

Michael D. · Answer

Don't put the parents on the lease as tenants, add them as guarantors for the lease and insist the fill out an application. The boys go on the lease as tenants (if they are 18+), as they are the ones living there. All four are each responsible for the whole amount of the rent (joint and severally liable).

The point is, the parents don't have the right to occupy the property. Only the boys do.
http://ohmyapt.apartmentratings.com/what-is-a-lease-guarantor.html#b

Also, you may want to ask for the last 2 months rent in advance, in addition to a sizable security deposit.

Michael

Jerry Kisasonak · Answer

Good advice here. I like deals where the rent is paid upfront. I personally would take the 6 month's worth of rent and rent to them. However, I would definately talk with the parents about how college kids have been known to damage property, and if their kids do ANY damage that you'd be looking to them (the parents) to cover the expense of repairs. It's sort of a "You've been warned" talk.  Emphasizing this should get the parents to have a stern talk with their kids about making sure the property doesn't get damaged. And if it does, the parents will already expect to be getting their wallets out (and having a second talk with their kids!). Most of the important work with leasing properties is firmly setting the precedent up front.

Tom Goans · Answer

Callie,

You are on the right track to do a good job of covering the bases and protecting your investment. Getting as many responsible and liquid people guaranteeing your investment is very wise. Be sure to get everybody’s social security number and have in your lease you will report any negativity.

I believe that most attorneys would highly suggest the parents sign the lease as guarantees. All occupants should sign the lease as occupants and co-guarantees.

However, there is something for your consideration. Rent would not be my concern. My concern would be damages. Damages could easily be more than the rent you will collect in a year’s time and far exceed the normal security deposit.

Be prepared and have a plan.

Let’s assume the worse. What happens if damages occur and the parents are not willing to pay or keep delaying paying you? Legal action will be costly and may be a long delay of months or more. Legal action for people living out of your area, especially out of state, will be very costly. Some of the expense you will never recover.

If it were me in your shoes, first, I would seek other tenants. The cons outweigh the pros. If you are determined to proceed, I would require the liquid people open an account in the bank of YOUR CHOICE with instructions given to the bank: 1) the monthly payment is to be automatically transferred to your account each month; 2) a balance of $10,000 or more is to be maintained at all times during the life of the lease; and 3) should there be damages, you are entitled to reimbursement after presenting paid receipts and photographs of before and after. An attorney should draw up this agreement for everybody’s protection.

Also, be sure your lease agreement includes a paragraph addressing the reimbursement of any legal action, including reasonable attorney fees by the prevailing party.

Be prepared for the worse and rejoice when better results happen.

Andrea M. · Answer

Hi Callie King, I would have all the boys parents on the lease and have the boys listed as the occupants. We all know and have heard of the college kids being broke , they may also be minors where legally they can't sign a contract.