Rent to Low income/credit + collection with good cosigner?

Question

My garden unit has been on the market for 2,3 months with only 2 applications so far. The demand has been tepid during this time according to my PM. I have a single mom with 2 kids applicant whose income is barely 2x rent but can provide a good credit score with good income although they are friends not family. She also has low credit score of 500 and a collection for medical bill.

How is everyone doing in Chicago market during this time? I normally would reject this type of applicant because they don't meet my criteria but the market has not been so good and winter is coming so I may sit on an empty unit for months. What would you guys do in this case?

John Warren · Answer

@Suduk N. if you are getting low amounts of interest I would look at your price and also where you are marketing the unit. If the unit is more expensive, I would look at maybe putting it on the MLS. If you are under $1200 per month then most likely your issue is price. Under no circumstances would I take a tenant that I was not comfortable with that didn't meet the minimum criteria. That isn't fair to other tenants and it is definitely not fair to yourself as this tenant will not likely be successful.

Michael K. · Answer

I totally understand the desire to get the unit filled, it's painful to think about the money wasted when your unit sits vacant. That said, I would 100% cut my price before I lowered my rental requirements. I have actually started doing this on some of my rentals that have come up for renewal in the wintertime. People who are smart with money are also bargain hunters. I would happily take a $100-200 cut in rent for someone with a good job and 700+ credit score. These types of tenants also tend to take better care of the property.

I might also question the effectiveness of your property manager. You should ask them how and where they are marketing your property. There are a lot of non-traditional mediums available to find tenants these days. Feel free to reach out if you want to talk shop.

Crystal Smith · Answer

I would not accept an applicant whose income is just barely 2x the rent. It's a recipe for disaster. We currently have 2 properties listed as Rent To Own in the city. Over 1000 inquires in a few days. Many who don't read the ad are actually looking to rent only; many are section 8. I haven't take the time to look at the real data on what's going on with the rental market in Chicago but our system has blown up with inquiries.

What I would do in your case- I would not sit on an empty unit. Continue to market the property. Maybe lower your criteria on one area but increase it in another. Don't however accept someone that can barely pay the rent. Regarding a cosignor- The criteria for a co-signor should be high. And that co-signor should recognize that in the case of default it will affect the co-signor's credit.

Bruce Woodruff · Answer

Better to let it sit empty than to take a tenant that doesn't even meet your criteria.....

I'm not sure of Chicago law, but guessing it favors tenants?

Let it sit. It may cost you $$ but having a bad tenant that you can't evict will cost more....

Jonathan Klemm · Answer

@Suduk N. - Just curious, what area of Chicago is your property locacted? I know right during the middle of COVID in 2020 I had the same problem, so audibled to airbnb.

I'd probably consider lowering the rent before you take an applicant that doesn't meet your criteria. Lower rent is way better than letting it sit vacant for multiple months - in my opinion.

I have a known move-out for one of my Bucktown units coming up in December so I am a little bit nervous myself.

Suduk N. · Answer

Same here, 1 building with 2 vacant units and 1 with 1 vacant garden unit. Your area is better than mine so I'm surprised the demand there is also low. Are people moving out of Chicago or is there any reason why?

Mia Capodilupo · Answer

One 3 months and one shorter, I will keep going down on the rent for the one, then once that is rented I can afford to be slower on the other one - just can't have 2 empty in one building.

Mia Capodilupo · Answer

I've also been surprised at how low demand has been (currently have 2 units in Bucktown available). Have lowered the price 3 times, not sure what is going on.

Suduk N. · Answer

Sounds like my PM is not making thing up. How long have your units been on the market? What's your plan to fill them with the winter coming up?

Mia Capodilupo · Answer

I've also been surprised at how low demand has been (currently have 2 units in Bucktown available). Have lowered the price 3 times and hardly have anyone coming to see it... not sure what is going on.

Rent to Low income/credit + collection with good cosigner?

Rent to Low income/credit + collection with good cosigner?

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