Family Inherited a House, completely new and I really need a someone suggestion here.

[Brandon White]

My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect,  so evictions and court proceedings imo can make you go insane. 

She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.

The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income).  I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:

Credit score is about 640

one time payments: 81%
total debt $15k 

open accounts are all student loans which has a note that says dispute resolved - consumer disagrees. 

Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024. 

Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.). 

Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say. 

I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants. 

I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert  

I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.

Thanks in advance!

[Randall Alan]

Quote from @Brandon White:

My relative died and left his fairly new home to my mother, and we were wondering whether to Airbnb or rent it out. She is very stubborn and says she’s tired of maintaining and paying the bills every month, she is eager to just move a tenant in. Im the opposite, I recently had to sue a company for a product defect,  so evictions and court proceedings imo can make you go insane. 

She has screened a few people interested from Facebook, and she’s set her mind on a couple living in a very bad apartments from another state, who want to move in immediately (like next week). Home is worth about $200k, my mother wants to rent it out for 1400/month.

The tenant she wants to move in is a woman with 3 kids and a guy, income is $2720 (but my mother says the guy makes the same income).  I listed the home on Zillow so they could do a background check, and the woman is the only one who has done it (guy says he will do his shortly). Here’s what Zillow shows:

Credit score is about 640

one time payments: 81%
total debt $15k 

open accounts are all student loans which has a note that says dispute resolved - consumer disagrees. 

Closed accounts has an auto loan for $9k that says B2 (chapter 7,11, or 12 bankruptcy). This is from 2022 up to now in 2024. 

Collections has $3200 in creditors from several creditors (southwest credit system, Louisiana recovery services, etc.). 

Here’s what I have a funny feeling about. She says she is moving to get out of that place and do better for her kids. These are apartments they are living are the worst in the city. Like imo if your household income with that guy is like $5400, you have no business being there (literally my other was shot at multiple times). They claim they are religious (he is a youth pastor) and don’t smoke (but they look like the do) and image wise are tatted from head to toe and don’t come off like they say. 

I am posting this because my mother goes off on me and says I’m negative because over the last 2 months of tenants applying through Zillow I have seen so many collections, 500 credit scores, and applicants saying on thing, but then asking can she accept housing. So I told her BP members are experts and know more than both of us. I think she should Airbnb, she thinks she should go with these applicants. 

I’m a complete novice to Real estate, so I suggested that she does a first, last months rent, and a 25% deposit, plus background check fee (all of which they said they have and will do). I tell her she should get a contract, which my mother tells me she can go to Walmart and get a contract and that will settle that, and my relative left his entire home furnished, so imo that makes more sense to air bnb but I’m not expert  

I’m wondering are there anything to look out for or avoid a migraine with? I suggested Airbnb because that avoids moving all these TVs, beds, and everything so hastily, and it’s basically turn key. She has it made up in her mind these are the right tenants and wants to empty the home asap.

Thanks in advance!

@Brandon White

There is a lot to unpack there.  

First - realize that AirBNB usually makes a lot more money than a long term rental (based on having a good occupancy rate <# of days rented per month>) ... but that all comes with the responsibility of continuous turn-over - where you likely need a cleaning service, etc as a support staff - unless you are going to do that yourself.

Second - When looking at renters - the reason many renters rent is that they DO have poor credit scores.  So in my opinion a credit score isn't the greatest indicator on a renter.  It's definitely an indicator - but unless you are dealing with a white-collar person who just doesn't want to own a home - it's more common than not to see a lower credit scores.

I'm not a huge fan of out of state renters.  You can often miss the bigger picture there.  The bankruptcy tells you something about their finances - that they had issues at least at one point.  I would try to look them both up on the county clerk's office website for the county they report to live in... and maybe a few of the surrounding counties.  You can see felonies, evictions, drug offenses, etc. by doing that.  It gives you perhaps a more thorough view of the type of person they are. 

Wanting to move "immediately" is often code for "We are about to be kicked out / evicted from where we live, so we desperately need somewhere to go."  I would definitely want to know about their future income.  If they are moving out of state - do they already have jobs lined up? What is bringing them to your area?   If they are operating under the "We'll figure that out once we get there" approach - that is a bad sign.  One of the big things we use for qualifying tenants is their income.  We usually want to see 2.5 - 3x their income as compared to the rent.  So if you were renting the unit for $1,500/month - we would look for income of $3,750 to $4,500 at a minimum.  This is pretty much how banks do things too - the idea is that not only do you have to afford your rent - but also your electric, your food, your car, your insurance, your gas, internet, etc.  You also want it to be VERIFIABLE income.  Paystubs and / or double check their offer of employment with their employer.  If they were down at the 2x income level, I would almost consider that disqualifying by OUR standards.  There just isn't enough income left to make someone's world go round.  This later translates to - We decided to pay the electric and phone bill, instead of our rent.  

As you sort of infer - we look at mitigating risk by how much security deposit we require.  The more iffy we are, the more deposit we want.  I can tell you that 3 kids can do a number on a house - especially if you add in a dog as a 'bonus'.  We find our units with kids need far more rehab at turn-over when there are kids involved.  Think crayons and dirt smudges on walls, spills on carpets, etc.  I would say First and last month's rent, plus a matching security deposit that is equal to the rent.  So if you were renting it for $1,500/month - that would be $4,500 to move in.  That puts you in a pretty secure place.  It can be harder for people to come up with though... so it can cut both ways.

As for rental rate - try going to rentometer.com and put in your rental address and see what it tells you it thinks the rent should be.  Just like with appraising a house, you want your rent to be close to the rents of the properties surrounding it - so that you aren't under-renting your property.

As for contracts - you will not find a lease at Walmart I'm betting! - but you can find them online by googling for them (if no better option).  If you are a paid member of Bigger Pockets I think they have landlord forms as well - so that might be an option.  But if nothing else you could start off by googling "your state" and "Lease" or "Residential lease" - something along those lines.  Then read through the results and choose carefully.  Some would say a lawyer should draw them up - which makes sense.  But many people I know take one they found, and modify it to fit their needs.

You mention your mom "paying the bills every month" and that it's a newer house - but you don't mention whether it is financed or not?  If so, given everything you have described - another option might be to cash out of it and take the money and run.  Sure - this is bigger pockets - so if you are interested in being a landlord and such - great - but it doesn't really sound like that interests YOU that much from your "migraine" comment.  So I would ask yourself, who is it that is up for this?  

You could always start off one way, and then go another.  I sort of lean your direction and say, "Why don't you try the AirBNB for a couple of months - see how you like it - and then reassess.  You also need to verify the requirements of the city you live in as to AirBNB and such.  Some cities require permits and have other restrictions, etc.   If the constant turn-over bothers you, but you like the idea of rental income - maybe the long term rental is the way to go.  Or maybe you decide that, "This is not my gig" and you bail out and sell the property.

Hope it helps a little!

Randy