Collision of conscious and business, or, am I getting old and conservative?

Miscellaneous and Personal Stuff I Must Share
1

I own a condo that I’m renting out. The rental market here is incredibly hot, with something like less than a 2% vacancy rate. My current tenants have a lease through August, but they bought a house and I told them I’d let them out of the lease if I get new tenants. Getting new tenants should not be a problem (2% vacancy rate, etc.) That is me being a nice and understanding guy.

The first business decision I’m only a bit uncomfortable with: The current tenants want a move-in date for the new tenants of the first of the month, understandable. I’ve already had a couple of offers of people wanting to set a move-in date of midway through next month, or the start of the following month. The current tenants are not interested in having to pay an extra half or full month of rent. I small part of me feels like I could just let them out at the end of the month, and go half a month with no rent. A bigger part of me says, why should I give near strangers half a month’s rent as a house warming gift?

Like I said, I’m not terribly uncomfortable with that decision. It’s that my liberal nice guy side keeps wanting to offer them a break, and I keep having to censor myself before I offhandedly say something that will cost me hundreds of dollars.

The second decision, which I don’t really like at all: Prospective new tenants, who seem like really nice people, but are a terrible credit risk. One offer I’ve had is from a couple, where one of them has very bad credit, supposedly (I haven’t pulled the report yet) because he defaulted on some loans (the exact details are not terribly important). The other person has (allegedly) excellent credit, but currently does not have the appropriate visa to be able to work here. Supposedly there is also a job lined up, and it is just a matter of waiting for the government to approve the visa.

So, reading that, the obvious answer is “runaway!” but that comes doubly impersonally, I’m just some squiggles on a computer screen, telling you about somebody else. It is much harder to do that when dealing face to face, on a personal level, and I don’t have any kind of corporate policy to hide behind. It’s just me and my wife deciding who to rent to. Policy is whatever we say it is. And these people seem so friendly and sincere (and don’t think for a second it hasn’t occurred to me that con artists often are friendly and sincere).

So this is the liberal dilemma. I’m a big advocate of saying that things like government safety nets are important. Why kick somebody just when they’re down? You lost your job, here is a bit of support and maybe some retraining, to get yourself back on your feet again. I’m perfectly willing to risk my (and everybody elses) tax dollars on gambling that somebody is a good person, just down on their luck. The cases of fraud and exploitation of the system are outweighed by the vast majority of cases where assistance and second chances are beneficial to society as well as the helped individual.

Now, am I willing to risk my savings, which will have to pay the mortgage, taxes, utilities, and lawyers if my tenants don’t pay the rent, need to be evicted, and then leave the country before I get my money? Not without some pretty strong assurances. The compromise I’ve reached with myself is to say I’ll rent to them if they have a cosigner. Somebody who I can hit with court orders if I don’t get paid. Let that person take the risk that these folks are irresponsible or con artists. I don’t get that vibe from them, because if I did I wouldn’t even make this offer.

I would be totally fine with renting to somebody who had bad credit because they lost their job, then got foreclosed on, but now have a good job and are getting back on their feet. But somebody who made a decision to default on some debts, because the other choice was to give up something else that was important to them? I might have made the same decision in the same circumstance, but those kinds of decisions have consequences, and one of them is that it makes it hard to trust you.

That is my long mundane thing. I think I’m making the right decision, even though I’m acting exactly like a big bank, “Bad credit, no job? You need somebody to cosign this loan!” At least I’m not hiking the rent to counter the risk.

2

Well, I can’t speak for your conscience, however it sounds like asking for a co-signer would be a good idea. It would also be a good idea if you were dealing with an applicant with no credit history.

Also, if I may, if only one half of a couple has poor credit they may not be such a bad gamble. Having been once upon a time been the half with the good credit I distinctly recall his credit scores shooting higher than mine in just about a year… Although I can appreciate that the plural data isn’t anticdote.

3

  1. I’d give up half a month rent to get good tenants and let the old tenants out early if they’ve been good to me, cleaned up after themselves, etc.

  2. Given the facts you present, I’d be reluctant to sign the new guys you like without the cosigner. You’re right, let someone who knows them better than you do take the risk they don’t pay.

4

An update! Just a few minutes after posting.

They’ve said no to a cosigner, because that would be “inappropriate.” But, the one with good credit has money! That person has been living on investment income for some time, and has offered to put several months rent down as a deposit.

Yes, chloes1, if it was one good credit and one bad credit person in a partnership, I wouldn’t be bothered. The big thing was that the good credit one doesn’t have a job, and is not allowed to have a job (at the moment).

Now I need to think about this. My initial reaction is that money is money, if I have 3 months rent in an escrow account, my downside is much more limited.

5

Getting 3 months rent is always great if you can do it.

If someone has sufficient wealth to live on investment income they should be able to document that just as easily as someone with a job. Ask for 6-12 months of statements showing the income. Just recently we rented to a man in his 50s who was out of work and wanted to have a job but had and was able to prove he had earned a pension. It was less money than he wanted, hence the job search, but enough money that we’d rent to him if it were salary from some full time job.

6

If someone can pay 3 months at a time, I’d say that might be worth it.

Otherwise it sounds like the least problematic direction to take is to tell the current tenants they will need to keep paying until someone rents the place.

Of course, my brain says “Out of country, dealing with cash…drug money, run away!” But that’s me, growing old and conservative. :stuck_out_tongue:

7

Dafuq? How is one “not allowed to have a job.” Is this a work permit thing for someone outside the US?

8

From the OP:

9

I’m not up on the rules for this kind of stuff now, but could you take the half month’s rent as a loss against taxes?

10

Be careful about taking too much of a “deposit”- there are laws regarding how much you can ask for that, and it could come back to bite you in the ass. Better to have them pay several months’ up front, I would think.

11

Not exactly advocating for deadbeats here, but try to read the credit report critically. I declared bankruptcy a few years back, defaulting on many tens of thousands of dollars in credit card debt, after an extended period of unemployment. I still owe some back taxes, and have unpaid hospital bills.

I have never, ever, failed to pay my rent.

If you look at my credit report, the credit score is middlin’. I have years and years of steady good credit habits, including cards, car payments, and a mortgage, and my score was very high until the catastrophe hit. If your prospective tenant has such a history, and has a single credit-destroying disaster, then he’s probably a pretty good risk. If the credit report reflects years of financial imprudence, on the other hand, you’re not going to be an exception.

I believe in social safety nets. I don’t believe in being the safety net all by myself, and I don’t expect it of my landlord. If I were to break a lease (and I have), I’d expect to pay pro-rated rent until a new tenant was found (and I did). That’s the law, actually. You, in turn, are expected to make due effort to mitigate the damage, and screening tenants for credit is definitely “due.”

12

That’s what I came to say. But as a landlord myself, in a very similar situation to you, I would have to say that it’s better to approach this primarily as a business decision. These people are not your friends, and you shouldn’t feel bad for doing what is best for you and your family.

13

Yea, I’ll second this. One of the arguments for having a social safety net is so I can conduct business without having to worry that the kids of some poor single mother are going to die on the streets if I don’t cut them a break. I don’t really want to spend a lot of time looking deep into the souls of someone I barely know trying to figure out if they’re really in dire straights or just trying to scam me.

I’d rather just pay higher taxes and let some specialized gov’t official that’s paid to figure that kind of stuff out deal with it.

14

Yes, you are acting like a big bank. I hope this gives you some insight.

It’s easy to have a clear conscience when you personally aren’t risking anything.

Denial, the first stage.