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.