I typically require income 3 x of the lot rent.I have a prospective tenant who only has small disability benefit ($600/month). The lot rent is $385 and utilities are typically $150. So with their income, I will not approve them. However, they showed me a bank statement with $22,000 balance saying that they recently get a settlement.
They said they will buy the trailer at $6,000 with cash and their son are looking for a job. My wife does not like to rent to them because their income does not quality while my property manager like them as they can pay cash for the trailer. His argument is that if they can not pay the rent, we can always foreclose on their trailer.
Assuming they pass background check (no eviction, no criminal history), do you recommend we approve the tenants?
I’m not sure about the laws in your park’s state - but where mine is I cannot “foreclose” on the trailer of a resident who stops paying rent. I can evict the resident but then I have to give them an opportunity to remove the trailer before taking it through possession. I suppose it is unlikely an evicted resident would have money to take a trailer - but you never know I guess.
If you are really concerned, have them pay an extra month’s rent ahead of time. That way they have more to lose than just the rent. Do talk to your attorney to see if you can take the additional payment.
In situations similar to this, we require a larger security deposit. Maybe 4-5 months worth of security deposit on file might make it possible. However, I wouldn’t rent a lot to this person personally because they are destined to fail. Even at 3x your lot rent, it would be hard to make it when you consider the nominal cost of living expenses. We require $1,900 per month or 3x the rent (whichever is higher) of income in all of our communities regardless of the rent amount.
I wouldn’t rent to them until they showed more income from new jobs. They are living beyond their means, and unless they are the US Government, this isn’t sustainable. You will bleed them dry.
You are doing them a favor by not accepting them into your park.
Keep in mind that in some states this is illegal. You cannot charge more than one month security deposit in some locations. Every state is different so know your state laws!
Without even knowing all the other items, the two questions I have are: 1) Where did this person live before with that kind of budget and without that settlement - there has to be a backstory that can indicate what type of tenants this person is; and 2) What sort of settlement was this and do you need to worry about them being eager to sue people, like you?
I have had many applicants apply that have cash but insufficient income. I reject them all for the simple reason that once the cash is gone they will not be able to pay rent. These types of people that come into cash generally spend it like water in very short order.
When screening I never take into consideration any bank account savings, Monthly income is what pays the bills.
This is exactly what happened to me. Limited income, lots of cash from a settlement, good credit and background. When the money ran out, so did he. Luckily, I got the home off of him and resold it quickly. I have learned my lesson.
When you say 3x rent, do you mean 3x take-home pay or 3x gross? Most of my applicants only know take home.
Income to rent $710/mo trailer incl lot rent no utilities?
3x Gross for just the rent. If the home rents for $710, they need $2,130 per month of gross income in the household. Gross is much easier in my opinion to screen on the front end:
What do you make per hour?
How many hours per week do you work?
Everything about that math is easy for our managers and applicants to figure out. Aside from that, we also usually require pay stubs to verify after their application is conditionally approved.
We have a park where the lot rent is $195 and in that park we won’t approve an applicant to move into a home another resident sells unless that new resident has a $1,900 household income. It’s our policy. Not saying it’s right or wrong but that’s what we do for all of the parks we own.
@CharlesD I would assume this is $1,900 threshold could be met by combining incomes if more than one tenant (Married Couple/Friends/etc) will be renting together?
I’m totally new at this, and looking at my second move in tenant. They have income of 3600/month (before taxes) based on the daughter working, and mom with SS income.
however, the daughter has 17K in debt (and a car she pays 400/month).
She has a credit score of 550, but no evictions and neg criminal history. They will be LTO and need 700/month for home, lot rent, and water/sewer/trash. They will also have to pay gas/electric.
My concern is the 17K debt! SHe has declared bankrupsy once (2011), and there is 845 in collections for DTE, and 6K in collections for medical accounts.
I’m inclined to decline. Comments? She has had her job for several years, and the mom has SS income.