<p>It is a funny situation. As you may aware, SF Bay Area real estate is red hot and many homes are sold over the asking price. So that fire seems burned into the rental market as well. Here is my situation:</p>
<p>I have a home in a very desirable area and the current renter is moving out of the state. So I put it up for rent. In a week of time, I received three offers. A particular potential renter is very interested in the house and after I denied her request, she came back with $300 more per month over my asking of $4500/mo rent.</p>
<p>The reason why I denied her request is that she has a grade C in her credit report. Further inquiries to the reason found that she had a $5 million dollar business failed two years ago in a chapter 7 bankruptcy , the credit rating must had falling through the roof and she had brought it up to a C grade. Her husband’s business, a high tech company, however, is doing well and he is making around $240k/year, they showed me a W2. They are renting in an area that has even higher rent than the area my house is located. The reason to move is the house they are in is to be demolished for rebuilding.</p>
<p>Because of the bad credit history, they now want to offer me higher rent and pre-pay 8 months of rent in addition to the deposit.</p>
<p>That is not unusual these days. Many who have poor credit are finding that they can still get what they want by paying extra, giving more deposits, offering extra assurances in the lease provisions or whatever it takes. It really isn’t a “funny” situation, as I could see this in many cases. </p>
<p>If the person seems to be fine in terms of other checks, like how they keeping their current home, paying utility,mortgage and other such bills, and the grade in the credit report is because of an isolated issue that has nothing to do with bill paying of necessities, I 'd go with it. It could happen to anybody.</p>
<p>If the additional amount seems to cover the risk associated with the rental, I would take it.</p>
<p>I would do it, but my concern would be that that is high rent for even that income. </p>
<p>how long is the lease? Maybe require a longer lease?</p>
<p>I know calif rental laws can be very tenant-friendly…but can you require 2 months in advance?</p>
<p>mom2ck, they are offering 8 months of rent in advance.</p>
<p>Put in bold in lease that deposits and 8 months prepaid rent are non-refundable and will be forfeited if they blow, and that they are obligated to pay balance of rent due for full lease term too. Not saying you’d be able to collect all of it though.</p>
<p>m2k is right, I could convert one of the 8 months rent to additional deposit so I have reach the limit of two month deposits in CA. The rule in CA on deposits is that if the unit is unfurnished, the maximum is 2 mo. and if the unit is furnished, 3 mo.</p>
<p>From the get go, I have already told the applicant, pre-paid rent is not one of my considerations.</p>
<p>If you think they can manage the rent, I’d rent to them. At the normal rate, perhaps with an extra-large deposit. (I find it hard to take advantage of anyone.)</p>
<p>Perhaps you have not heard my story in prepaid rents.</p>
<p>I rented a house to a tenant, he pre-paid three months of rent for a year without an incident, the deposit was one month. We renewed the lease for another year, but as soon as he renewed the lease, his check start bouncing and stop paying rent. It cost me over $15K to get rid of him and my comp was only his deposit.</p>
<p>Fortunately, he did not destroy the house when he finally moved out.</p>
<p>I usually go with my impressions of the people–did you deny these folks because of the credit report only or was there something else? </p>
<p>There is no assurance that ANYONE will not lose their job, etc. Even if these people have references from prior landlords, etc, the H could lose his job or his business could take a significant downturn in a flash. Even if they are responsible. Then what?</p>
<p>That is why I like to rent to a low risk, not self employeed tenants.</p>
<p>btw, the 8 mo prepaid rent was offered from first day she called. Not after I denied her request.</p>
<p>I just rented to a family with a BK in 2009 but a good score (740). They had rented at their last place for a decade. I think I am swayed because I know more than one person who was hit hard in the recent economic collapse but prior to that were AAA financially–and likely will be again. I’d probably do it if you have a good feeling, but I run more on the vibe. </p>
<p>Does she have non-self employment earnings?</p>
<p>Tempemom</p>
<p>That is my problem, no.</p>
<p>Busdrive–I’m confused. Why did you turn down the offer of prepaid rent/rent over the asking price? Was it because the people are self-employed? Or was it something about the people that bothered you?</p>
<p>My folks had rental properties–not high end like yours. I couldn’t imagine doing something like that. It seemed like every time we were going somewhere one of the renters would call with a problem. Plus, my folks were always getting renters from hell. </p>
<p>Is there any way you can find out from their current landlord what kind of tenant they are?</p>
<p>mg</p>
<p>yes the offer/app came with LOR from the landlord saying they pay on time without a problem and I called to verify with the owner. They have been renting the same house for four years.</p>
<p>I also put in the lease that the tenants has to pay $250 deductible for any repairs each incident, so that I don’t have to pay much attention for small incidents.</p>
<p>Wow $250? I’ve heard of $25…does that apply if it’s “your” problem eg shower head fails etc?</p>
<p>At the time I hand over the keys, I will walk through with the tenants to inspect everything, after that, it is $250 each incident.</p>