Newlandlord, Home Owner in Greenville, SC

Couple w/ marriage related bankruptcies, but Incomes are good. ***Said they'd short sell their current home or let it go. Should I rent to them?

Asked by Newlandlord, Greenville, SC Thu Jul 21, 2011

They actually want to lease option which I'm leery of. Considering just renting to them until they could get a loan to buy in a few years. Seems like a nice couple just unsure how much to ask for up front. First and last and deposit and pet fee? Rent would be 1150 per month.

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I wouldn't rent to them. A bankruptcy, with a willingness to short sale their home? I agree with Bill: Those are red flags. On top of that, they may be nice . . . or they may be con artists (who often perfect the appearance of niceness and friendliness).

The pet fee is the least of your concerns.

So what should you require IF you wanted to continue to do business with them?

Rental: Minimum of $4,600. That would be first, last, and two additional months. Some states have limits on what can be charged for a security deposit. So you could just make that a 1-month security deposit but charge, first, last, and next-to-last. After all, many landlords charge first, last, and security deposit to tenants with GOOD credit. These folks don't have that.

Lease-option: You don't say what the purchase price of the home would be. You also don't say what rent credits, if any, you'd apply. Those are important to know. At a minimum, 3% of the sales price or $6,000, whichever is higher. Break the numbers down this way: $1,150 for first month's rent. $100 security deposit. The rest is the non-refundable option fee. That way, if you have to kick them out (or even if everything goes well but they decide not to exercise their option), you get to keep the bulk of what they've given you.

And have a lawyer review all the documents.

Hope that helps.
0 votes Thank Flag Link Fri Jul 22, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
More and more former home owners are entering the rental/lease purchase arena because of financial hardship. Letting a home go because it's upside down is one thing....but adding to this a bankruptcy should take financial credibility to a "Red Flag" level.

The fact that you are questioning commiting to them in itself should pave the way for your final decision. Because they appear to be a nice couple won't guarantee you will see your monthly rent.

Good luck with your decision.

0 votes Thank Flag Link Fri Jul 22, 2011
doesn't sound like they are too dependable with their obligations:

do you want to be their next good friend?

Good luck and may God bless
0 votes Thank Flag Link Thu Jul 21, 2011
Hi Newlandlord, You can draw up a lease to own agreement but making provisions for taking back home should they fail to meet the payments. Lease options are just that an option. If they can buy it in a few years then great. however if they still don't qualify for a mortgage then they can either move on or rent it a bit longer. Make sure you include non refundable payments each month for example and extra 200 a month then if they can buy it, then the 200 per month for say 3 yrs goes towards their downpayment. set a price now for the property and include it in the lease option so their is no dispute as to price.

All the best
Dave & Lisa
Web Reference:
0 votes Thank Flag Link Thu Jul 21, 2011
Basically, the transaction that you described could be structured as a lease-option.

Whether or not you should rent to them is a judgment call; you need to determine whether or not they meet your rental criteria.
0 votes Thank Flag Link Thu Jul 21, 2011
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