I have a rental property in Florida with a terrific model tenant. Her financial situation is about to change ( go back to school, work less hours ) and wants to bring in a roommate to offset the cost of her lost wages to help pay for the lease. How should I approach this situation? Do I need to have any new lease arrangements made in order to protect myself from any potential problems the additional tenant could bring down the road? What happens to the original security deposit in the current tenants name? Any help. Thanks.
This represets a change in the lease agreement. I believe that if you went to http://www.naahq.org/ you could join their association and get the best forms in the business. Once you have the right forms, you could perform an addendum to a lease agreement. The addendum would say something to the effect of:
"all previous lease agreements are rendered null and void with the initiation of this lease agreement"
Of course, the new lease agreement would have ALL TENANTS fill out new applications and lease agreements.
At least one tenant should qualify for your strict, pre written application requirements, which would find the unqualified tenant in breach of contract if the qualified tenant moved out...
I'm pretty sure that you could perform all of these changes, then just say in an additional addendum to the lease agreement "security deposit provided in the lease agreement dated on mm/dd/yyyy will be applied in it's entirety and as payment in full for the security deposit on the new lease agreement dated mm/dd/yyyy." Unless, of course, you would like to increase the amount because the new tenant has a pet or waterbed...whatever, in which case you could just increase the amount that you are asking for your deposit.
This situation highlights the importance of having a clause in the original lease agreement which prevents anyone from moving into the premesis for longer than (usually two weeks), otherwise the tenant is in breach of the original lease agreement.
Joining the National Apartment Association is a small cost when compared to the cost of doing business incorrectly and losing money because you had the deal set up wrong in the first place.....
Absolutely get the roomate on a new lease. This obligates them to pay rent and abide by the lease terms and protects your rights. You may wish to consider increasing the rent and/or security deposit when you redo the paperwork.
It is common for tenants to change roommates on a frequent basis. They bring in new friends, shack-up with the boyfriend/girlfriend of the week, etc. If I’ve got a good tenant, I will allow them to add a friend provided the friend pays our application fee and passes our screening. I usually do not change the lease other than to fill out an addendum allowing another person to live in the property. The original tenant is still the lessee and is completely responsible for the rent. I’ve already got the security deposit.
That way, when the new roommate moves back out (the majority of time in my exprience), the original tenant is still responsible.
Mike
prescreen the new roommate and get his or her signature on a lease. protect yourself. expect the worst and word towards the best. the worst has happened to me a few times so i don’t take anything for granted anymore.
definitely draw up a new lease, and up the security deposit.
I was just thinking the same. Might as well since the tenant probably won’t complain seeing that their roommate will bear the load of the additional rent and reduce overall what they pay out of their own pocket.
Definitely screen the roommate as you would any other applicant and reserve the right to reject them. Definitely have the new roommate sign an addendum.
I will only lease the property to one person or one entity/couple. I make it clear that they are responsible for the rent and no one else. I don’t care if their roommate or whoever can’t come up with their portion, full rent is still due. I’m not going to play any games. I set a limit for the number of people that can live in the house, normally at 2 per bedroom and require the names of everyone who will live in the house and what relation they have with the lessee. If the lessee desires to add a roommate I just require written notification to include the name, social security number and relation. As long the lesse does not have more then that number I really dont care who lives there as long as the rent is on time. Like Mike said “The original tenant is still the lessee and is completely responsible for the rent.” With that being said, why would you require the new roommate to pay an application fee and pass screening? Just for a criminal background check?
As for increasing the rent/security deposit, I don’t find any reason to do so. I was actually discussing this with the family the other day and their arguement was because it would increase the wear and tear on the property. My response was that was what the security deposit was used for. If the security deposit can’t cover the wear and tear it should have been higher in the first place. If I was the tenant, I would be rather upset if the landloard raised the rent because I was getting a roommate. It doesn’t cost the landlord anymore if another person lives there. The exception would be if utilities were included in the rent, which would justify an increase in rent. Just because you can raise the rent, it doesn’t mean you should. Greed can be very dangerous.
If I’m missing something here, I would love to hear it and the explanation. Thanks!
p.s. My family owns two single family homes in Orlando that are rented out.
I don’t make it a habit of allowing more people into the units. As an example, I own 3 family multi’s, and the optimal occupany is two tenants per 2 BR apartment. I find if I rented to say 4 people on the third floor, instead of two, I’ll get more complaints from the second floor about noise upstairs.
For a while, I was replacing my 50 gallon, 10 year hot water tanks every five to seven years. I happen to be chatting with a rep from the company making the tanks about it, and he asked how many people occupy the units. He said the the rule is a 50 gallon tank would statistically last 10 years used by five people. My average ran about 7 to 8. Would you say “more wear and tear”?? I would.
From time to time, I got tenants needing to add a third roommate to pay the expenses, and when I say no, asked if they can pay another $50 to $100. In these cases, I make an exception, provided that I don’t start getting noise complaints.
I also have issues with “South Asian” tenants (mainly Indian and Pakistani). Americans say "You rent to 2 people, and 12 people are going to live there. According to you, there’s no additional wear and tear.
But, even if true, what am I going to explain to the neighborhood about the six extra cars parked there, and people next store has to park a block or two away??
I don’t want to turn these people away, and many are highly educated professionals. I asked one “is it true that I rent to two of you, I’ll wind up with eight or ten”??
The answer I got “quite possible”.
He goes on to explain that South Asians visit relatives months at a time, and if you got his inlaws, parents, sisters all visiting at once, then, it would look like eight or ten people living there.
What I did was to define visiting as “someone staying for a period of two weeks or less”, and anything over requires additional approvals and rent.
Although I find there is actually MORE WEAR AND TEAR when eight to ten people live there all at once, instead of two, I charge additional rent to DISCOURAGE more people visiting for six to eight months at a time. If I don’t do this, then my neighbors nightmares would all come true, and there’s absolutely nothing that could be done during the visits.
In fact, I found later that they may not be all that truthful. His parents wound up visitng for “two years”, and the downstairs tenant complained about “no hot water” when he gets up a 7:00AM to shower to get to work because half a dozen people took showers already.
As it turned out, his parents visited from India, got jobs here illegally, and lived with him, all the while claiming they were visiting. I found all this out when he had a little trouble paying the rent, when his visiting dad got hurt on the job.
I was chatting with a tenant at one of my suburban SFH about the trouble with these tenants. He told me that a landlord across the street from where he used to live didn’t care that his tenants taking in additional roommates, and because this guy didn’t charge any additional, some guy was smart enough to rent the place, and then sublet by the room to make money. He said neighbors wouldn’t have cared if they don’t start parking in front of everybody else’s house. He himself wound up often parking blocks away.
So after the landlord failed to take action, the neighbors complained to the town, and the owner was cited for numerous violations and for running a “rooming house” even though a tenant of his was doing it.
Solution??
Even if more tenants does not make for more wear and tear, charging more rent would give you better control over who lives there and how many. In many of the better suburban neighorhoods, absentee landlords already has a bad name, and looked at with suspicion, and the last thing you want is overcrowding the place, cars parked everywhere, and making the neighbors mad, and filing complaints with the town.
Conclusion.
Better have the tenant get mad at rules that I make to control the rental, than to get the whole neighborhood up in arms. If the tenant doesn’t like the rules, let him move.
With that being said, why would you require the new roommate to pay an application fee and pass screening? Just for a criminal background check?
We certainly want to know the background of everyone that will be living in our rentals. There’s no point screening the original tenant if you’re going to let just anyone move-in with him/her.
Mike
Some more thoughts on why you screen roommates, and also restrict the number of roommates. I generally rent the 2BR’s to 2 roommates, and nowadays, at $1,200/month per unit, I get a certain caliber of tenants.
Once, I got sloppy, didn’t screen, and even allowed a third, then a 4th roomate, the third for another $100.00 which they volunteered, and the 4th at no charge.
Then, I found out the hard way the more roomates share the units, the lower the caliber of the tenants. The third tenant was a part time waiter, the 4th was an unemployed student. Tenants able and willing to pay $600/month are a world different than those barely able to pay $300/month.
After roommtates 1 and 2 moved, roommates 3 and 4 got roomamtes 5 and 6. However, the lower the caliber the tenants, the more fights they got into, and one Xmas, roomate 4 remained, after numbers 3,5 and 6 left.
I had to evict roomate 4, the unemployed student who came in at no additonal rent.
I learned that the key to success in this business is to control who lives there, and make sure it’s a certain caliber of tenant.
So, charging more is not even an issue of “wear and tear”. Being able to pay a little more separates those creditworthy to those that’s not.
Frank, thank you for your thoughtful response. I only have experience with single family homes which is the perspective I was writing about, but I can definitely see where problems could be created in multi-family units. I am hesitant to get involved with multi family units because of the babysitting associated with them that you mentioned. The nice advantage of my 2 single family homes are that they have land, space and privacy.
The water heater is a great example of wear and tear that I had not considered is not generally covered by the security deposit. Thanks for the insight, do you have any more examples?
The south asian, rooming house and 6 roommate examples show the extreme of the question regarding roommates. There is definitely a line that needs to be drawn at some point. I decide to draw the line at 2 per bedroom and have had success with that, but that may not work with multi family units or townhouses with limited space. In the south asian example, I would never allow 8, 10 or 12 people to live in a 3 bedroom unit. In the 6 roommate example, I would have required screening and a new lease to be signed after roommate 1 & 2 moved out. To prevent the rooming house, I require a minimum of 1 person per bedroom. It would just seem a little odd if 1 person wants to rent out a 3 bedroom house.
The credit check and checking pay stubs is enough to prove a tenants credit worthiness and caliber. I think that it is very smart to have a roommate as it helps to save money. I could afford my own apartment but I would choose to have a roommate just to save me money.
As for the neighborhood parking issue, I can see where it would create problems, but it is not my responsibility to manage public parking spaces. Both of my properties have space for 4 cars so I haven’t encountered this problem
I keep our properties in good condition but the people in our neighborhood are always complaining about cosmetic crap (such as the color of my fence). I generally try to maintain good relations with one or two neighbors because they are invaluable assets to have that will watch your property for you for free. In general though, I really don’t care about the neighborhoods opinion of me or whether they like me.
In my lease to protect myself, I state that I reserve the right to raise the rent if the tenant desires to add a roommate, but I rarely ever raise it. I also have the two week visiting clause in my lease. I completely agree with you that the landlord has to remain in control.
In the south asian example, I would never allow 8, 10 or 12 people to live in a 3 bedroom unit. In the 6 roommate example,
You’ve got to be careful with this issue. When our city’s Equal Opportunity Housing Officer spoke at our REIA, she said that refusing to rent to a large family can be considered discrimination because that is traditional in certain ethnic groups. Of course, that would not affect adding a roommate, but it does come into play when you are renting the unit.
Don’t misunderstand what I’m saying, I’m not renting a small SFH to an EXTENDED family and friends gathering of 10 or 12 people either. However, caution is advised. This is one of those issues where you can’t win. If you don’t rent the place, you’re discriminating. If you do rent to 10 or 12 people, then you’re a slumlord and you would certainly be in the spot light if there was a fire or other problem.
Mike
To follow the mandate and spirit of equal housing laws, I allow 2 residents per bedroom plus 1. So a 2 bedroom unit could technically have 5 people, a four bedroom unit could have 9 people, ect. I try to charge enough for cleaning and security to cover all wear and tear. If tenants are making too much noise, they need to be threatened with breach of contract and eviction. This works for keeping boxes on the deck or in the front yard, and for junker cars too...blah blah...the rules of tenancy for your duplex specifically state that "no inoperative cars are allowed in the driveway..."
As for keeping the place from becoming too overtaken by slackers, my financial qualifications must be met by one individual, so rent is $1200.00, and at least one tenant must qualify for my financial qualification, which is FICO > 650 and income three times the monthly rent. If any tenant moves out, all tenants must requalify for application requirements.
Identifying tenants by their ethnicity would put you on the losing side of any discrimination lawsuit.