New House Renting Questions

May 12, 2006 6:35 PM

I'm looking at renting a house with two or three friends. We're all young (early 20s) and I'm the only one that really has much of a credit history. What do I need to know about working this out?

I am looking at places in Arizona in the Chandler, Tempe, Gilbert, Ahwatukee, and (possibly) Queen Creek markets. I'm looking in the $1,300-1,800/mo range and am hoping to get at least a 3 bedroom, 3 bath, 3 car garage house with a pool. Preferably 2 story.

I initially planned to just rent the house on my own and then just rent a couple of rooms out to my friends for $450/mo. However, I don't want to have to claim that as income and I'm worried if I do that I will need to do so. Can I avoid this as simply as having their name on the lease or do I need to worry about having them included in the application too? (I'm concerned about their credit)

Also, what is looked at when determining whether you qualify to rent a property at x rate? For example... how much money would you need to make to qualify to rent a house for $1,500/mo? I can afford about $1,300/mo on my own if I live somewhat frugally, but that is a large percent of my income.

Any information you can provide would be greatly appreciated!

posted by Bondrake to home & garden (11 comments total)

I'm not familiar with the Arizona rental market, but I can tell you that I've lived five different shared rental places in Oregon in the last five years -- countless friends have lived in others -- and very little actual background checking is done. I've rented houses as well as apartments, and rented direct from small-time folks who own a single property as well as major property management companies.

Some places have very explicit rules about not allowing long-term guests without adding them to the lease, and many places don't allow subletters.

Chances are, you'd be better off all being on the lease. The landlord will be most interested in knowing that:

1- between you all, the total income is enough to pay rent and continue to live (this will be a personal judgment, not based on any formula).

2. none of you has screwed over a past landlord. References of past landlords will be requested, but it's OK if you've only ever lived with parents or in dorms before. Just say so.

3. You're decent, OK people. May just decide after talking to you, may check your office to make sure you really have a job, may call a personal reference.
posted by croutonsupafreak at 7:33 PM on May 12, 2006

Put your friends on the lease.
posted by radioamy at 10:41 PM on May 12, 2006

Second radioamy.

You don't want to be that person left holding the soggy biscuit.

You're all adults now, share the responsibility. Yes, it may hurt your collective ability to secure a "good" place, but it's also a (mild) buffer against losing friends/getting burned.
posted by porpoise at 12:20 AM on May 13, 2006

If it's all under you name, and your roommates can't pay the bills, you're the one who gets takes the rap. To add further insult to injury, if one of your friends suddenly finds themselves in a situation where they can't pay the rent, you'll be seen as the asshole when you have to hound them for their share of rent money. I've seen it happen too many times, and it's not worth the hassle.
posted by Civil_Disobedient at 2:26 AM on May 13, 2006

Just another perspective: from my years working in property management, my understanding is different from what's suggested above. If you and your friends are all on the lease, and they decide to bail, sure, it'll destroy their credit/rental history/etc, but it'll destroy yours too unless you pay the entire amount due. My experience has been that in a roommate situation where three people are all on the lease, it's not that one person is each responsible for one-third of the monies due -- all persons are responsible to ensure the entire amount is paid. So until any financial obligations are fully satisfied, it won't matter if you were conscientious and paid your portion, if the others haven't done the same. I saw countless instances of roommates having a fight and one taking off, unmarried couples breaking up, friends having a falling out, etc. and the more responsible/stable person was always left holding the bag.

After seeing that I always said I'd never share a lease with someone. You might want to look into putting the lease in your name only (if you qualify), and then working out some kind of written agreement with your roommates so they are financially liable to you for their part of the rent/utilities.
posted by justonegirl at 6:00 AM on May 13, 2006

Oh, and with regards to how you qualify for a particular rental amount -- most property management companies I know, and a good number of "professional" private landlords, use a formula. It roughly translates as no more than 30 percent of your income should be spent on rent. This may vary slightly depending on your debt-to-income ratio (i.e. if you are obligated to other creditors for a high dollar amount each month, the housing allowance would be lower). If you and your friends decide to all be on the lease together, they wil total your incomes and compare that collective amount against the rent. I actually think this is how a lot of people get into unstable roommate situations -- wanting to get into a particular place that's beyond their means, so including others to qualify.
posted by justonegirl at 6:03 AM on May 13, 2006

Well, as I said, with my month to month income I would be able to afford most if not all of the rent on my own were something to happen with any of the roommates. That does not account for my savings either. I want to be the the one primarily responsible for the house. They're honest, reasonable, responsible people though, so I am not particularly concerned.

As justonegirl mentioned, I was under the impression there is a formula similar to the maximum mortgage payment calculation for homebuyers (28% of your income or 36% - other loan payments, whichever is lower).

I'm sure I can work this out easily with an owner landlord, but a large portion of the available properties here are managed by property management firms and I'm just hoping for more details on the process, as I have been renting a place informally with an owner landlord the last few years.

I don't have a problem with having my friends' names on the lease as tenants, and they're fully aware that they'll have to pay the rent or be kicked out so I can get another roommate. However, as I mentioned, I'm concerned over the qualification process and what is looked at when determining eligibility... If income is the only consideration we could all pool together on the application, horribly overextend ouselves, and get a huge 8 bedroom house with three levels (and likely lose it the first time one of us goes without a job for a couple of months).

I just want to not have to pay tax on the money I collect from my friends for rent and also be sure we qualify for the kind of house we want. It sounds like I will need to have all of their names on the lease as occupants and have one of them (with practically no credit history) included in the application too to meet the income requirements. Is this correct or am I misguided here?
posted by Bondrake at 10:40 AM on May 13, 2006

Also set up a joint bank account that can only be accessed with three signatures or via pre-authorized debit. Have the cheques/direct deposit come from this account. Make sure the account is not at your own bank or they may debit your account to cover any shortfall on the part of your roommates.
posted by acoutu at 12:52 PM on May 13, 2006

You guys are making this way complicated: I've had countless roommates and we just did it all informally. At one place we were all responsible for a different bill and we had a rule that if you paid late you had to put that bill in your name from then on and be responsible for collecting from the other roommates. One of my roommates ended up with basically everything in her name because she was chronically forgetful If anyone got behind on rent they would have been booted within the month and replaced but in 10 years of sharing houses I have never had this happen.
posted by fshgrl at 12:59 PM on May 13, 2006

Try to get a realtor that will work to find you a house (preferably one that you don't have to pay for - such as apartment locaters), and explain the situation. I recently did the same thing - rented a house with four roommates, and I was the only one with a fulltime job. We searched for a month on our own without success. Everytime we called on a house we saw in the paper, they lost interest once they heard we were a bunch of college kids. I finally got a realtor who did the negotiations with the leasor, and we had no trouble after that. We actually ended up with a house that we had visited before on our own but got rebuffed, so it definitely made a difference.

Also, unless one of them has awful credit rather than none, put their names on the lease. Everyone has responsibility (so they're not going to sneak off and leave you in the lurch) plus they're adding to their credit history.
posted by coffeespoons at 2:12 PM on May 13, 2006

Put everyone on the lease. If your circumstances change, or you just don't want to live with those people anymore, you don't want to leave them out in the cold, which can happen if you're the only named lessor. You can be the public face of the house, if that makes the most sense, but make everyone responsible. Like coffeespoons said, if someone has awful credit, you might have to bend that a little, but it's better if you can get everyone on. It's hard to go on to rent somewhere else when you have a big gap in your rental history, so don't do that to your roommates.

I have found that house-leasing is not as intimidating as it seems. Be an organized entity as far as the property management is concerned, and that's all you need as long as you can provide income information that falls in that 30% rent category.
posted by Lyn Never at 4:13 PM on May 13, 2006