Tuesday, January 3, 2012
Similarities between renting your home to a friend/local person and a foreigner
I had an interesting conversation with Jody Beal, the Property Manager of Weichert Realtors in Washington, DC to discuss evaluating an out of town rental prospect for one of my listings.
One of the challenges with a potential renter who is moving to the area from out of the country is that if you run a credit check on them, they may have no credit history in the United States. So another step in evaluating whether a rental prospect is a good fit for your home financially is through verifying income. This could be challenging with someone who is not from the country. There may be some skepticism because of internet scams. So, what can you do? One thought is to tell the person you want copies of bank statements from the institutions they bank at as one mechanism to verify income. I also insist that the prospect give you a letter from the local employer he/she is moving to the area for, which verifies the person has a job and states the income. On its face you look at the ratio of the rent to the person's income to see if it the rent you are charging looks attainable for the potential renter and then you contact the employer to actually talk to a person in human resources to verify the employment, as a letter can be falsified.
As far as security deposit and upfront rent, you should either ask for cashier's checks or if you get a regular check, allow enough time to pass that you can see the
potential renter's security deposit check clear and not bounce.
Some people are skeptical of renting their homes out when they can run a credit check or know the credit rating will come up low for a potential renter. So they may not want to rent to someone who is moving to the area from out of the country. But if this is your thinking, then there may be a fair housing issue if you decide to rent your home to a friend or local who has never rented a home before, maybe just got out of college/moved out of family's house and has no credit history. Or the friend/local might have just lost his/her home to a short sale/foreclosure so the credit rating was damaged. But if you would still rent to this person but not rent to someone from out of the country due to credit issues, there maybe a fair housing issue.
If a foreigner finds out that you rented your home to a friend/local who has no credit or bad credit after you turned the foreigner down because he/she had no credit, he/she may have a claim against you. You can't simply say the person is a friend/local so I feel more comfortable. You certainly can't say that to your realtor or he/she has to tell you that might be a fair housing issue and refer you to a property manager, a real estate attorney. One solution for choosing a friend/local to rent your home when this person doesn't have credit history or has bad credit is to get a guarantor to also sign the lease (that the rent is guaranteed by another party of the renter doesn't have the money). But, then you might need to propose to a foreigner that he/she gets a local guarantor to sign the lease. You really need to ask a property manager and real estate attorney these questions.
It is a great market to own an investment property, whether it means purchasing a new investment property or buying a new home and keeping your current residence as an investment property. You just to be familiar with the local laws regarding renting houses and get a realtor who can help you find a renter in the quickest and profitable fashion. I am here to help.
Life is good!
o. 301-718-4100 - ask for adam
Licensed in MD & DC