How do you lease a multifamily apartment to someone that cannot afford it? Is this a difficult task? Where do you start? Are co-signers a good thing?
Why on earth should you consider renting to the financially challenged applicant (or a potential resident of nominal means)? To gain incremental occupancy.
In multifamily we have numerous resident universes (or cohorts); seniors, Gen-X, Gen-Y, workforce, students. Property management companies that focus on student housing long ago determined a method for renting to people without jobs (students); have the parents co-sign. Can this same method work across market-rate multifamily?
For example, what if you have an asset that is perpetually 90% occupied. Try as you may to break this barrier it remains like a Trojan solider- immovable.
What percentage of your leases have co-signers? What is the payment record for these units? If the default rate is less for units that have co-signers then adding occupancy by encouraging co-signing actually strengthens property revenue (in real dollars) AND adds to incremental occupancy.
Most renters are non-students. They range in age from eighteen to eighty (and older). Most have jobs. Some are supported by government assistance programs. In other words our residents are a rainbow of society with every conceivable financial capacity included. That said, what about working adults co-signing for their elderly parents, for example.
Click here to learn about the do's and dont's of leasing to college students from Tenant Screening Blog.
The core issue is credit quality, right? Consider, selectively, marketing to those attempting to "move up" with a message that conveys that this property accepts co-signors. Is this type of active marketing near the top of your list? No. This method is just one more tool when the objective is to incrementally address chronic vacancy or hard-to-rent units.
Click here to learn about co-signer guidance qualifications from Insurent.
While you never want to lower your credit quality standards, adding co-signors to "stretch" the envelope and gain incremental occupancy is one more option to fill units that may otherwise remain non-revenue producing.
Mr. Wilhoit is the author of two books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 - How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets. Multifamily Insight Vol 2 is set for release in 2015.
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About This Blog: Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. www.MultifamilyInsight.com
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