In previous posts I mentioned that I spend a fair amount of time taking calls from new landlords. They want to know about the TenantMagic program www.tenantmagic.net and to discuss others issues they are facing. Renting rooms in private homes has been a trending topic.
Trends in room rentals
It appears that renting out rooms in private homes is becoming more popular. The calls I receive are typically from empty nesters or single women that are looking to supplement their income. Many come from California. The rents are so high there that it is difficult for young professionals (that aren’t in the tech industry in Silicon Valley) to afford even a modest rental.
According to Rent Café https://www.rentcafe.com the average rent in San Francisco is $3609 for a 792 sq. ft. apartment. In the Los Angeles area, rents average $2371 for 786 sq. ft. A 3 -1 income-to-rent ratio is the industry standard. This would require a monthly income of $10,827 in San Francisco and $7113 in Los Angeles.
It is easy to see why there is so much demand for rooms with rents so high. One owner in the Los Angeles area told me that she had 12 people waiting in line at her house the day after she posted the room availability.
Taking precautions when renting a room
This can be a win-win situation for both the property owner and the tenant. There are however, a number of precautions that need to be taken by the property owner. After all, they are having a complete stranger living under the same roof as them.
The first thing the property owner needs to avoid is what the owner who had 12 people waiting in line at her house experienced. As an owner, you really do not want to have a crowd of complete strangers descending upon your property.
The solution is to require each applicant to complete an online application and background screening before meeting with them. The TenantMagic application displays the residency requirements at the beginning of the application. These requirements are Fair Housing-compliant and refer to income, criminal, credit and eviction history.
There is very specific wording that tells the applicant not to apply if they do not meet the requirements. The $35 application fee is charged at the end of the process. The applicant is further told that the fee is non-refundable if they apply and do not meet the stated requirements.
Benefits of screening applicants before meeting them
The screening process culls the unqualified applicants that are “just looking.” It also provides the property owner with a good understanding of the person that they will be meeting with. The TenantMagic criminal report is quite detailed. The eviction report lets the owner know if the applicant has a history of not paying the rent. The credit report identifies lines of credit, balances due and if there history of late payments and collections. All of these factors need to be carefully reviewed before accepting them as a tenant.
No single process is guaranteed to get owners the perfect tenant, but having them go through a thorough application and screening process is critical. This is especially important when they live under the same roof.
Jay Apple is co-founder of TenantMagic, LLC www.tenantmagic.net TenantMagic provides online rental applications and comprehensive screening reports at no cost to landlords and agents. The applicant pays the fee.