High debt to income and commission based income : ezLandlordForms

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Kellie G

started a topic over 7 years ago

Hi, We use an agent to find new tenants for one of our rentals and for the first time ever our agent is pushing us to accept a tenant that makes us uneasy. Single parent with a kid, decent amount of income is commision based, and has a rental property that isn't quite cash positive. Credit score is good, but even if I give some benefit of the doubt and assume the commissions for the entire year will be in line with what was paid in the first 6 months AND including the rental income, debt to income is 41. Assuming the income is in line with what it was for the two most recent pay stubs AND include rental income, debt to income is 56. Reality is probably somewhere in between those two. Our agent is saying looks like a "solid" tenant. Before I ask what he has been smoking, anyone agree? PS - Stayed at last two addresses (as a tenant) for one year each and has 8k in savings. That 8k wouldn't cover 3 months of rent at our place. Thanks everybody for your insight!

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Stan M

said over 7 years ago

Kellie......I would tell the agent that you wanted to talk with the applicant directly. I would ask her why she's looking to rent from you and renting her place. If she hesitates with her answer, I would say she's thinking of a good answer to give you. If her response is immediate, its probably the truth. Also inquire for the moves. Another good clue would be her payments to loans/store/credit card payments. .........I also have used a RE agency to find my tenants for over 15 yrs. I ask agent for their opinion, but the final decision is mine. Hopefully, agent send you a copy (via email) of application & reports for your review. If agent refuses, say goodbye. Good topic. Keep us updated.

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Douglas S

said over 7 years ago

Ask to look at her last 3 years of tax returns to make sure that her income, even though based on commission, is steady. I would not discredit anyone for living off of commission, the realtor you use lives off of that, so does the salesman you bought your car from. Just because she moved frequently does not mean she is not a good tenant. Maybe the neighborhood wasn't the best, the property/home may not have been maintained well and had issues, or the previous landlord may have been more of a slumlord. In my years of property management, I have learned that income to debt ratio really has nothing to do if they pay their rent. Have their previous landlords filed any judgments? I know personally my assistant rents a home where the rent is 50% of her income and that she has a lower credit score and a higher income to debt ratio, but this lady pays her rent on time every month and maintains a clean house and well-kept yard. Do not always base your choice off of a piece of paper.

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Stan M

said over 7 years ago

Douglas.....I agree with your response. Not sure about debt to income ratio. Can you clarify what you meant by "Do not always base your choice off of a piece of paper"