We have an investment property in Arizona and we have an applicant. Looks like he may be a student and also working part time. He applied for renting our house. The property manager brought this to our attention that he has his parent as guarantor who has a very good credit history. The student also has fairly ok credit score but I believe due to lack of rental history and also not enough salary, he is getting the guarantor. The guarantor (parent) is in a different state.
My question is whether, do you see any red flags? Risks of renting to student?
My experience in this area is limited, but I have seen similar situations so here goes.
My concern is that the guarantor is in a different state. That would complicate the ability to sue them should your renter fail to pay. I was peripherally involved in a similar situation years ago, and the problem was serving them, which court system was appropriate, etc. It was complicated and the person owed the money eventually decided it was going to cost him more money to get a judgment than he would receive in the judgment so he dropped it.
Others probably have more recent and a closer match experience.
Depending on the state law, have you considered asking for a larger deposit and more up front payment. maybe first and last month and 1.5 month deposit?
1. It isn’t hard to serve a random upper-middle American unless they are on some survivalist compound or far outside of even a small city. Process servers cost $40-150, with $70 about average. They are one of the few things that are cheaper in big cities. I won’t pay more than $50 in LA/SF, but Iowa or something $100 would be fine. You get back the cost of service when you win the case because it is a “taxable cost.”
2. Signing a contract relating to an Arizona rental is consenting to Arizona’s courts if there’s a dispute. If they are aware you’re in California, there’s a case you can just do it in San Diego small claims court, but it would be safer if you want to do that to explicitly put “guarantor consents to the jurisdiction of both California and Arizona courts” into the contract. The California court though can’t evict anyone, but can award you a judgment.
3. Good credit history is a good overall sign. For additional security, require the first and last month be paid in advance, in addition to the regular security deposit.
Team – thanks for the points! Very helpful. I have declined the applicant with the reason being the Guarantor is not in AZ. Looks bit more complicated than I want.
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