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Posted at 05:30 AM ET, 07/24/2012

For Rent by Owner: Our landlord chooses between two potential renters

The rental of my Dupont Circle apartment reached its final stage with two potential tenants to choose from. While this was far less than the stampede that many may believe landlords expect for their vacant apartments, it was still nothing to sneeze at. I had increased rent by about 7 percent from my last tenants to $2,800 per month, and when rents get so high, one can hardly expect people to be beating down the door to take up residence.  
The entrance to the Dupont Circle building where Douglas Hsiao owns a condo. (Photo by Doug Hsiao)

So out of the two prospective tenants, how did I choose?  The first applicants were female roommates and recent George Washington University graduates, moving from a more expensive apartment in the District. They both had fine references from their last apartment manager and passed credit checks. While both of them were employed, their income was on the borderline of being able to afford the rent based on their combined salaries. Both, however, had parental co-signers. 

When I discussed my ambivalence about parental co-signers in a previous blog post, several readers did not understand how I could possibly object to having high-income parents backing their child’s lease. The parent co-lease has both pros and cons. 

Although the parents’ largesse eliminates the question of whether there is enough income to support the lease, in the event of a landlord-tenant dispute, that income is hard to go after. For example, let’s say your tenant vacates the apartment and simply stops paying rent. 

While it is true that you can legally seek to collect the back rent from the parent, how would one go after that money against a parent who lives in St. Louis or Philadelphia? The cost of trying to collect money from an out-of-state person has to be factored into the value of the parental co-lease.    

Despite my ambivalence about parental co-leases, I can’t argue with the overriding judgment of D.C. law: It’s illegal to discriminate against tenants because of their sources of income, and one has to consider income to be income no matter what the source. And these roommates seemed like fine, responsible tenants and, after two weeks of showings, they were the sole applicants

I asked my manager to hold open the listing for another few days through the weekend. I wanted to give time for the Craigslist advertisement to get some traction, as we had listed on that site somewhat later in the process, but barring any late applications, I would have been happy to select the roommate pair. 

On the Monday of my self-designated deadline, we had another application. This time it was a couple relocating to Washington for a job.  Coincidentally, they were relocating from Denver, my current hometown, and their address was within a mile of my own home in Denver. The job that they were relocating for was in finance and seemed plenty to cover the rent. After passing their credit check they also seemed like very good potential tenants.        

The two applications presented the two typical types of renters that I get for my apartment: the Roommates and the Couple. Roommates have certain built-in advantages. They can often have longer tenancies, because it not often that both roommates want or need to move at the same time; that means one keeps the lease and replaces the other roommate. 

These staggered terms can go on for years, with my going through successive combinations of roommates without having a vacancy and on the same lease. It’s like the Greek philosopher’s paradox of the axe: If, over years of use, you’ve replaced the handle of an axe four times and replaced the head of the axe three times, can you really say it’s the same axe?  

For the landlord, the paradox is a risk too — although the lease is the same, the landlord no longer controls the process of finding the tenant and thus does not have much say in who takes up tenancy. In my experience, I basically get presented one roommate as the replacement and can only say yes or no to the proposed replacement. Sometimes this works out just fine, but I have had some problem tenants from these new roommates.

One might think that that the other tenant archetype — the Couple — is the ideal tenant, since they are usually at the stage of life where they are more stable, responsible and mature. And having dual incomes certainly doesn’t hurt. While this stereotype usually holds true, the drawback is that the tenancy of a couple is, on average, shorter than roommates. This is because for the Couple, living in an apartment is a transitional step toward a different living arrangement. A rental apartment is not part of the long-term plan for the Couple. 

And this seemed true of the couple that was seeking to rent my apartment. As newcomers to the Washington area, I surmised that they would probably look for a house to purchase after they had time to familiarize themselves with the neighborhoods of Washington the surrounding suburbs.  

In fact, when I asked whether they would interested in a two-year lease, they were honest enough to have their agent tell my property manager that they were going to be buying a house soon, so they could not commit to more than one year.  

Knowing from my question that this was a potential concern to me, they sweetened their offer to rent by $100 per month. It was the classic conundrum for me — a choice between the Roommate tenants who would likely be long term renters or the Couple who would only live there one year but at a higher rent.

After weighing all relative merits of each of the tenants and sleeping on it for a night, I chose the couple from Denver. While happy with this decision, I know this ensures that I will be going through this leasing process once again one year from now.  

Read more For Rent by Owner

A Colorado-based lawyer, Douglas Hsiao has rented out his Dupont Circle condo for 18 years. In his occasional column, he details his search for a new tenant.

By Douglas Hsiao  |  05:30 AM ET, 07/24/2012

Tags:  landlord

 
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