For Rent by Owner | Foreign service can generate potential tenants

November 27, 2013

(Kathy Redd)

Colorado-based lawyer Douglas Hsiao, who rents out his Dupont Circle condo, writes an occasional column about landlord issues. 

No matter how open they are to all types of tenants, landlords will tell you in an unguarded moment that they have an ideal tenant in mind when renting out an apartment. I certainly do. My “dream tenant” is Christine Lagarde.

Well, not necessarily the managing director of the International Monetary Fund herself but the hundreds if not thousands like her — highly paid foreign nationals assigned to work at the IMF or World Bank headquarters in Washington.

Generally, non-governmental organizations (NGOs)  generate more potential tenants than embassies, which often have dedicated housing services for their diplomats. Because these NGOs are funded by governments all around the world but headquartered in the United States, the top foreign officers and professionals come from other places and cycle through Washington every few years to gain experience and exposure to the international community.

That is how some of the most talented and educated global policymakers, such as Lagarde, come to live in Washington. It is a built-in tenant base of foreign academicians and policy makers, and, to my mind, they are the gold standard of tenants.

Besides their high incomes, what other characteristics do NGO officers have going for them that other potential tenants do not? On top of their incomes, foreign NGO employees may receive housing or cost-of-living subsidies from their employer to make up for the high cost of living in a city like Washington. These generous subsidies make $3,000 per month rents much more palatable when house-hunting.

And these tenancies can be extended indefinitely. We once had a renter (of our house in Chevy Chase) with a one-year stint at the IMF from France who only signed a one-year lease. After the first successful year in her position, she stayed on and eventually remained as a tenant in our house for four years before moving back to France. Her husband was a gardener, and our house never looked so good.

Also because the NGO officers are often traveling for work, the rental apartment is lived in less and wear-and-tear is minimal. Our IMF tenant would even go home to France for months-long stretches and the house would sit empty, all the while they were paying full-time rent.

The non-permanent nature of the NGO officer job assignment discourages homebuying in the United States. While buying property in the U.S. by foreign citizens is certainly possible, things like obtaining a mortgage, establishing U.S. residency, paying U.S. income taxes and other complicating factors make the NGO officer much more likely to prefer renting over owning a home.

That is not to say that renting to foreign NGO officers doesn’t come with some problems. First off, they are hard to do credit checks on, and you really just have to take them at their word that they are good tenants. I would not know how to even start to find a reference from a landlady in Athens for a tenant.

Second, their leases normally come with diplomat clauses, which mean that they can exit their lease without any penalty if they are reassigned back to their home country. This is a common clause that is generally non-negotiable. This gives some added uncertainty as to when the lease will finally end, but in my experience, I have never seen the clause exercised by one of my tenants.

Of course, the biggest problem to the tenancy of an NGO officer is actually being able to find one for your property. Because the cost of their house hunt is subsidized by their employer, typically the NGO officer will use a rental agent to find a home. This makes sense, as the NGO officer is not familiar with all the Washington neighborhoods, and this service will come at no cost. Therefore, being on the multiple listing service is a key to having access to the NGO officer tenant.

But the other secret to finding a renter is to get access to the internal bulletin boards within the NGO where housing is listed for rent. These bulletin boards are not open to posting by the public, so having a friend who is employed at the World Bank or IMF to post a listing for you is indispensable. That’s yet another reason for wanting to get to know Christine Lagarde.

Read Douglas Hsiao’s previous column.

Hsiao can be reached via Twitter at @doughsiao.

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