Episode 3: Debunking bad answers to good questions series

Please note that this post is an excerpt of the webinar hosted by our sister company, The Landlord Code, where our co-founders coach DIY landlords how to avoid problem tenants and maximize rental profitability. Get access to more training like this in our (free!) private Facebook group HERE.   

 Q: I have a very nice apartment that a local company which is owned by a foreign entity wants to use for corporate housing, trying to tweak my current lease. Anyone have any insight or tips for doing this? –

A: So we’ve got people who want to rent properties for corporations. So they have one corporate, we have a lease and then that corporation moves tenants in and out of that property. This has happened a couple of times over the course of the year. So it’s not foreign and no pun intended, it’s not foreign to me to tackle this. But what you want to do is you want to make sure that there’s someone on the hook for this. I wouldn’t tweak your lease per se to accommodate them like, hey, this is XYZ Company, and we’re XYZ Inc. And they’re going to rent this property for tenants, which you should have, is the lease, that actually names the company, but also names the tenants that are going to be in the property. And every time they move into somebody new, you have a background check on those people. I know that could preclude them from wanting to work with you. But the best way to protect yourself is to make sure that whoever moves into your property is going to be qualified. And then in addition, you need to have a guarantor, who is a person, not a company, guaranteeing the lease contract. And that person should be someone who has a social security number, or something else that you can you can go back to if there’s some issues.

Now there’s some workarounds around this and you can talk to the company and see what they want to do, but if they’re going to want to work on this, on an annual basis, the first thing that you can do to protect yourself is to:

Number one, you want to take the maximum allowable security deposit, and Number two, talk to them about advanced payment of rent.

So if they want to pay a year in advance, you can do that to make sure that you’re protected, you still want to have the guarantor, you still want to name the tenants, but you can do that. And in the rare scenario that they don’t want, or in the scenario that they don’t want to name the tenant, they just want to have one corporate lease. And they just want to have people move in and out of there, I would recommend taking an advanced payment of at least 12 months. And then you would want to do that year in, year out with them. Every time they want to re-up for an additional year, you’d get advanced payment of rent. And you do an inspection between tenants. That would be the way to mostly protect yourself. Now, I don’t know if that’s going to fly with them, but that’s what I would do. And then I would also have some way of making sure that they let you know who’s moving into their property. So you can create an addendum around the lease. It’s not a very straightforward answer, but if you’re trying to protect yourself getting advanced payment and rent is the best way to do that. And you want to do that year in, year out, and you’d want to ask for that advanced payment 60 days out from the end of your contract, so they can re-up it. And then again, you run your annual inspections. So that’s the way I would do it. If those were my only options, the best option really is not to go down that path, unless the tenants are going to, you know the tenants are gonna be in there for 12 months. So if the corporation is going to be paying for the unit, and the tenants are going to be in there for long-term, then you would have a corporation named as the lessee, the tenants would be the people who are living in the property would be named as the occupants. And you would have applications from the occupants and the company would guarantee the lease. And again, you’d have somebody who’s a physical person guaranteeing that lease contract.