Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Couples or Singles: Who Are the Best Tenants?

By Jordan Wathen - Oct 26, 2013 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Selecting the right tenant for a rental property can be the difference between profits and losses.

Photo by: TheDigitel

Renting your home to someone else isn't an easy decision. Who you choose as a tenant will affect everything from whether or not you're paid on time to how many post-move-out repairs your home needs when the renters leave.

I spoke to one real estate investor about who are the best and worst tenants for a rental home. The results were interesting.

The best tenants
Who would you most like to have rent out your rental property? I posed the question to Sam Dogen of Financial Samurai, a former investment banker and real estate investor who owns five properties, including his live-in homes.

His answer: couples.

"The easiest tenants I've ever had were couples," Dogen said, citing things like shared expenses and fewer people moving in and out of a property.

"My Home Owners Association smartly instituted a $300 "move-in" fee to cover common area damages. There is only one $300 charge for couples and couples with children, even if they don't all move in at the same time. Two single tenants moving in together would also be charged a one-time $300 move-in fee. But if one single tenant moves in even a day after the first single tenant moves in, there will be another $300 charge," he said.

Couples make everything easier. They generally have shared accounts, two incomes, and provided they don't break up, are more than capable of paying the bills. Two roommates, on the other hand, may move in and out independently, risking a nonpayment when only one person covers the full rent, and creating additional costs and wear and tear.

His worst tenants
If couples make the best tenants, who are the worst? You may have guessed it: two single renters.

"The most difficult tenants I've ever had were two single women. Roommates tend to bring two sets of everything: friends, boyfriends, girlfriends, parents, parties, complaints, and so forth," Dogen said.

It's not just a matter of income. Singles can often bring bigger incomes to the table, giving a landlord confidence that rental payments will be made in full and paid on time.

But two individuals come with their own inconveniences for landlords. In one case, Dogen was ready to accept two male Google employees who each make more than $100,000 per year. That is, until he found out "each wanted their parents to live with them for six months at a time. Due to wear and tear and liability reasons, I decided to go with different tenants."

Dogen said, "Having 6-8 people live in your rental while only two are on the lease is a very risky proposition." That is to say that if people aren't on the lease, they have no responsibility for the property, and more importantly, they bring additional risk to the table without any additional reward.

"The main hidden expense that is hard to quantify really is liability," Dogen said. Landlords can be liable for accidents on their property, injuries, and become subject to sizable lawsuits if found liable or negligent in operating their rental business. That expense, though it is rare, isn't cheap.

The bottom line
Renting out a home isn't just dollars and sense, but a little common sense, too. Seeing as a home can cost as much a $1 million just for a bare-bones, lower-quality property in hot markets like San Francisco, good tenant selection is everything. Dogen boiled it down to this: "It's much better to wait for the perfect tenant than rush into a mistake. ... You're counting on a stranger to pay for and take care of a large asset."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.