Adding a co-signer to a lease is a proposition that understandably makes a lot of landlords nervous. After all, collecting rent can often be an uncomfortable part of the job to begin with, and no landlord wants to have to shake down a third party for the rent when their tenant won’t pay. Still, there are many situations in which property management companies typically allow co-signers, because the advantages far outweigh the potential complications. Let’s back up a little and explain what a lease co-signer is.
What is a co-signer on a lease?
A co-signer on a lease is essentially a person who will be required to pay rent if the tenant fails to do so. Much in the same way that banks and lenders will allow co-signers on a loan, property management companies typically allow a co-signer on a lease when a prospective tenant lacks the required credit score or job security to rent an apartment.
The co-signer, quite literally, co-signs the lease agreement with the tenant. Both are jointly and separately responsible for upholding the terms of the lease, including paying the agreed-upon rent. The co-signer is also responsible for the financial costs of any damages caused by the tenant.
When Should Property Management Companies Allow a Co-Signer on a Lease?
Co-signers can open the door for good tenants who might not otherwise meet a landlord’s requirements. There are many situations where it’s definitely to your advantage to allow co-signers. These are some of the most common reasons why property management companies allow this arrangement:
- It broadens your renter pool. Allowing co-signers opens up a lot of possibilities, and can make your rental property available to a wider range of prospective tenants. That can be an advantage in and of itself, but there are certain situations in which it may be almost a necessity. One of the most common examples is if you own rental property in a college town. In this situation, you’ll be constantly faced with tenants who are young, unemployed, and have little to no credit history. Allowing students to rent your property with a co-signer gives you more opportunities.
- It can give you an advantage. Many landlords choose to allow tenants that other rental property owners might consider “high risk” because it gives them a competitive advantage. Allowing co-signers gives you an edge over landlords who won’t allow them, which can be a major leg up in a competitive market.
- It reduces your risk. A co-signer represents backup. It’s a second line of defense against non-payment of rent. As a landlord, that gives you peace of mind that if for any reason your tenant is unable to pay rent, you know where the money will come from. It’s also worth noting that not every tenant who needs a co-signer is necessarily a “bad” or irresponsible tenant. Even if you never need to lean on a co-signer, you’ll sleep easier knowing they are there.
There are many times when the pros of allowing a co-signer on a lease far outweigh the potential cons. But remember that it should never be a reason to justify renting to an irresponsible tenant.
Even when property management companies choose to allow co-signers, they still thoroughly screen all their tenants. Remember that a co-signer only offers backup protection from the financial risk that comes with a bad tenant; it doesn’t shield you (or your other tenants) from bad tenant behavior.
Contact us today to learn more about the strategies property management companies use to make rental properties more successful. Our team can offer the tools and solutions to take your rental business to the next level.