You may encounter different tenants with different backgrounds and social status. You may be fortunate to have tenant applicants who have experienced renting in the past. Some landlords would prefer this, particularly those with excellent tenant history. A landlord will be more at ease with these renters as they would have the basic knowledge of how it all works.

However, there will be applicants who are first-time renters. They are usually new graduates who are just starting to be independent or they might have been living with a relative before moving out. As a landlord, how will you make sure that they would be able to pay rent if they are not yet employed?

This is where guarantors and cosigners enter the picture. These are the things that you should know when you involve these persons.

• Difference between guarantor and cosigner

A cosigner is usually a parent or relative of a tenant that may compensate if the tenant is unable to pay his rent. This usually applies to the above mentioned newly independent persons. The parents will commonly assist them financially until they can seek employment. The cosigner and the tenant are equally responsible for the rental payment.

A guarantor can be a sibling, grandparent, or even a friend as long as the guarantor is close to the tenant. There are certain qualifications to be a guarantor, such as good credit history or financial stability; being a homeowner is also a plus.

A cosigner can settle a rental payment as soon as the tenant is not able to pay while a guarantor will pay the fees only if all measures to obtain the amount from the tenant are exhausted. A cosigner can also be allowed to live in the property, in theory. However, a guarantor will have not have any right to live there.

• When should you include a cosigner/guarantor?

You cannot just deny an applicant because they are still seeking employment. You might be accused of discrimination as there are certain factors that a landlord can use as a basis for rejection under the Fair Housing Act.

Consider the possibility of enlisting a guarantor or cosigner to somehow assure you that the rent will be paid.

• Pros in using a guarantor or cosigner

If during the tenant screening process, you identify the applicant as not financially stable to keep renting a property, a guarantor or cosigner will be a better option as they will provide the due rent of the tenant.

Also, if they will be accepted as tenants, this will motivate them to stay longer because they are aware that most landlords will prefer those who can make the payment without asking a third-party for the money. Plus, they will not have to go through another screening.

This will also benefit the landlord as the property will not be left vacant and will still generate profit.

• Risks in using a guarantor or cosigner

Using a guarantor also means screening additional people and their backgrounds to make sure that they can compensate for the primary tenant’s failure to pay on their own.

The tenants may not feel as motivated to make the payment if they have a cosigner. This will be a problem for the landlord to have irresponsible tenants. They will tend to rely on their cosigners and guarantors all the time.

Composing a lease agreement should be one of the first things you should do before renting out a property. Even before you make that listing at Padleads, be sure that the policies regarding cosigners and guarantors should be in place because once the property listing is out there, several applicants will contact you and the screening process will begin. Make sure that they are aware that they have options available.