What is a Rent Guarantor? (And When Is The Best Time to Ask For One?) 

Sometimes, when you are looking to find tenants for your investment properties, you may find that some tenants seem nearly perfect, but they are simply one or two factors off from being an ideal fit. 

Instead of turning these potential tenants away based on factors such as high debt ratios, poor credit, or a short credit history, there is something you can do in order to accept these renters – without taking on the associated risk. If you find yourself in this situation, you may want to consider asking for a rent guarantor.

Rent guarantor's can play a very important role in ensuring that your tenants pay on time. In fact, there are even rent guarantor services you can direct potential tenants to in order to ensure they are able to pay rent.

If you would like to learn how to continue to incorporate guarantor's into your strategy and why lenders like when you ask for one, click the button below to book a free strategy call with us.

What is a Rent Guarantor? 

A rent guarantor or lease co-signer is a person who takes on the responsibility of ensuring that the rent is paid on a particular unit on behalf of a tenant in the event that they cannot make rent payments. This person should be someone in a stronger financial position who can reasonably cover the rent in the event of a tenant missing their payments

Most commonly, a rent guarantor is a family member such as a parent or grandparent. However, it can be anyone who is willing to adopt the responsibility, regardless of their relationship with the renter. Sometimes, renters may even go through guarantor companies in order to provide one for their landlords. 

Information You Will Need When Qualifying a Guarantor 

When you are qualifying a potential guarantor in order to ensure they are qualified to cover the rent if a tenant finds themselves missing a payment, there are a few things you will want to check for. These include: 

Identification – When you are qualifying a guarantor (or anyone else you may be doing business with) it is important that you receive proof of identification. This will be required to run a credit check as well as verify that the person you are speaking with is who they say they are. This should include a Social Security Number as well as one other form of government ID such as a driver’s license. 

Contact Information – Since this is going to be the person you need to contact in the event the tenant does not pay their rent, you will need to receive their preferred contact information so that you can reach them for rent collection if the need ever arises. 

Employment Details – In order to ensure that the person you are dealing with is in a strong enough financial position to pay the rent, you will need to receive all relevant employment information. Notably you will want to know how much they make each year. Often rent guarantors are required to have noticeably higher salaries in order to eliminate the risk of non-payment. 

Relevant Banking Details – In order to run a proper credit check on the guarantor, you will need to receive all relevant banking information. Of course, you can streamline this process by having them submit their details directly to the credit agency or asking them to provide an up-to-date credit report themselves. 

When Might You Ask For a Rent Guarantor? 

Typically, you are going to want to ask for a rent guarantor when an otherwise qualified tenant meets any of the following criteria. 

  • No Credit History or Short Credit History
  • Poor Credit Score
  • New Job or Spotty Employment History
  • Lack of References
  • History of Frequent Changes of Address 

While a tenant in any of these positions may be more than capable of making their rent payments alone, asking for a guarantor provides you with extra assurance that your tenant will not miss required payments. Remember, ideally your tenant will never actually need to rely on their guarantor to pay their rent at all. 

Discover Rent To Own With This Step By Step Guide

Invalid Reasons to Ask for a Rent Guarantor 

When considering whether you should ask for a rent guarantor, there are a few reasons that you should be careful not to use when asking a potential renter to provide one. 

Reasons you cannot use when asking for a co-signer include: 

  • Marital status 
  • Age
  • Disability
  • Family Status
  • Social Assistance 

As well, other reasons you cannot use are outlined in the Ontario Human Rights Code under their protected categories against discrimination. 

In order to avoid being accused of utilizing discriminatory practices while asking for a guarantor, make sure you clearly outline your reason for requiring one from a tenant. For example, if a recent 22-year-old university graduate has high debt ratios and has not been at a particular job for very long, it is valid to ask for a guarantor. Meanwhile, you cannot tell the tenant that they need one due to their young age. Alternatively, you cannot demand that someone provides a guarantor for a rental because they are a single parent, but you can if their income does not produce a healthy enough debt ratio when assessing their ability to reliably pay rent. 

What Can You Do If Both a Tenant and Guarantor Cannot Pay? 

If both a tenant and guarantor cannot pay the rent, you are then free to proceed with evicting the tenant in question. In regard to the unpaid rent and any outstanding costs associated with the property such as the costs to repair damages on the property that the tenant would have been liable for, you can begin the process of trying to collect them from the guarantor. 

The two most common options people use is to file a lawsuit for the money owed or to pass on the bill to a collection agency to receive the payments. 

As well, be sure to report this circumstance to a credit agency. This will ensure that the guarantor and tenant have this instance adequately reflected in their credit history – ideally preventing this circumstance from happening again. 

If you would like to learn more about responsible real estate investing, or need assistance with any of your mortgage needs, give us a call at LendCity. Our agents are ready to help you find the best solution for all of your investment financing needs. Our number is 519-960-0370 or you can find us online at LendCity.ca Alternatively, you can click the link below to book a free strategy call with our team.

When Should You Demand A Rent Guarantor, With Scott Dillingham