Guarantor or Bust

I'd like to know if there is an alternative method of getting a guarantor for an apartment lease if one does not have one readily available. It was suggested that perhaps some sort of loan type relationship with a bank could handle this scenario.Is such a thing even possible in NYC? Logistically I would deem no, but frankly I have no idea. If anyone even has an idea as to how to approach this matter it'd be a great help to me.

Many landlords require renters to have a guarantor if they do not meet certain income requirements, are new to the area, or are newly employed. The standard rule of thumb is that landlords want to see tenants who earn approximately 40 times the monthly rent. For example, if the monthly rent on an apartment is $1600/month and you are the sole occupant, you would be expected to earn a salary of $64,000 a year. If your salary fell below that, most landlords would require a guarantor. The guarantor is someone who will provide the rent to the landlord in the event that you are unable to pay. Many landlords require a guarantor within the tri-state area, although some will accept one within the U.S. Some landlords will require that the guarantor own property or meet certain income requirements.

We asked a friend of ours who is a lawyer if he had ever heard of a bank being a guarantor for a renter. His response was: "This kind of thing probably happens frequently in commercial situations, but I can't imagine it's common in residences. If I were renting a residential apartment and a prospective tenant had a bank's guarantee, I would want to investigate whether the bank's agreement is legit. Why would a bank enter into such a risky venture with seemingly nothing to gain? It's an odd business proposition for a bank executive to justify to superiors, no?"

So what do you do if you don't earn the required amount and don't have parents who live in the tri-state area? You have several options. According to this FAQ on a no-fee rental site, "Relatives, employers, or associates who have excellent financial statements, excellent credit and agree to pay the rent if you cannot" can all be guarantors. If you can't get a relative (even an out-of-state one) or very trusting friend to be your guarantor (which we really wouldn't recommend anyway), you may have to find a more flexible landlord - such as the landlord in an owner-occupied unit with one apartment rental (which can be found in many neighborhoods in the outer boroughs) rather than the landlord in a big apartment complex. You can also try finding a roomate with a guarantor, or find a sublet in an apartment with a roommate who's already on the lease.

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By Janine Annett in Miscellaneous on December 2, 2004 9:30 AM

Comments [rss]

della

apparently typepad doesn like "less than" signs. anyway...

I'm earning $10k/yr, but have had no problems using a guarantor from the Midwest who earns $60k. I have no relatives in the Northeast and no rich relatives, but it hasn't been a problem even in the Village and UES. So my advice to the guy is to find the best guarantors possible, get all the paper work ready ahead of time, and go to town finding apartments. Oh, and don't waste extra cash on brokers obviously, use that for a second month's security deposit, which is usually enough to convince a skeptical landlord.

della

If you have good credit and they like you, their rules don't really hold even in Manhattan. I am a student (earning

Ron

I was the original poster for this article.

In reponse to several of the comments here:

Roomates are able to pool their salaries together (I've done it in the past, though I still needed a guarantor), dependent solely on the policies of the Owner (whether it be realtor, owner, etc.)

If you want to live in manhattan and you don't make enough, your only chance will be a roomate(s). The less you make, the longer your commute will be. It's all about getting lucky.

And as a follow up to my own situation -- I got lucky and found a landlord who was cool about the whole guarantor situation; I've been at my job 5 years, I've lived in and around NYC since 98... and the dude moving out who had the lease already had a roomate. I then took sole responsibility for the $1700 apt lease and I subsidize the rent with the already-there roomate.

Tom

In response to ACE:

You bring up a very good point: For some people, financial limitations make securing an apartment in manhattan impossible. The only solution in that case is to try an outer borough, or a less expensive part of upper manhattan (i remember when I used to be able to tell people to try the east village and lower east side!) However, some people do make the financial requirements and still can't get approved because they are new hires (haven't started their $200k a year job yet, but have their offer letter) or sometimes can't get an appartment because it's their first time living in New York. Some landlords want you to have lived in the city for at least 3 years. So, my point was that if you have money, but still need a guarantor (for whatever reason) sometimes paying rent up front and extra security is the difference between securing an apartment or losing it.

ACE

Tom:

So your answer to the problem is pay the full year up front? Maybe for rich immigrants, sure.

On a $1600 a month apartment, that's a lump-sum payment of $19,200.

If someone living here now has an extra twenty grand in the bank, they don't need a Guarantor. They need an apartment they can afford on their income.

And virtually no landlord will allow someone to sign a rent-stabilized lease without meeting income requirements, because by law they have to let you re-up when the lease is over.

Again: why is the solution not "do not enter into financial obligations you may not be able to pay". I'm not a landlord, but I don't want to spend 60-70% of my income on rent, either. If your parents can't be your Guarantor, they can't afford your rent either.

And isn't an arrangement with a bank where they give you money towards housing usually called a "mortgage"?

As far as a roomate, nope that won't work either. Only MARRIED people usually can have their income pooled. The thinking is, what happens if you guys have a fight and one of you moves out? You have no legal ties to each other, which means that the landlord can't get the money from the vanished party.

Tom

If you do not have a guarantor and do not meet the income requirements, many landlords will allow you to pay anywhere between 6-12 months up front and put a few extra months into security deposit. I used to be a broker and we had to do this with many of our international clients who have no US credit established and have no american guarantors.

judas

Find a roommate. If you jointly sign a lease with a roommate, many landlords allow you to pool your salaries together, which halves the required income per person, which is much more feasible.

Or--

Just fake your proof-of-income and bank statement by finding a Photoshop-savvy artist to help you. They can call your employer but they are legally not allowed to ask how much you make. Also, landlords cannot call a bank and ask them how much you have in the account. It's all based on paperwork, which can be altered in Photoshop.

I personally did this and it worked like a charm. The landlord still gets his money every month, right?

christina

I was required to have a guarantor in Queens, so it's not entirely true that you can live anywhere you want outside of Manhattan guarantor-free.

ACE

My favorite part of this article was when you didn't even acknowledge the possiblilty that the renter's friends or relatives might not have enough income to qualify as a guarantor.

Usually it's a 90x monthly rent requirement, so for a $1600/month apartment they would have to earn......$144,000 per year. And live in NY, NJ, or CT. That's a lot of money for most people.

Not everyone can have mommy or daddy pay their rent for them. They are called "working class people". Their solution to this conundrum is to rent a cheaper apartment. If you do not earn 40x the monthly rent, you can't afford the apartment.

Let me demonstrate:

Income $40,000
Which means...

Monthly Gross is... $3333
Monthly Net is (take 1/3 away in taxes)... $2200
A $1,000 rent is 45% of that, so you'd be spending half your income on Rent. Which is normal for NYC. If you are spending more than 50% of your net income on housing, it's time to move.

BTW, only Manhattan or Trendy Brooklyn Zone landlords want a Guarantor. I assure you you can live in Bay Ridge or Maspeth Guarantor-free. In fact, you can most likely live everywhere in NYC except Manhattan below 96th Street Guarantor-free.