Paul

Real Estate Investing

Over the last 3 or 4 months the talk I have been hearing around the water cooler is

I DO ALL THE BACK GROUND CHECKS, I CHECK JOB AND REFERENCES FOR POTENTIAL RENTERS, AND STILL I HAVE TO STRUGGLE TO GET RENT PAYMENTS

Welcome to the world of Property Management. Getting your rent checks every month is a big issue and if someone could just figure out the secret to making that happen, he/she'd be a genius.

So I made a few calls to some of my property management friends and talked to my own property manager. I asked them to go back at least 1 year or more, look at all the evictions and see if there was a common thread.  I've come up with a chart of the results. As you can see, the bigger chunk of  income that is taken up by a rent payment, the less chance you have of getting paid. Basically, if they are paying 1.5 times their weekly salary for a monthly rent your chances are good to get paid. The survey was taken from a total of 236 rental properties. Not a big sample but enough to get you thinking. When I looked at my rentals the chart of payments was right in line with this. So I guess the mortgage people had it right: 31% of income for housing expenses. Too bad they forgot that and now so did we. I've used this information to make a change in how I evaluate applicants. If the rent is more than 1.5 times their weekly income, or more than 31% of their total income, we either turn them down or adjust rent if all other factors are good. Rather have less rent than pay for an eviction, and have 4 months with no rent.