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Single Family Homes with Multiple Families

Single Family Homes with Multipe Families

Kathy Worley - Thursday, March 29, 2018
With the market change we are seeing home purchases of "non-owner occupy" again, this means new purchases of home to be used as rentals.  Even more prominent is that we are seeing that we have priced the market of rental customers out of the market!  The largest customer base of people renting are adults between the ages of 23 to 35 years old, in most metro areas their typical yearly income is $30K to $40K.  Best practice is their rent should not be more than a third of their income, similar to the FHA rule of purchasing.  An income average of $35K is a monthly income of $2,914 which means  a single person would only be able to afford rent of $972.00 a month and a married couple $1,944.00.   Keep in mind that we are also seeing two vehicle loans with payment of $500 to $700 a month, student loans with monthly payments of $300 to $500 and mandatory insurance payments totaling $500 to $800.  When you do the cost of living math maybe we should change this rule to one fourth of their income for rent.  Young adults that appreciate and respect their credit score know this to be a fact, cost of living has out priced income.  We are experiencing 70% of applications for rental homes requesting to share the home by two and three incomes.  Property management companies are brain storming lease changes needed to accommodate this need to share due to vacancy rates being on the rise.   We want the young adults that appreciate and respect their credit right?  Investment home owners need to start considering if they want higher rents does the location of the home support single family income, if not, does their property management company have leases and processes in screening and on going management that protects their investment for a shared scenario. Most investment home owners want the higher rent they see other people asking on prominent rental sites though don't want their home to be shared.  In this case consider does a month of vacancy to get $2,200 and most likely lowering it after a month make since or does lowering the rent up front to $1,975.00 to obtain a tenant within a week make more sense.  The yearly effect is $2,700 less in rent and possibly avoiding the shared situation resulting in having less impact of wear and tear on the home.
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