The economy, tenants and your thoughts.

[EasyMoney_in_NC]

So its no secret that gas prices are getting out of hand, and apparently out of the comfort zone of the every day person.
I've begun wondering if my tenants are starting to feel the pinch and if I'll experience them not paying the rent on time (as most have thus far) or at all (depending on how bad things get).

I understand that everyone needs a place to live...........but, when in a bind, will they do the right thing (whatever that is for them/us) or will they stop paying figuring that it'll take time to boot them? I would feel like most of my people are good folks, but one never knows in times of extenuating circumstances....?
I've been extremely fortunate over the 10 + years I've been doing rentals, I hope the near future doesn't bring un-tested waters.............I'm adversity allergic

Thoughts, comments, experiences?

 

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[Runum]

I agree with you. In response to the possible problems I have raised my deposits and am being very picky about my tenants. Also, I am checking paycheck stubs of prospective tenants so i can get an idea of their income level. I learned that from Andviv. Still, I am concerned that they are going to run out of money before they run out of month.:cheers:

 

[Bilgefisher]

The shear cost of living has gone up at least 4k-6k per year for the average family. Gas, food, rents, misc. Pay hasn't kept up in many cases and right now we are on the employer side of the pendulum swing as far as benefits go imo.

The question for the seasoned landlords, at what point does it effect how much you can charge on rents and still get decent tenants.

 

[rxcknrxll]

We've experienced a cool period of increasing rents which I attribute to the credit crunch. Many would-be home buyers are renting, and these make great renters. This has made our rentals cash flow very well. Units we got $600 for last year are renting for $825 now. Kiyosaki describes the increase in gas prices a "tax on the poor". I think that's fairly apt. Rich people pay more for gas too, but they can simply afford it. For poor and a lot of middle class, it's literally starting to eat into their grocery money. This will inevitably affect landlords on many fronts. I agree on qualifying tenants as best you can. But that's always the case. This current market is when you find out if you've bought right and if you know how to manage the property well. This, imho, is not the time to START managing property. OP, you will do well because you know your business well at this point. If you've not had "good luck" to this point, tighten it up. People won't diss their landlord if they know they have a good thing where they're at. It's your job to create the perceived value. People have to live somewhere. Last time I checked, unemployment is still low. If you have rental property, you have something people will always want. I think it's a good time to own property.

 

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[PurEnergy]

One of my tenants just broke their lease six months early and moved out. They had a good deal in a nice neighborhood in a nice house but they found something CHEAPER and moved immediately. Obviously they were feeling the crunch. It took me about four years to properly screen tenants and I get tighter every time. I like the pay stub idea.

I may raise the rent on this house slightly from $625 to $650. I like to make it affordable as I thought it was, to reduce turnover. Rents have always been low in my area (North Carolina) and it's hard to get regular rent raises. It's much cheaper here to rent than it is to own. I might consider jacking it up to $675 anticipating more turnover?

I normally do a lease option for two years. I'm wondering if anyone will be able to come up with say two times the monthly rent as option consideration this time, in addition to the first months rent. It could be good timing with the rebate checks so I'll be aiming high and adjusting accordingly.

 

[randallg99]

the irony is that us landlords were absolutely elated once the housing market started going downhill thinking we would finally capitalize on higher rents after a plateau in rates for a few years.

now the multitude of problems is nailing the consumer but the rent/mortgage must always be top priority and this message must be conveyed to the tenants.... but landlords have to be price sensitive when determining price. I also see pockets and gluts of investment property owners that are driving prices downward.

ultimately, most people are not good budgeters. We know this. So, they need to drop the cell phone, drop the extra movie channels, move down to dial up internet, start buying generic, skip the vacation, etc, etc... Food and shelter are always priority and money should always allocated for them instead of the luxuries listed above

nothing irks me more than after visiting deliquent tenants and seeing beautiful electronics and computer systems in their homes yet they bitch and moan about the rent late fees.

I have thought of sending out a newsletter to all of my tenants offering help on budgeting and managing their bills.... I have given this kind of help/advice to many of my employees over the years and it's proven helpful (one of them has saved over 20k in the past 5 years because of my talks - not exactly fast lane, but the light bulb definitely clicked on for the 40k/year worker)


hmmm... I'll send out a little letter to everyone. I'll clip some articles online about budgeting and prioritizing their bills...

 

[tbsells]

I had some problems this past winter that I've never had before. It was mostly related to fuel oil heating. Fuel oil hit $4 last winter before this most recent round of gas price hikes. A typical 150 gallon fill is $600 plus delivery. That is equal to most of my rents. I had several late payments and one tenant moved because of it. I have 4 houses with fuel oil heat and will avoid purchasing any more unless the deal is really sweet.

I'm thinking this gas problem may affect most of my tenants in a similar fashion. These are blue collar types who have lost all their overtime, are driving a decent distance to work, and are paying more for everything. Do the math. I don't think it looks good for my tenants which will eventually create new problems for me.

 

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[rxcknrxll]

the irony is that us landlords were absolutely elated once the housing market started going downhill thinking we would finally capitalize on higher rents after a plateau in rates for a few years.

now the multitude of problems is nailing the consumer but the rent/mortgage must always be top priority and this message must be conveyed to the tenants.... but landlords have to be price sensitive when determining price. I also see pockets and gluts of investment property owners that are driving prices downward.

ultimately, most people are not good budgeters. We know this. So, they need to drop the cell phone, drop the extra movie channels, move down to dial up internet, start buying generic, skip the vacation, etc, etc... Food and shelter are always priority and money should always allocated for them instead of the luxuries listed above

nothing irks me more than after visiting deliquent tenants and seeing beautiful electronics and computer systems in their homes yet they bitch and moan about the rent late fees.

I have thought of sending out a newsletter to all of my tenants offering help on budgeting and managing their bills.... I have given this kind of help/advice to many of my employees over the years and it's proven helpful (one of them has saved over 20k in the past 5 years because of my talks - not exactly fast lane, but the light bulb definitely clicked on for the 40k/year worker)


hmmm... I'll send out a little letter to everyone. I'll clip some articles online about budgeting and prioritizing their bills...

randall i like your idea of a newsletter. one idea i've toyed around with is including internet and voip phone service and wrapping it into rents. i wouldn't do it as a profit center necessarily but as a way of differentiating. plus, with multiple accounts, possibly negotiate a discount with the service provider? it would also force a lower cost solution for phone service onto the tenant, leaving that much more leeway in the tenant's budget. just an idea.

 

[EasyMoney_in_NC]

nothing irks me more than after visiting deliquent tenants and seeing beautiful electronics and computer systems in their homes yet they bitch and moan about the rent late fees.

Thats hilarious and sad all at the same time. The ones I have the most problems with, have plasma TV's and video game consoles and all sorts of crap they waste money on, but I have to chase them to get paid.......? Whats that all about?

 

[andviv]

Those toys are paid with credit cards, so that's why they can "afford" them.

In regards to the OP, I think this is the perfect time to go buying properties closer to the employment centers. If your property is located in an area where people have short commutes (or, even better, public transportation) then you are in a better situation than most.

I don't like the idea of "helping" with budgeting or any other type of advising role for two reasons:

1. I don't want them to see me as a "friend trying to help". I'm the landlord, I provide you housing in exchange for your rent. If paying for housing is not your priority #1 then my priority #1 can't be providing you for housing.
2. If I help them to budget and they screw it up then it is now my fault and that is why they can't pay the rent anymore. They are creative and can come up with great excuses, I don't want to give them one more.

 

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[EasyMoney_in_NC]

Couldn't agree more ^^^^^^^^^^^

 

[randallg99]

....

I don't like the idea of "helping" with budgeting or any other type of advising role for two reasons:

1. I don't want them to see me as a "friend trying to help". I'm the landlord, I provide you housing in exchange for your rent. If paying for housing is not your priority #1 then my priority #1 can't be providing you for housing....

...

good point. rep***
interesting the gal in my office had the same initial impression that you did. Minus the obscenities, she asked why I should take the first step if they are potentially facing trouble if they spend their money frivolously...

has anyone here read the Tipping Point?