While I’ve focused
on home sales in the last couple entries, don’t think that I’m only a sales agent. I’m not. I offer complete Property Management services, and also work with tenants trying to find rental properties.
As bad as the sales inventory is, rental inventory is worse. At this moment, there are 605 single family homes (SFHs) for rent on MLS, that are at least 3 bedroom/2 bath, and under $2000 a month. SIX HUNDRED AND FIVE.
That’s an insanely low number. Especially for UP TO $2000 a month! This lack of rental inventory is part of the problem with the shortage of sale properties. With the low interest rates, and (still relatively) low prices of sale properties, coupled with the massive jumps in rental prices (7.5% in PHX 2018 to 2019, according to the Business Journal), many renters are faced with a scenario in which they can’t afford to continue to pay rent, and it’s actually cheaper for them to buy. Seriously, a $1500/month mortgage payment will get you a house that you’d pay $1800 a month in rent for. If you can buy for significantly less, and get more house, than you can renting, why wouldn’t you buy?
But, what if you are stuck in a situation where renting is your only option? With the competition for rentals being even greater than for sales, what can you do?
Many of the steps I suggested for Buyers are going to apply here:
- Plan AHEAD! Since most leases are only for a year, this one is tough, but even if you’ve just moved in, you need to have the countdown clock running in the back of your head. You need to start setting aside money for security deposits, and make sure you always pay your rent on time. Property managers will contact your current landlord for a reference when you apply somewhere else, and any late rent payments could be disastrous in this market.
- Do whatever you can to improve your credit score. Rental History and Credit Score are two of the three things most Property Managers base their decisions on. The better your credit, the better you look to a prospective Landlord. Pay off any collections, liens, or judgements. Pay down credit cards. If you don’t have credit, get a secured credit card, and pay it off every month.
- Establish verifiable income. The third thing most Property Managers look at is gross monthly income. The general rule is that a tenant’s gross monthly income needs to be three times what the rent is. IE: If the rent is $1200/month, you need to be able to show $3600 a month coming in as gross income. If you’re not a W2 employee, this can be tough. Especially with so many people working in the “Gig Economy”, and doing Uber/Lyft, or other fill in jobs that either pay cash, or don’t report. Any money from these kinds of jobs needs to go through your bank account. That way you can show on bank statements that you’ve got deposits in the amount you claim. Letters from employers are also an option, especially if you’re starting a new job. Even if you haven’t actually started the job, you can ask for an “Offer Letter” or “Letter of Intent”, which your employer can write, stating how much you will be paid. A letter from a Supervisor or Manager would be acceptable as well, if you’ve been in the job for a while.
- NETWORK!!! Friends, family, neighbors. Hit them all up, and ask them if they know anyone who has a property to rent. With the shortage on MLS, you need to think outside the box. Be very careful of online searches though. While they can be a great tool, they’re also crawling with scammers. At least once a year there’s a news story about someone who got scammed out of thousands of dollars by a bogus rental scammer. I’ll post another blog about how to take steps not to get taken, later.
- Work together. With competition for rentals fiercest at the lower end of the market, one way to have a better chance of finding a good rental property is to partner up with friends or family. I’m talking about Room Mates. This can be a really tricky situation, but if you can go in with one or two other people, obviously two or three incomes are better than one. Multi-generational housing is an increasing part of the real estate landscape, too, as home prices rise, and the costs of elder and child care skyrockets. So, while no one wants to move back in with Mom and Dad, maybe it’s the smartest move, since it might allow you to rent a large 4 or 5 bedroom home, instead of the 2 bedroom apartment you might be able to swing alone.
Lastly: Really be patient, but do NOT hesitate for a second to jump on a property that looks good. In this market, waiting for your spouse to get off work to look at a property could cost you that property. As much as I hate to say it, you can’t afford to be picky. Trust me, I dislike the current situation as much as you do.
As always, contact me with any questions, comments, or concerns at Erin@HomeSellerErin.com.
