Income is Three Times Rent
We want to make sure that the income is three times the monthly rent. That is something we rarely if ever violate. I would recommend you develop something similar to that whatever it is. It could be 3-1/2 and it could even be 4. Whatever number that is, make sure either there is no violation of that rule or certainly that you have a justification for it. Maybe they have a co-signer, a parent or something. There are some exceptions.
Typically if the property is $1,000 a month, we would expect that person to be making $3,000 a month. I would not violate that too much. What will happen is we have found over the years that if somebody has a problem – a medical issue or a car break down with a $1,000 bill – if it’s three times they can kind of live through it. They can recover. If you start putting people in there at 2 to 2-1/2 times income and they have some sort of crisis in their life, they never get caught up again.
You know what happens is people have to fill their gas tanks, they have to have a car to get to work, they have to have a cell phone. They’ve got to have heat and water, and buy food. What’s the one thing in their lives that they can put off, that you can’t just go in 먹튀폴리스there and remove? That’s rent. That’s the thing that gets pushed. Be careful and use that multiplier of three times.
Check their references, particularly the landlords. Also check the personal references. Call them. I know they’re putting their friends, their mother or their co-workers. You can still get a sense, a feel for it, believe me. Call them.
Pull credit scores. Make sure you belong to a credit agency. There are many out there. It costs us $18 to pull credit. Do Social Security verifications, criminal backgrounds and eviction backgrounds, and it’s $18 per report. It’s the best $18 you’ll ever spend.
Credit scores will be anywhere from 550 at the low end, and if they’re below 550 you’ve got to think long and hard about it. It indicates that they’re having a problem paying their bills. Anything over 650 or 700 is a pretty good credit score. If they’re over 700 basically it’s a slam dunk approval.
In this day and age and what’s going on in this economy right now, the credit scores are unbelievably low. In these last two weeks I’ve never seen anything like it. We’ve had 10 applicants come in with credit scores under 425. I didn’t even know you could get down that low. We’re seeing credit scores of 417, 425, and 416. These are people that don’t pay their bills. They’re not going to pay your bill. Think long and hard before you accept them.
We also require first, last and security – three months rent. Here again I would very rarely, if ever, violate that. People that have three month’s rent saved up and can pay you that three months rent when they move in are organized and plan their life enough that they can save some money.
People that can barely cobble together two month’s rent sometimes live hand to mouth. You kind of want to avoid those types of people. In our opinion, three months rent separates the weak from the strong. That’s one of the ways that you can do it.
If they can only come up with two months and they can pay you the third month over the first few months, that’s up to you guys. My standard opening position is three months rent. If you want something else you have to justify it and tell me why.
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