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Updated about 3 years ago on . Most recent reply

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Jay Hinrichs
#1 All Forums Contributor
  • Lender
  • Lake Oswego OR Summerlin, NV
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3X income for for C D class rentals is it out of date?

Jay Hinrichs
#1 All Forums Contributor
  • Lender
  • Lake Oswego OR Summerlin, NV
Posted

with this incredible inflation and gas price hikes.. 

Anyone worried that 3X rent for your C and D class tenants that are basically pay check to pay check are going to be able to pay rent

and still buy gas and groceries ?? 

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JLH Capital Partners

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Mike Dymski
#5 Investor Mindset Contributor
  • Investor
  • Greenville, SC
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Mike Dymski
#5 Investor Mindset Contributor
  • Investor
  • Greenville, SC
Replied

Financial obligations (bank payments + rent) as a percentage of disposable income is at a 40-year low.

The average household wealth of the bottom 50% of households is at a historic high...there is no comparable period whatsoever.

If you back out real estate gains, net worth is over 100% higher than pre-pandemic levels for the bottom 50% of households.

Bank deposit balances of the the bottom 50% are $10,000+ and $3,000 above pre-pandemic levels, and kept increasing in 4Q21 after 3 quarters of increasing inflation and lower fiscal support payments.

Nominal wage growth for the lowest income quartile is growing at the same pace as inflation (most important stat on the page).

2020 had large gains in real wage growth; so, even though real wage growth is severely negative for the past year, the 2-year trend is break even.

If real wage growth is -1%, it would take ~6 years to burn off the excess savings of the average bottom 50% of households. Even at -5%, it would take over a year.

Job openings are at all time highs; so, wage growth should continue, particularly for the bottom 50% of households.

The statistics for the lower income consumer look strong.  Time will tell how long that holds up.

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