Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
How many of you have tenants paying $600 and under who aren't living at or below the poverty line? Don't take offense. I'm well aware that $600 can rent some nice units and is enough for a mortgage payment in some parts of the country. I know that plenty of tenants are making choices about how to spend their money.
As a landlord you are presumably looking at income versus rent. A tenant making $1800/mo is making three times a $600 rent, a formula many landlords are happy with. A 4 person family making $21600 is pretty much at or below the federal poverty line level.
So how of you have tenants with $600 rents who aren't living below the poverty line?
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
12y
Originally posted by @Account Closed:
Housing costs are cheaper in the Mid West, but paying 30-50% of your income towards housing doesn't give one that many lifestyle choices. Food, transportation and utilities aren't cheaper. A family making $50K/year and paying a $600 rent has life style choices. Less so for the family living on $21,600.
"Food, transportation and utilities aren't cheaper."
Ah, but they certainly can be!
Unleaded gas in Sacramento is currently $3.80/gal, Springfield MO is $3.23. That spread will get wider in the summer.
PG&E electric rates are currently about 20¢/kWh, Springfield, MO is about 5¢/kWh. Gas is a little harder to compare. PG&E is about $1.30/therm, Springfield MO is $13/month + 12.75¢/therm.
For food I have only anecdotal info. A couple of years ago I bought strawberries in Watsonville, flew home to MO 2 days later and bought strawberries at the grocery store (shipped from Watsonville) for $1/basket less than I paid in CA. I often found the food prices at Walmart in my mother-in-law's city (not far from Sacramento) to be higher than the same food bought at Walmart in MO.
Lower cost of living means much more than just lower housing costs.
Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes
12y
Our 2 bedroom units in Scottsdale AZ rent for around $600. Most of the tenants make closer to 4x or more in income. We do have one tenant, single mom with 3 kids, who made a little over 3x, but she may be getting additional support from the dad, I'm not sure. For some of the tenants, I don't know their income, since we inherited them.
Antelope, CA · Member since 2012 · 23 posts · 1 vote
12y
My Dad used to rent to nothing but people below the poverty line(rents from $200-$450) Had about 10 properties or so. Once they rented, they either stayed for multiple years(3 years+)or they would stay a few months stop paying rent for 3 months+ then when we evict them they made sure to trash the place as "revenge" for us being so unfair and kicking them out. Had TWO tenants that burned our rental houses down over the course of 5 years or so. Poor Dad had 3 heart attacks in 7 years no doubt due to the stress of those properties.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
12y
I don't own any rentals, but I would assume that generally speaking, most of tenants renting space at the sub $600 price point are in the poverty category. I do have a couple friends renting condo's here in scottsdale at that price point who are making $40k - $60k per year though. They chose the low rent units that they live in simply to save more, play more, and not overextend themselves. To some people their home is just where they go to bed every night, to others a home is where they spend the majority of their waking hours.
Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
12y
I'm certain I have two... maybe three. Two single young women, one with a great job, one with an ok job, Both in one-bed apts. A young couple working three jobs between them, small two-bed house.
It's a cold world out there. I can think of several more who pay more than $600 and are near or below the poverty line.
Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
12y
Four of our units are in that price point and only one is not under poverty line. The one is choosing to live in a cheaper area. Other three don't work, relay on state assistance. We don't require 3x income, couldn't rent them if we did.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
The majority of mine are at $650 or less (actually all of them I think). I don't know if they are below the "poverty level" or not. Most of them have jobs and seem to be getting by. They're not hungry or cold or anything. Just saw on Facebook where one of them is looking to buy a 4-wheeler or something for their kid. I live in a low-cost-of-living area.
Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes
12y
I invest in Dayton Ohio in zip 45403 the median household income is around $24,000 and a 3 bedroom property will rent for $700 a month and a 2 bedroom 1 bath cottage will rent for $550-$575. I do not dispute the point about living at , or close to poverty levels and the schools are a problem. Cities across the Mid West have been decimated by the economy even before the real estate bubble burst. In this area Section 8 provides one source of reliable rent and the Air base is another. While the vacancy rate in Dayton is probably above 11% this is deceiving. A large part of the vacancy is accounted for by properties that are in need of repair be rented. My last add for section 8 rental drew over 50 responses in one week. I was surprised to see the level of poverty in these cities and disheartened to see that many prospective tenants have been veterans some who were disabled. There is a huge need to provide housing to our veterans who have not fared very well in this last downturn.
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
12y
Like @Bryan L. my rentals are in a low cost of living area (and no, we're not all below the poverty level). Here a 4 BR house rents for $650. In my experience, people on the left coast don't really comprehend that.
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
One of my duplex apts (2 bedroom) is at $600 a month but that's the lowest one I have. The tenant there makes $1938/month.
Before I bought my own home, I used to live in an apartment that was $645/month for a 2-bedroom. I made well over that but wanted something cheap to save money to invest in real estate and to buy my own home.
Calumet City, IL · Member since 2014 · 312 posts · 49 votes
12y
As @Michele Fischer said, it will probably be hard for me to enforce the 3X rent amount for income. My tenants are generally working lower middle class. My best tenant so far only makes about $8/hour working at target. But pays every month no problem. My rent is $800/ month.
Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
12y
When you look at poverty line, you have to factor in the location. Even though federal government doesn't break it down for continental US (at least I didn't find it)
Someone making $21,600 in California or NY can be considered poor, but someone making that money in Mid West can have a better lifestyle than on either coast.
there is a difference between actual income and reported income. Many of the poverty income tenants generate much more than the tax return.
That is true. One of my tenants told me when they applied for the apartment, they get a government check every month for a relative they take care of and make an additional $1k a month "off the books" My other tenant works at a clothing store that pays him all cash (no pay roll taxes)
As @Michele Fischer said, it will probably be hard for me to enforce the 3X rent amount for income. My tenants are generally working lower middle class. My best tenant so far only makes about $8/hour working at target. But pays every month no problem. My rent is $800/ month.
How many people in the family? If 2 or more, that guy is living below the poverty line. Even if he is a family of one he is most definitely not "working lower middle class" or even "working lower class". Many people living below the federal poverty line are working. Full time minimum wage is poverty level for a lot of families.
When you look at poverty line, you have to factor in the location. Even though federal government doesn't break it down for continental US (at least I didn't find it)
Someone making $21,600 in California or NY can be considered poor, but someone making that money in Mid West can have a better lifestyle than on either coast.
Housing costs are cheaper in the Mid West, but paying 30-50% of your income towards housing doesn't give one that many lifestyle choices. Food, transportation and utilities aren't cheaper. A family making $50K/year and paying a $600 rent has life style choices. Less so for the family living on $21,600.
When you look at poverty line, you have to factor in the location. Even though federal government doesn't break it down for continental US (at least I didn't find it)
Someone making $21,600 in California or NY can be considered poor, but someone making that money in Mid West can have a better lifestyle than on either coast.
Housing costs are cheaper in the Mid West, but paying 30-50% of your income towards housing doesn't give one that many lifestyle choices. Food, transportation and utilities aren't cheaper. A family making $50K/year and paying a $600 rent has life style choices. Less so for the family living on $21,600.
For majority of the people, housing is going to be the biggest expense for them, so having cheaper housing will give a person some lifestyle choices. Some of my tenants drive more expensive cars than I do, and that's a lifestyle choice. They wouldn't be able to do that if their rent was $1,200/month instead of $600/month.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
My BEST properties are the ones going for 600-650 per month. I have others in the 400s (and others that are 100/week with me paying the utilities) I have a PM for most of these so I don't know the nitty-gritty details of the tenant's lives. But they are not hungry or cold. One of mine goes on a beach vacation every year. Another one has a motorcycle (for hobby I think, not transportation) and I remember seeing a boat at the house too. Most all of them have cell phones and cable TV (and probably internet), refrigerators, and most have washers and dryers (even the 100/week units have hook-ups, but some may not have the washers and dryers). Many of them get an earned-income-tax-credit rebate of $3000-$4000 each year when they file their taxes. Even my tenants in my lowest end apartments have enough money for cell phones, cigs, beer, and tats. "Poor" and "poverty" are relative terms. All of my tenants have better living arrangements than my parents did when they were young, and especially so compared to my grandparents. My dad has told me stories of his mother stuffing used newspapers in the cracks of the walls in the house to keep the snow from blowing in - and that was in the South. And I doubt that they had running water or electricity either in his younger years. My maternal grandmother once mentioned eating the skin off the chicken's feet because they had so little. The "working poor" in America today are much better off than most people in the rest of the world. Even the very poorest in America have access to food and shelter and free emergency health care.
Calumet City, IL · Member since 2014 · 312 posts · 49 votes
12y
@Account Closed
I don't know the income of my tenant that works at the clothing store. I inherited him. I know he told me that he work purely on commission. He has worked at this place over 10 years. People around the community know him. His live in girl friend has two kids and they all stay in the apartment together. She does not work. I just Spoke to him yesterday, I asked did he get my text message. He said "no, my phone is off right now" He drives a Lexus that is at least15 years old.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
I started this thread not to discuss what poverty means. Obviously some people are going to live better on limited resources than others. A poverty line has been established by the federal government. You are either providing housing to that group or not. If you or your property manager verified their family size and income, you know whether or not they fall below the federal poverty line.
In particular I was interested lower rent areas, and to know what percentages are below the poverty line.
Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
12y
Great thread. I have tried to stayed away from the lower cost rental properties, but I have been looking at some that rent around this $600 or under range.
I'm still not sure if I'm going to head down this road, returns on these properties can be phenomenal around me but the desirability factor may attract a higher maintenance tenant base.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
@Account Closed - I would say that most all of mine in my lowest-end rentals (the ones where I pay the utilities) would officially be below the poverty level. Then I have some that rent in the 400s, and these probably are too. Then another group that go 600-650. My PM does confirm income and my guess is that this group typically just barely meets the requirements of 3X.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
In my area, one can buy a pretty nice house for $100,000 or so. I flipped one last year that sold for 119,000. It had a two-car garage, in a nice area, 1500 ft^2 with 3-beds and 2-baths, hardwood floors, less than 10 years old, and I had recently rehabbed/refreshed it. Also a nice yard. For a good first-time buyer kind of loan, a buyer with good credit can own this house for less than $700 per month including taxes and insurance escrowed into the payment. So, we don't have a lot of houses in my area that rent for more than this. People who have their stuff together can buy a house cheaper than they can rent one. Sure, there will be some who have short term plans that may rent a house at $1000 per month, but most who can afford $1000 per month also have good enough credit to just buy a house. And $1000 per month will get you a great house in my area. In a nut-shell, someone just barely above the "poverty level" can afford a pretty nice house in my area, assuming that their credit is not shot.
By the way, that person that bought my flip described above - that person works at McDonalds. And not in management I don't think.