QUESTIONS: We are curious if and how you use Minimum Income Requirements. 1.) Do you use a ‘Minimum Income Requirement’ for Potential Tenants for Park Owned Homes and/or Lots?2.) If you use a ‘Minimum Income Requirement’, do you state the ‘Minimum Income Requirement’ when advertising the Park Owned Home?3.) If you use a ‘Minimum Income Requirement’, what formula do you use? OUR ANSWERS:1.) Do you use a ‘Minimum Income Requirement’ for Potential Tenants for Park Owned Homes and/or Lots? Yes, for Park Owned Homes2.) If you use a ‘Minimum Income Requirement’, do you state the ‘Minimum Income Requirement’ when advertising the Park Owned Home? Yes, we do say that you ‘must meet a Minimum Income Requirement’. However, we do not state the actual amount. 3.) If you use a ‘Minimum Income Requirement’, what formula do you use? We use the formula as 30% of Gross Yearly Salary / 12 Months = Maximum Amount Of Rent They Can AffordWe state the following in our correspondence:"We do NOT discriminate
based on race, color, national origin, religion, sex, familial status
(including children under the age of 18 living with parents or legal
custodians, pregnant women, and people securing custody of children under the
age of 18), and disability."However, we are now getting people applying to Rent a Mobile Home for $625 Per Month who make only $14,400 Per Year. With our formula this person can only afford $360 Per Month in Rent. Do people really think that they can afford Rent, Food, Cars, Gas, Insurance, Clothes, Childcare on only $14,400 Per Year? I understand that they only make so much money. However, just because they are working does not mean that they need a place of their own.We are just curious of your thoughts.
We screen our applicants thoroughly including credit score, employment or pension, previous landlords etc.We require that they show proof of income with two recent and consecutive pay stubs. We allow up to 40% of income for housing. This includes not only rent but estimated heating and electrical as well.What we do not do is ever tell a applicant how or what we screen for nor do we ever tell a applicant why they are rejected. Discrimination is a very slippery slope and can include income or income source.
Greg, thank you very much!
I should add that we do not have rental homes so housing costs include lot rent, water, heat, hydro and mortgage/house payments. There are also other considerations affordability wise when screening such as age and family status. Younger residents especially those with children tend to be less carful with money than older residents. Although ours is a adult only park if we had a family park I would require a higher income level than we presently do.
Just thinking aloud, when you buy parks with poh do you really consider how much nicer to buy parks with No rentals and receive the same return?? For 30 years we have refrained from parks with poh since we are not in the business of fixing homes but renting spaces. We have further concluded that being on city metered water and sewage is much easier since we are tired of all the new regulations and testing. This past year we have spent around $2,000 on testing almost the same cost of operated the systems.
Carl, do you have ‘Minimum Income Requirements’ for your Lots?Your Potential Tenants who ‘Own’ their own Mobile Home might still have a very large ‘Mortgage’ on their Mobile Home along with your Lot Rent.Do you verify that they are able to pay both their ‘Mobile Home Mortgage’ and their ‘Lot Rent’ with their Current Income?Thanks So Very Much!
Greg–is your 40% out of net or gross income?Probably like Kristin I get a lot of people who don’t have the life experience yet to know how fast the paycheck can vanish. However, I was young once, and looking at the ratios now I’m shocked I got a loan. Those were the days, right? My ratio was more like 50% of gross. I made it. But I wouldn’t trust just everyone else to do the same.
We are in a niche market and since any home that comes up for sale that might stay in park we do a complete inspection to see if the home meets OUR standards plus every year we do an outside visual inspection with a report to the owner. Last year we had 14 homes change hands and all buyers paid cash since my wife does the closing and the transfers since the power company will not transfer to a new party unless we say they are a resident we ok. Our new buyers are middle class buying their second or third home and the rest are retires with a stedy income. On the application they indicate their income and the only area we look carefully at is bankruptcy and IF it was because of health issues we generally give them an ok. The last four parks we have owed the residents are middle class and we have not had an eviction or attorney fees in the last 15 years of 17 years of ownership. We have become very picky in what parks we buy and again NO rentals like what Greg is doing also. When we owed family parks the parade of problems was endless and for the same income we say why own them. There are exceptional parks to buy that you never want to sell since our one with 136 spaces is easier to operate than 4 poh. 25% of our residents pay by the year and really it is a joy to own and operate. Buying parks with poh is not our business model at this time–we want to collect pad space not fix homes.
Greg–is your 40% out of net or gross income?Gross
A few things that need to be added to this discussion:1) Tenants can lose their job the day after you verify their employment, so doing a lot of legwork in that regard is not going to guarantee success. You have to take the leap of faith that they will somehow muddle through by finding some type of employment to pay the bills out of their innate desire not to be homeless. At these income levels, job turnover is normally chronic.2) If you are that strict on your income qualifications, you may soon be in trouble because the average social security check in the U.S. is running only $1,200 per month, and there are 10,000 baby boomers per day retiring into that amount, and we also have plenty of customers on disability that are earning only$800 per month or so. Yet these type of customers are among our best. If you earn $800 per month – and have no bills other than rent, utilities and food – you can still make it on that small an amount. It’s not pretty, but that’s the reality. Bear in mind that around 15% to 20% of the entire U.S. population is at or below the poverty line. And many of those are who we serve in the affordable housing business. When you’re poor, the government’s ratios don’t mean much. This is the same government that says that retirees should expect to pay $250,000 in uninsured medical costs when the average senior citizen has only $70,000 in assets, and who thought that $1,000 per month per family in health insurance was affordable. The truth is that your tenants just make it happen, and somehow get the rent paid despite a tough world out there.3) The most important factor with our tenants is their “FIGHTCO” score, not FICO. Will they fight to pay the rent, despite all the adversity in their lives? Those tenants who make sure that they have a roof over their heads, regardless of what it takes to make it happen, are the kind we seek out, and their FIGHTCO score has nothing to do with income level. I’ve been to evictions court and seen guys with $100,000 per year jobs being evicted as much as $14,000 per year jobs.
Being a landlord is all about risk. The majority of tenants see landlords as being rich and have little to no respect for us. They will pay their hydro, cell phones, buy booze and lottery tickets while at the same time making excuses for not paying rent. Why is that, because they know they can. No pay no stay is all well and good but you still lose money.The best and only time to protect your business is before a applicant becomes a tenant. If as a landlord you chose to rent to those on government assistance or with less than a livable income then the risk is all yours. As a park owner you have two choices continue that practice and take your chances or over time increase your tenant base by raising your standards.I personally do not see my business as a extension of government assistance and am not providing social housing. I provide affordable housing. I do not rent to anyone on social assistance as I view them as not contributing to our society as a responsible citizen. I will always chose those willing to work hard for a paycheck as opposed to those waiting for their next hand out. There are plenty of hard working lower income people that I believe deserve a chance to earn my trust. Choosing a new tenant is always risky but I prefer to approach the process as a educated risk as opposed to a leap of faith. Faith is a belief in something that can not be proven. I simply prefer my proven business practices for my particular community because I know it works. Others may operate a welfare community and there is no problem doing so but it is a different business plan than mine and does involve more faith than I would ever afford a stranger.
Frank, Greg, LoriCooper & Carl, thank you all for your comments!
We greatly appreciate them!
Frank, you are correct:
“1) Tenants can lose their job the day after you verify their employment, so doing a lot of legwork in that regard is not going to guarantee success. You have to take the leap of faith that they will somehow muddle through by finding some type of employment to pay the bills out of their innate desire not to be homeless.”
Greg, you are also correct:
“There are plenty of hard-working lower income people that I believe deserve a chance to earn my trust.”
We have some hard-working, lower income Tenants in our Mobile Home Park that are great.
In fact one set of hard-working, lower income Tenants are roommates that originally moved into one of older, smaller, renovated Mobile Home.
They have since gotten better jobs with promotions. As a result of their better jobs with promotions they have now moved into one of our newer, single-wide Mobile Homes.
Our desire is to provide nice and affordable housing.
Thank you again for your comments!