With the new standard of tenants spending 30% of their income on rent, as reported in a recent Moody article, investors may be questioning the stability of the residential real estate market. Leading real estate expert, Peter Maragh, turned to Kalena Advisors to validate this data and discuss the implications for investors. Listen to his compelling insights in his interview.
Smart investors will appreciate knowing that landlords best practice typically involves screening for tenants whose total income is at least three times the rent. This strategy not only ensures financial security for the landlord but also helps maintain a profitable and stable residential real estate market. If the ratio were closer to just twice the rent, tenants would likely fall behind on rent, leading to evictions and legal complications – risks that investors want to avoid.
Seattle, an emblematic example of many US metros, has seen a cost of living increase of roughly 11% annually for the past two years. In just this year, we’ve observed property tax rising by 17%, materials and vendor services by 30%, and insurance rates by a whopping 50%. These rising costs are a reality for landlords and are reflected with market pricing. But rather than being a deterrent, it presents an opportunity for savvy investors who can get ahead of these costs that must be inevitably passed onto tenants using Kalena Advisors analytics thus maintaining profitability in the residential real estate sector.
Investors, we value your thoughts and experiences in the residential real estate market. What are your insights? Join the conversation below.