Do people rent (or only buy) nice big homes?

[Yoni Osteen]

Hi all,

So, I'm looking at buying a property in Deltona (suburban Central Florida), and the rental rate of the previous tenant was $1650, which makes sense for the property. It is a nice spacious 4 bedroom. 

My concern though is that many people wouldn't be able to afford it (this is high-rent for Deltona), and if you are a family who can afford it - wouldn't you just buy? You can get a decent enough 4 bedroom in the area for $200k. 

My real estate agent hasn't led me wrong before, and she responded to this concern with "many renters are not able to purchase due to lack of credit and available cash reserves", but isn't that the definition of a risky tenant, and how many of those renters can afford high rent (this is 30% higher than the median rent for Deltona)?

I heard that there was data on what share of homes in an area are rented vs owned, so I thought that might lend insight, but don't know where to find that or how granular it gets.

Any advice would be appreciated.

Yoni Osteen

[Chris Mason]

"if you are a family who can afford it - wouldn't you just buy?"

Doctors with hundreds of thousands of dollars in student loans on deferred payments tend to have problems getting mortgages (or at least they think they can't, which amounts to the same thing). Lawyers, same thing. On the other end of the spectrum, those present with income from family members who lack certain immigration documentation tend not to have SSNs, they also tend to have a hard time getting a mortgage (since the income from that spouse will not generally be "counted" by the lender). Someone that just quit their job and started their own company, same thing, though you may not want to take on this risk as a landlord. "Gig economy" people can make good money, but often have a hard time getting the bank to "count" it. Food servers, exotic dancers, bar tenders = typically none of that "tip" income is on tax returns, same thing, doesn't "count." Here in the Bay Area, a lot of tech employees get >50% of their compensation in the form of Restricted Stock Units, that sometimes works, sometimes does not. 

Basically, your target renter is someone with solid income, who can't get a mortgage because of (often stupid) mortgage rules. Some mortgage rules are smart and there's a dang good reason they can't get a mortgage. Up to you to tell one from the other.