We thought so… they’re just too much work! If you’re like most investors, you take the first free rent range you can find on the Internet. Plug that into your proforma (assuming you use one), and make sure you cover your monthly ‘nut’. Off to the races…
We have news.
Even the very best financial projections built on high quality rent range data are subject to MASSIVE FAILURE. Translation: you lose money.
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Cause #1: Optimism Bias
This is that natural tendency (human nature) to “make the numbers work”. Use the high end of an already too-wide rent range. Assume you’ll improve the existing expense figures. Go lean on maintenance. Tell yourself you’ll manage it yourself. And vacancy… no, that won’t happen to you.
Cause #2: Data Accuracy
The quality or omission of information is generally a consequence (and typically correlated with) the cost to acquire it. Everybody knows rent ranges are free on Zillow and a number of sites on the web. First you get exactly what you pay for. Secondly,
Cause #3: Likelihood of Occurrence
Now here’s where the rubber meets the road. No matter how well researched your assumptions and figures are, “life happens”. Tenants get fired, sick, or divorced. They move out in the middle of the night and don’t tell anyone. Even leave the water on and stick you with a lien or two.
Those are the ‘nice’ ones. Some will get an ambulance-chasing lawyer and try to take your property.
How on earth could you ever forecast stuff like that?
You can’t of course, but this is where the RISC index comes in. It gauges the stability of net rental income like nothing on the market. It is, in essence a credit score for the location, independent of the specific resident that moves in. So even when the numbers say it will pay, the proof is in the score.
Start making better decisions. Try RentFax today at no charge here.