First of all, I’d like to thank many of you for providing some feedback on which tenants to choose. I’ve come to a decision on who to rent to, and it’s actually nobody on the list!
The 28 year old Googler who makes $450,000 a year with $400,000 in savings looked phenomenal on paper, but as I got to thinking, he just didn’t seem like the right guy for the place. A guy so young, making so much will more than likely look for a nicer place to rent, or buy a year from now since he’s a transplant from New York City.
Let’s say he gets no raise and still makes $450,000 in 2012, he’ll likely have around $500,000 in savings at 29. With those kind of financials, and a girlfriend who also works at Google, there’s little doubt in my mind they’ll put 20% down on a $1 to $1.5 million home somewhere in the city. As a landlord, duration is an important metric and I don’t want to go through this process again in a year, especially when my last tenants have been there for four years.
The Googler and I traded e-mails back and forth figuring each other out. I basically suggested he really take the time to explore all the great neighborhoods in San Francisco. We came to a mutual agreement that my place wasn’t for him.
LIVING BELOW YOUR MEANS
It’s commendable that someone who makes so much is willing to rent a place so far below what he can afford. People with this type of income are generally in the $5,000-$6,000+/month rent range or own. If I knew he would be in the apartment for at least 2 years, of course I would rent to him. But I know the chances of that is small.
Living relatively frugally was basically the feedback I got from all interested applicants as they spend just 10-13% of their gross income on rent, hopefully investing and saving the rest. It gives me confidence that people aren’t leveraging up and going crazy with their consumption.
The last thing we want is another relapse of 2008-2009 where credit shuts down, millions of people lose their jobs, and socioeconomic warfare starts blaring. I guess you’re already seeing it with the occupy Wall St. protesters who could use that time developing their skills instead.
THE LEAP OF FAITH
The “winner” of the apartment lottery isn’t any of the 5 highly qualified candidates, instead, the winner is a single, 55 year old woman with a lovely personality. She relocated from the east coast thanks to a 3-year job offer to work in the arts as a member of the board. With an income of $140,000, she makes roughly $200,000 less than the other top candidates, but still earns 40X the monthly rent. Her liquid savings was also 60% less than average, but her 401K is in the hundreds of thousands.
If I didn’t see the financials of the other top candidates, I would think this tenant’s financials were great. They are good on a stand alone basis, and I’m taking a leap of faith that she will pay the rent on time and take care of the place. She was a homeowner before and came very organized with all her documents in a manila folder. She smiled a lot, made a couple jokes, and reached out over e-mail afterward. I immediately felt that we built a great rapport that could last for the long run.
At $140,000 a year, paying $3,300-$3,700 is probably the most you can comfortably pay in rent after taxes. As a result, my place is at the upper end of what she can afford as she “lives it up” a little. I also felt that she would appreciate the place much more simply because she was reaching a little bit, and I mentioned that I priced it 6% cheaper than the market to find the best tenant possible. The final thing she said that sealed the deal was her desire to stay for 2-3 years, matching the duration of her contract. That is music to my ears!
PARALLEL TO EMPLOYMENT OVERQUALIFICATION ISSUES
After a certain amount of income / qualification, more money and more experience is not necessary. Overqualification can seriously become a risk to the applicant’s chances of landing anything. An employer who is looking for a person with three years out of undergrad will be hard-pressed to hire someone with 10 years of experience who is willing to accept the same pay. Why? Because the employer will fear that the candidate will bolt as soon as the job market recovers.
The parallels with finding an apartment and finding a job is uncannily similar! Managers and landlords do not want turnover. We are deathly allergic to turnover, which is why if you keep hopping around every 2 years, you’re eventually going to reach an age and a point where nobody will take the risk on you.
I would much rather have a tenant who stays for 5 years and earn 6% less than market, than charge market rent and have to go through this process every year. As a manager, I’d rather have a good employee who sticks with me for 5 years, than a great employee who bounces after 1 year for greener pastures. Funny enough, beautiful women tell me that they’d much rather have an average looking guy than a stud muffin because they are afraid of competing with other women and losing him!
APPLY WITHIN YOUR RANGE AND MISLEAD WITH GOOD INTENTIONS
Employers, landlords and even ladies looking for love think in rough bands. If you are below or above the band, your chances pretty much get thrown out the window since there are so many eligible people already within the band.
If you do have a Master’s degree but are willing to work a job that pays an undergraduate degree salary, then take off that Master’s degree from your resume. If you do love the apartment that costs $3,500 a year, but you make $1 million a year and have every intention of staying there for 2 years or longer, put down that you only make $200,000.
Some may think this is misleading, but if your ultimate intentions are good eg you don’t care about the money and love the job, or truly enjoy the location and simple living while planning to stay in the apartment for years, then go for it! Being “too smart”, “too qualified”, “too beautiful” or “too rich” shouldn’t nullify your chances. You can always own up to your credentials if they ask, but by then, you’ll have shown an employer how much you love the work, or the landlord how much you enjoy the apartment that it really won’t matter one bit.