Sunbelt Underperforms in On-Time Rent Payments for 6 Months

The importance of timely rent payments is hard to overvalue. An integral part of making a project’s numbers pencil out is getting the revenue as it’s due.

Chandan Economics tracks rent payments to independent landlords, which might be more telling than a snapshot of what the biggest players see. The September update, using data from RentRedi , noted that the on-time payment rate had risen from August to September by 55 basis points to 81.1%, which is an improvement but not necessarily all that confidence inspiring.

Also, the September full payment rate was forecast at 91.2%—a 182 basis point gain year over year but, again, not that comforting. That is especially true as the country continues to see inflation and increasing Federal Reserve rate hikes, the effects of which economists say take a good six months to fully be felt. In other words, it sure seems like payments could feel increased pressure as the reality of the economy takes a regular seat at board meetings and family dinner tables.

The numbers get more specific by type and location. Rental units for two to four families had the highest on-time payment rate: 83.2%. Single family rentals, the lowest at 81.5%, even though they were up 88 basis points from August. Gateway markets had the highest on-time rates for any general geographic location for the ninth month in a row, though at 81.2% versus the national average of 81.0%, not by that much. The Sunbelt, that darling of multifamily interest, had an on-time rate of 80.1%. Again, the Sunbelt’s lag isn’t terribly large compared to, say, the on-time rate of units with sub-$1,000 rents, where lower incomes and credit scores fueled a 79.6% rate.

The important point is that these small differences suggest the potential of greater exaggeration as those Fed jumps keep coming and the eventual impact inexorably approaches. If you’re already locked into properties, there’s not necessarily anything you can do other than sell and buy another one—which, depending on your strategy, might make sense. But if you’re planning your next project or acquisition, then it probably makes sense to look at local demographics of age, income, credit, and, most importantly, cost of living. The more pressure on people’s incomes, the more potential impact your future plans, and cash flow, might feel. Offerd’s systems can help run the numbers so you can make more informed decisions.