Using rental payment data to help reduce skips and increase cash flow
As a result of integrating rental payment data into its screening process, The
Shelter Group was able to identify risky residents better at the point of application
and reduce the likelihood of a skip. By using rental payment data to accept those
residents more likely to pay their rent on time, Shelter established better cash flows
and a more solid cash position each month.
Every company needs money to operate. In the multifamily industry, when you rely
heavily on income from rental payments to manage community operations, it is imperative
to ensure that monies will be readily available when necessary. The Shelter Group
manages 48 affordable and market-rate multifamily communities throughout the mid-Atlantic
region and is consistently looking for better ways to improve cash flow.
The Shelter Group’s screening provider integrates Experian RentBureau®
rental payment history data into its scoring model, which has been a part of Shelter’s
score result for several years. This data delivers a greater overall view of residents’
likelihood to pay rent, how often they make late rental payments and if they skipped
out of a lease at another property.
Leveraging rental payment history data during the screening process enabled Shelter
to tackle a problem the company was experiencing in the affordable housing market:
skips. “For those of us dealing in this particular market, you sometimes have
residents who play the eviction game. They can move two or three times before it ever
hits their credit report. Well that is not the case with the data available from Experian
RentBureau,” explains Diane Edwards, Vice President of Operations for the Baltimore,
“The offering allows you to see payment history before the eviction even
happens or when the eviction is happening. For instance, if they are out searching
for another apartment, you could end up being the second or third community on their
stomping ground. And if they were to move into your community while skipping from
another one, you are burned because you could have been notified about it up front
by using rental payment data during the screening process. That’s the biggie
— reducing the likelihood of a skip.”
But more important (and something Edwards didn’t anticipate), using rental
payment history data benefits the ability to establish better cash flow earlier in
the month. It is a logical progression, explains Edwards, “Looking at prospective
residents’ rental payment data, if I see they are risky, maybe out of the last
12 months they paid late eight or 10 times, I may choose not to rent to them.
If I use rental payment data to identify people who never pay late, then I will
have all my rents paid at the first of the month, and I now have all my cash flow.
It’s a more solid cash position each month. The expectation is that you are
getting all of your cash, or at least as much as possible, before it becomes late.
Isn’t that the point — to get the highest quality resident and rental
payment data helps to achieve that goal.”