Case study: The Shelter Group
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, Maryland–based company.
“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.”