Saturday, 23 September 2017 00:00

Rental Property Investors & The Equifax Hack

What does the huge Equifax credit hack mean for rental property investors?

The supersized hack of credit bureau data could have a substantial impact on real estate, the economy, millions of individuals, and rental property investing. Here’s what rental home investors need to know…

The Equifax Hack & Credit Quality

With the massive data breach at Equifax potentially impacting close to 300M Americans, plus Canadians and the British, there are likely to be many renters and would be home buyers affected over the months and years to come. Some of those who hoped to buy homes will no longer qualify for traditional home loans. The renter pool could see a significant dip in average credit quality due to ID theft and fake accounts being taken out in consumers’ names.Rental property investors should be anticipating this. If the damage really begins to stack up, landlords may have to lower their approval criteria, and dig deeper into credit. Check if this is an applicant who has maintained good credit until recently, and may be a real hacking victim. In which case their rent to income ratios may also be far better in reality than their reports show

Identity Theft

Rental home investors not only need to monitor their own credit, but watch for other clues of their identity being stolen as well. Equipped with the data from Equifax, criminals can obtain new social security cards and driver licenses in your name. When it comes to signing new leases, or accepting co-signers, landlords should be extra diligent in verifying identity, without making the application and approval process to difficult or unappealing to navigate.

Rental Property Demand

The above is only likely to spur more demand for rentals. Large funds and apartment complex managers may be slow to adjust to the new credit norm. Many home buyers may fall out of the process and become long term renters. This may even be true of the oldest of Generation Z, who could have credit compromised before they even get a chance. This will only strengthen the already record setting demand for rental housing in the US. In turn, this could help to continue to spur growth in rental rates and operating income.

Financing for Rental Homes

There could be some new regulations for those who handle credit data on their way. Lenders may also be forced to readjust, due to a potential increase in chargebacks and costs associated with combating more complex fraud, and lower credit scores. In the interim this could present some challenges for those going through traditional banks and mortgage channels to finance residences, vacation homes, and individual investment properties. However, there are alternative lenders which may prove a better match with rental home financing programs such as no ratio loans, stated income loans, and non-recourse asset based lending.

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