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Homeowners turn into landlords waiting for better times

 
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GenXer



Joined: 20 Feb 2009
Posts: 703

PostPosted: Wed May 13, 2009 10:37 am GMT    Post subject: Homeowners turn into landlords waiting for better times Reply with quote

http://finance.yahoo.com/news/Homeowners-Turn-to-Renting-cnbc-15216285.html

Basically, instead of selling, homeowners are now renting their places out, many are not selling because of irrational reasons - i.e. they don't want to lock in their loss (i.e. they'll rather bleed to death until they have to foreclose). Some 'can not afford' to sell. It would be interesting to know how widespread this is though. If its just a small % of the total, the overall effect is still miniscule.

There are several issues this article raises:
1) If many of the homeowners rent their places out - this will surely drive the rents down even further (with rents already going down all over the country, even in Boston)

2) How long can they last? A year, two? And these are people with jobs, not unemployed! We know the prices are not coming up any time soon, so the question is, on average, how these people will fare paying rent on one hand, and receiving less than their expenses for their rental property
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melonrightcoast



Joined: 22 Feb 2009
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PostPosted: Wed May 13, 2009 1:01 pm GMT    Post subject: accidental landlords Reply with quote

I have seen this. In the past couple of months, I have seen four homes that were listed for sale be taken off the market (or not) and are now trying to be rented. They were overpriced when they were for sale, and they are overpriced as rentals.

As a renter, I didn't even look at these homes because they were too overpriced, and it is obvious that they just want to sell their homes and I didn't want to deal with having to move because it sold. Also, there is the issue of what happens if the landlord stops paying rent. And most individual landlords want three months rent up front.

Rentals I looked at were in two family homes, condos, and townhouses. Most of these were small and in fair to poor condition. There was still the issue of what happens if the landlord stops paying rent, and three months rent up front.

So, we ended up in a three bedroom in a new apartment complex paying hundreds (and thousands) of dollars less than the SFHs for rent and only a couple hundred dollars more than the cruddy two-family units, condos and townhouses that wanted three months rent and a year lease.

I'm curious of anyone else's experience with renting this spring.
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john p



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PostPosted: Wed May 13, 2009 1:27 pm GMT    Post subject: Reply with quote

I know three people that come to mind. The logic they all shared was that it was a bad time to sell so they were waiting it out and renting. In all cases it was a second or investment home. One in the Bay Area of California, one in Ft. Lauderdale, and the other in Weston, MA. All three are very much insulated and are not forced to sell. One is based on a retirement, the other is an investment in a property in Weston (both cases, houses were originally paid in cash), and the third was due to a marriage where they both owned a place.

I think that it would take either a job loss, a job relocation or another more attractive relocation for someone to sell for a substantial loss.

I think that if a place stays on the market for too long, people decide that it is better to rent than for it to sit empty.

What I'm thinking now, is that I wonder if this will change the amount that colleges in Boston can charge for board. Think about it, if there is more rental stock that presumably will be less expensive, will more families choose to let their kids rent off campus?
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renterstill
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PostPosted: Wed May 13, 2009 3:28 pm GMT    Post subject: Reply with quote

I have a similar observation. I'm looking in towns like Winchester, Melrose, Lexington, Arlington and I have seen 4 or 5 SFH that were taken off the market (overpriced) and put on the craigslist as rental (still overpriced).

One SFH - 1,200sf listed at 550K initially (sic!) is now listed for rent at 2,200/month. I'm sure even with this rent they will not break even (high property taxes, property bought few years ago and totally renovated).

We are too looking for a rental place, we need a 3bdr and whatever is half-decent is overpriced, the rest is quite crummy. I rather dislike and apartment complexes and buildings, multifamily, or a duplex type townhouse will work for us.

You can find quite good rentals if you give it time, but there are few and far between. Our current rental SFH was a good find, an estate, reasonably priced, great neighbourhood, 4bdr/2.5bath, garage, nice yard. The owners decided to sell now and, yes, you guessed it, they want to list as if it's in a top shape, which is not the case (nothing's been updated since 70's). We decided not to even "low ball" it. They would probably laugh at us. In this case, they can affort to keep it on the market forever, they own it out right.

I wonder what would happen if property was foreclosed while being rented. This is my concerned as we look for places to rent.
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melonrightcoast



Joined: 22 Feb 2009
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PostPosted: Wed May 13, 2009 6:14 pm GMT    Post subject: renting a for sale property Reply with quote

Quote:
I wonder what would happen if property was foreclosed while being rented. This is my concerned as we look for places to rent.


I have read many stories of renters being evicted when the landlord is foreclosed on, however, I think I also read that evicting tenants has been halted in MA...? I'll have to see what I can dig up about that. That was also a concern when we were looking at non-complex rentals, as well as the accidental landlord situation and the owner does not know rental policies, potential maintenance issues, the owner putting it on the market to sell (which you are currently experiencing).

I am curious, have you asked for a rental reduction in order to stay in the property while it is for sale (or do the owners want you out while it is for sale)? We knocked $150/mo (~12%) off the rent when we were selling half our two family ... to try to keep the tenants in and have them keep it in decent shape. I guess it wasn't enough, as they moved within a month, anyways. Thankfully, we sold it the next month and only lost out in a half-month of rental income.

As for apartment complexes, we never lived in one until three years ago, and they have their pros and cons. At this point, we feel the pros still outweigh the cons.
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renterstill
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PostPosted: Wed May 13, 2009 6:32 pm GMT    Post subject: Reply with quote

No, we have not engaged in these discussions yet. We are trying to look after ourselves first, but yes, I like this place enough that I'd be willing to stay there while they are selling even for the current rent, which is lower to begin with for a property like this. My prediction is, they may start playing a "put in on, take it off the market" game for many months, and if they get tired of it, we may jump with an offer. I know my cap, we did the math. If we find something we like to rent in the meantime we'll move.

Question is, if they want renters during showings, they may want to stage to get a better offer. Who knows?

I've just enjoyed the privacy and quiet for the last 2 years being in an apartment building (nice one too for that matter) that I'm not ready to go back in to the multifamily building. Besides, there are not that many 3bdr complexes, most are 1/2bdr. I know it's a pain, but it's even greater pain to pay a half-a-million for a piece of property that we don't even like and needs a lot of work and additional resources.
OTOH, we would like to be in the municipality when my son starts kindergarten/school (next year) so we don't have to switch schools.

Did you find a 3bdr appartment complex?
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PostPosted: Wed May 13, 2009 6:42 pm GMT    Post subject: Reply with quote

I really don't understand their logic. Unless they bought after 2002, certainly it's not like 2005 or 2006 during the crazy peak, but now it's not a bad time to sell a house.
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melonrightcoast



Joined: 22 Feb 2009
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PostPosted: Wed May 13, 2009 7:01 pm GMT    Post subject: 3 bedrooms Reply with quote

Quote:
Did you find a 3bdr appartment complex?


Kind of. We got a big 2 bedroom with a loft, and we'll be up in the loft and the girls will be downstairs. It isn't perfect, but it is better than our current situation of two bedrooms and a walk-in closet for the baby's room.

There are two Avalon's in Lexington that have three bedrooms and 2 bedrooms with lofts, and I think a couple other older complexes that have three bedrooms. I am pretty sure Kathadin Woods in Lexington has three bedrooms. There are several complexes in Waltham with three bedrooms, and I think a couple complexes in Bedford with three bedrooms.

I used this web-site for my search:

http://www.bostonapartments.com/luxrycom.htm
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renterstill
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PostPosted: Wed May 13, 2009 7:03 pm GMT    Post subject: Reply with quote

No, it's not a bad time to sell, and this is probably why they are doing it now, not waiting another year. That is exactly why we are waiting Smile. It's an estate, belonged to their parents who passed away. Now the heirs (trust) own it out right, so they can wait, and just keep paying taxes on it for months. They are in no hurry to sell, and not bleeding heavily.

We intended (not anymore) to offer 15% below zillow price and to SBO but , they want 20% above assessed price and talked to an agent already Shocked . I think they are just being greedy, and want to claim their inheritance.
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renterstill
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PostPosted: Wed May 13, 2009 7:04 pm GMT    Post subject: Reply with quote

Thanks Mel, I'll check it out. Very Happy
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melonrightcoast



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PostPosted: Wed May 13, 2009 7:17 pm GMT    Post subject: 3 bed rentals and sellers Reply with quote

Quote:
Thanks Mel, I'll check it out.


You are welcome ... hope it helps Smile.

Quote:
...they want 20% above assessed price and talked to an agent already.


That's called "buying a listing" and shame on the agent if that is what they are doing. That's one of the primary reasons to have at least three agents give comprehensive market analyses on the property. However, there may be other factors about that property, such that it is big enough to be subdivided and a developer would buy it ... and that would support the higher than assessed price.
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