Rental search in a tight market

rental
Finding a rental (infographic from appfolio.com)

Some housing experts are excited about the recent one-half of one percent uptick in the homeownership rate, saying it’s at a three year high. But the Census’ most recent release of the Quarterly Residential Vacancies (Fourth Quarter 2017) and Homeownership described the move as “not statistically different” from the previous quarter or year (census.gov). Essentially, the homeownership rate remains historically low. This dovetails with the Census’ most recent renter moving data indicating that the percentage of renters who moved in 2017 was the lowest since 1988. So, it should not be a surprise that rents are on the rise, and it’s becoming even more difficult to find a rental.

How can you find a rental in a tight market?

Before you go off and sign a lease, you should create your own “rental guide.” First, make a housing budget of how much you can afford for rent and utilities. Then make a list of “must haves” for your new home. Think about the size, location, local amenities, commuter routes and public transportation, and anything else you deem important. This guide will help you stay focused on your needs, and help you decide on a rental that makes sense.

home ownershipOnce you begin looking for a rental, you may realize that finding a rental that “checks all the boxes” may be difficult. You may find that rent per square foot varies depending on the neighborhood, age of the building, and the amenities. This may force you to prioritize your needs. For example, you may find that a small condo near a metro station is the same rent as a three-bedroom single family home that has a longer commute. Or there may be a new apartment available with luxury amenities with a higher rent than the older apartment building with sparse amenities.

The internet is the medium of choice these days to look for a rental. There are numerous websites using state of the art applications to advertise rental listings. They also include vast amounts of information on each listing to help your search. There are a number of specialty sites focusing on niche rentals (such as apartments, luxury, etc.) that tout their exclusive listings. However, there are sites that are more comprehensive that include a mix MLS and private listings. And let’s forget there are online classifieds too.

Many renters search for their new home without an agent, and that’s ok. But consider that an experienced licensed real estate agent can help negotiate your lease, possibly getting better terms. While most agents will work rentals and sales, there are real estate agencies that specialize in rentals. Consider contacting legitimate property managers or rental management companies and ask about their upcoming rental listings.

If a rental listing sounds too good to be true, then be suspicious of a scam. To protect yourself from scammers, it can be helpful to understand how they operate. The Federal Trade Commission (ftc.gov) offers insight on how rental scams work, and how to report scams.  Scams are typically from hijacked ads or phantom rentals.  The FBI (fbi.gov) and USA.gov also offer tips on protecting yourself from rental scams.

Some basic cautions from the FBI:

-Only deal with landlords or renters who are local;
-Be suspicious if you’re asked to only use a wire transfer service;
-Beware of e-mail correspondence from the “landlord” that’s written in poor or broken English;
-Research the average rental rates in that area and be suspicious if the rate is significantly lower;
-Don’t give out personal information, like social security, bank account, or credit card numbers.

Regardless whether you go it alone or with a real estate agent, practice due diligence. Real estate scams have been part of the rental scene for decades. Scams have become more prevalent with the increased reliance on the internet for home searches. And in a tight housing market, it’s no coincidence that real estate scams are on the rise.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Homeseller turned landlord

Dan Krell, Realtor®
DanKrell.com
© 2012

Reluctant home sellers turn to renting their homes.

home for saleHanding over the keys of your most expensive investment to another person is not how you think you would have moved on with your life.  But, because the housing market threw a wrench in many peoples’ plans, many home owners who could not sell their homes decided to rent it instead.  Unfortunately, some didn’t know what to expect from their tenants, while others didn’t realize that they had obligations as a landlord.  And as you might imagine some rental arrangements did not turn out so well.

Although the home owner turned landlord may feel kinship to the hard core real estate investor, there are some differences.  Unlike the genuine real estate investor, most people are not accustomed to leaving their home in another’s care (often the person is a total stranger).  Another difference is that the home owner may decide to rent their home to ride out the housing market, while the hard core investor has made a commitment to the real estate investment as a vehicle for accumulating wealth; many investors will hold property for many years looking forward to the future payoff of appreciation when the property is sold.

Of course there is a commonality too; the desire for positive cash flow.  The positive cash flow is the perpetual incoming of cash so the mortgages and other real estate related expenses (such as property taxes, HOA/condo dues, maintenance, insurance, etc.) can be paid. Although a positive cash flow is a good thing, some are content just to break even and have no net proceeds from the rental.  Expenses can add up quickly and turn the rental into a negative cash flow situation (when the rent does not cover all the home expenses); which can became the source of serious financial issues.

home for saleSo, you decided to rent your home (or maybe you were talked into it) so you could move on with your life, what now?  Finding tenants and maintaining the property can be an issue for the novice and experienced alike.  Although seasoned real estate investors have systems in place for various aspects of their business (from finding tenants to collecting rent); you might consider hiring a licensed professional to manage your rental property.  For a fee, professional property managers take care of your rental property: which can include finding tenants, collect rents, and maintain the property.

And since rental agreements can be rather legally complex, consulting with an attorney prior to entering into the agreement would be prudent; as well as consulting with an attorney when issues arise between you and your tenant.

Consider getting additional information about rental properties before embarking on your new journey.   Some municipalities and local governments offer resources to inform you of your obligations and provide additional resources.  For example, the local government of Montgomery County MD offers resources for landlords and tenants.  Besides the “Commission on Landlord – Tenant Affairs,” which hears landlord – tenant disputes; other resources are available including a description of “ordinary wear and tear,” and links to the District Court of Maryland listing actions a landlord can take against a tenant (and vise verse).

What seems to be a comprehensive guide is the “Landlord – Tenant Handbook,” which is offered as a manual to renting for both the landlord and tenant.  The handbook describes: the obligations of the landlord and tenant; property licensing requirements; rental application and lease; security deposits; property maintenance; complaints; terminating the lease; and “survival tips.” The handbook and other landlord – tenant resources can be found at montgomerycountymd.gov/dhca (click the “Landlord & Tenant” link).

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(if this article appears anywhere other than a feed originating from, or directly on DanKrell.com, the article has been re-posted without permission).
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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 10 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

Renting vs Buying 2012

by Dan Krell © 2012
DanKrell.com

rental signInventories of homes for sale are at a five year low. The last time home inventories were this low, homes were sometimes selling as soon as you could put a “for sale” sign in the yard. For some, the recent shrinking inventories are a welcome sign of market equilibrium; even analysts at Barclay’s site low housing inventory as one indication of a housing comeback.

For others, however, the shrinking inventory is a sign that supply is just lessening to demand. Many individuals who might have previously thought of buying home are, for now, putting off home ownership. Many people are delaying family formation and do not want to be “anchored” by a home in a tight employment market. As Fed Chairman, Ben Bernanke, discussed in a speech given in February to the National Association of Home Builders, economic uncertainty has impacted the willingness to commit to home ownership. “…housing may no longer be viewed as the secure investment it once was thought to be…” (“Housing Markets in Transition”; federalreserve.gov).

As the inventory of homes for sale homes shrinks, the number of rentals increases- along with rent! According to rental statistics compiled by the Greater Capital Association of Realtors® (gcaar.com), fourth quarter 2011 rental listing volume increased about 89% compared to the fourth quarter 2010. Additionally, fourth quarter 2011 average rent list prices for Montgomery County increased 11.4% compared to the fourth quarter 2010; and the average rent price for Montgomery County increased 5.29% compared to the fourth quarter 2010.

More evidence of a strong rental market comes from the National Association of Home Builders (nahb.org): the Multifamily Vacancy Index (MVI) fell in the fourth quarter of 2011 indicating fewer rental vacancies. Additionally, the Multifamily Production Index (MPI), which measures builder and developer sentiment about current conditions in the multifamily market, is at its highest since 2005; the MPI component measuring developer sentiment for market-rate rentals is at an all time high.

The recent shift in the perception of homeownership has resulted in a falling homeownership rate: recent seasonally adjusted homeownership rates have been slowly declining from the all time high of 69.2% reached in the first quarter of 2005. The most recent seasonally adjusted homeownership rate (Q3 2011) is 66.1%, which is similar to the homeownership rate of 66.2% reported by the 2000 Census.

for saleBut evidence of a housing market attempting equilibrium comes from a May 9th National Association of Realtors® news release suggesting that home prices are stabilizing. First quarter 2012 “Median sales Price of Existing Single-Family Homes for Metropolitan Areas” compiled by the NAR indicate that although average national home sale prices decreased 0.4%, and average home sale prices for the Washington DC region increased 5.7% (realtor.org)

Reports of a recovering housing market may be supported by recent increases in home buyer activity. Market data reported by GCAAR indicates that “contracts” (also known as pending sales) increased 12.4% for the month of April (compared to April 2011); and increased 8.5% year to date 2012 (compared to the same period last year).

Even though home prices may be stabilizing, buying a home could still be cheaper than renting. According to Trulia’s Winter 2012 Rent vs. Buy Index (trulia.com), homeownership is less expensive (and may still be a better deal) than renting in 98 of 100 metro areas- including the Washington DC metro area.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 14, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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