Marin's Homeowners into Landlords: But I Thought Rents Were Up?

This Sunday's IJ ran an article on the front page of the real estate section by MELISSA KOSSLER DUTTON titled Homeowners Turn Into Landlords. (Original article can be seen at http://www.vindy.com/news/2009/jan/25/tough-times/) My fiance' and I opened the paper this morning and, over Peet's coffee and marble rye bread, shook our heads.

We've been trying to explain this to Marin for months.

The piece reads as follows:

When Dave and Gina Schudi of Phoenix went house hunting last year, they knew the time was right to buy — not sell — a home.

So when they did buy a new one, they rented out their old home.

“It all depends on the market,” said Dave Schudi, who plans to sell the old house eventually. “We’ve got good renters in there.”

Falling house prices and a slow market are forcing more homeowners to consider renting their properties.

It’s something Tampa, Fla., Realtor Julia Vakulenko suggests to potential clients. “Basically, we ask all the people who contact us, ‘Must you sell it right now?’” she said. “Most likely, it will just sit there or maybe sell below the market value.”

For many, the role of landlord is something they’d never considered. If done right, however, renting out a home can help the owner ride out the housing slump, said Vakulenko, of Tampa4U.com.

But the process does require doing some research, said Vakulenko, who owns five rental properties. She often refers clients to property management companies who can determine what their home would rent for and whether there’s a market for it.

Homeowners are often disappointed to learn that their home would rent for less than their mortgage payment, added John Nuzzolese, president of the Landlord Protection Agency in East Meadow, N.Y. “Whether it’s for sale or for rent, it’s only worth what people are willing to pay for it,” he said. “People have to be realistic and put themselves in the tenants’ shoes.”

Real estate analyst Danielle Babb often sends people to www.rentometer.com to see what the going rent is in their area. The Web site allows users to see what comparable properties in the area charge.

Once you’ve set a rent range, determine your demographic — students, families, young professionals — and market the house to them, said Babb, author of “The Accidental Landlord” (Penguin Group, 2008). Babb, who has 27 rental properties, wrote the book after watching friends and colleagues trying to rent out houses they couldn’t sell.

“You’ve got to think like a renter. There’s lots of availability,” she said. “They’re going to choose the most exciting option.”

The truth is, we are running a very high inventory of rental properties in Marin. There are vacant homes for lease and no hordes of tenants pounding on the door to rent them. (There are always a few exceptions...I mean, we are still Marin!) Anyone who was a landlord after the dotcom bust remembers what this feels like--but anyone who has only become a landlord in Marin within the last five or six years is going to have a hard time understanding why his or her home that rented for $6,500 last year is only worth $5,000 or less now.

The formula is simple supply and demand; we have high supply of rental inventory due to the languishing home sales market turning homeowners into landlords and--due to an economy that's pinching everyone's belt--much reduced demand for said homes.

It's time for everyone in Marin to be a little more reasonable.

Homeowners, now is the time to take advantage of the downtime and update your rental property. Tenants have a lot of choices right now and they do not have to settle for outdated 70's or 80's style homes. The updates will give you a better chance of leasing your home now, and will certainly help keep it rented next time you have a vacancy. (Or, if your goal is to sell eventually, will make your home that much more competitive.)

If your home is already in great condition and is still not renting, it's time to lower your price. Unless you have owned your home for many years or put down more than half of the purchase price, you are unfortunately not going to be able to cover your mortgage cost. If you want to find a great tenant, price your home for this market.

Tenants, you can find some great bargains in Marin right now, but don't overplay your hand. Rentals, unlike a purchase, involve an ongoing relationship. Our experience has shown that tenants who submit extreme "lowball" offers come off as pushy and/or unreasonable...not exactly someone you want a relationship with. Also, it's important to note that if you have three dogs and two cats, or poor credit, or unverifiable income, you still may not be approved to rent a home--even if the property has been sitting vacant. So take factors about your profile into consideration when negotiating. If it's a house you really want, make a fair offer, explain your reasoning, be realistic, and don't lose it over principle!

My partners and I specialize in leasing Marin homes: tenants and landlords call us anytime with questions.

Aticle quoted originally published: Sunday, January 25, 2009 By MELISSA KOSSLER DUTTON (http://www.vindy.com/news/2009/jan/25/tough-times/)