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Monday, January 17, 2011
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44 comments:
What not to put on a rental application or ask a prospective landlord.
"I am in the process of buying a house. What is the process to break the lease?"
funny i told my current landlord exactly that. he saw nothing wrong dealing with people being upfront.
but YMMV.
MM,
I'm not necessarily talking about being upfront. I am spending alot on new carpet, paint etc. A tenant can ruin this stuff in a matter of months.
In addition, there is down-time to consider. All-in-all, I would never rent to someone in this situation. I'd rather lose a month up front than have that kind of turn-over.
Obviously, your LL operates his business in a different matter or had reason to believe you would be staying longer. Did you ask about breaking the lease?
I like to see someone who has been at their last place a number of years and looks likely to be a renter for quite some time.
Va Investor I have had tenants try to pull that, but they are usually the ones who end up staying the longest and never buy a house.
I had one vacant house starting Dec. 1 because after 3 years the people decided to move back to Illinois. This is usually a bad time to rent, but 3 of the 4 serious inquiries I had were from people who wanted to rent for 6 months because they had house fires. Apparently that is what the insurance carriers allow them. I did take one of the house fire families. Their lease ends on June 30 which gives me time to rent during the better summer time period. I raised the rent by $250 to market so that was good.
yes, reecon, you never know. I had one tenant insist on a 6 month lease and he has been there 8yrs. I thought he would stay awhile because he was living in his last rental for 5yrs and only moving b/c his LL was selling.
There were some other "flags" with this particular tenant.
I agree that this is a bad time of year. When I end up having to start a lease b/t Oct. and March I usually try to get an 18mos initial term.
I haven't had any fire victims...
contrarian,
Are you in favor of these foreclosure problems? You post this stuff and the links seem to suggest this is a victory. A victory for who? It seems to me that people who cheer these "victories" are cheering further economic loss for all of us.
Someone on CNBC (?); an analyst of some sort had an interesting take on this issue. He opined that this type of court action will only cause supply to dry up and may actually result in home prices rising.
Do you see some societal benefit in allowing people to live free in homes for which they are not paying for? Is it helpful to cheer lending institutions to have even greater losses? If you lived next to a boarded-up home frozen in limbo would you be happy?
Have you seen the condition of many of these homes? Is further deterioration a good thing?
What about people who are waiting for an affordable reo so that they can afford to buy or buy at a price they believe is reasonable?
All of this cheering seems to me a veiled desire to somehow redistribute wealth and/or see our capitalist society destroyed.
The "greedy lender" rhetoric is stupid in my mind. Get rich quick thinking was as much to blame as the loan brokers who either turned a blind eye to the facts or inflated income to qualify borrowers. The cause was a combination of many things, but how do these efforts by supposed "righteous" lawyers help the situation.
If these people aren't paying their mortgages, they don't get to keep the house. No sort of short-term gimmicks and legal tricks are going to change this. The banks aren't going to let a $200k loss turn into a $500k loss (by never receiving collateral) just because they're too lazy to show or find the origination documents. The money was loaned and never paid back, and the deadbeats are only gaining a few months of rent-free living with this stuff.
VA-
Maybe contrarian is or wants to become a lawyer. I can imagine that all these legal issues are great for lawyers, but other than this I fully agree that it helps very few and is bad for the vast majority of people.
hb,
Yes, the lawyers full employment act. I find it all the more disturbing that a University of Maryland Law Professor and his class (with his prompting) were behind the Maryland legal action.
Tax-payer $$$ spent on this?
contrarian,
So it appears that you think this will benefit you financially. Good luck with that. The Utah cases are all under appeal. It will most likely be found that MERS is a party in interest.
As I said last week - the issue is recording fee's. A simple fine is the appropriate solution, not a windfull to deadbeats and lawyers.
And, do you honestly believe that gov'ts will stand by and watch this ridicu;ous outcome?
http://franklymls.com/DC7426570
Assessed at 612K, sells for 375K
Down 40%
59 DOM
VA_I
What I see happening with Busted titles is the Banks are being forced to negotiate short sales.
As for losses, the Banks sold that paper to pension funds, their losses are now 100%.
6 years ago, people could declare chapter 11 and cramdown a mortgage,
now the busted titles let you declare Chapter 13 and cram down busted notes.
Same effect.
"No McMansions for Millennials
By S. Mitra Kalita and Robbie Whelan, WSJ.com
Jan 14, 2011
Here's what Generation Y doesn't want: formal living rooms, soaker bathtubs, dependence on a car.
In other words, they don't want their parents' homes.
Much of this week's National Association of Home Builders conference has dwelled on the housing needs of an aging baby boomer population. But their children actually represent an even larger demographic. An estimated 80 million people comprise the category known as "Gen Y," youth born roughly between 1980 and the early 2000s. The boomers, meanwhile, boast 76 million.
Gen Y housing preferences are the subject of at least two panels at this week's convention. A key finding: They want to walk everywhere. Surveys show that 13% carpool to work, while 7% walk, said Melina Duggal, a principal with Orlando-based real estate adviser RCLCO. A whopping 88% want to be in an urban setting, but since cities themselves can be so expensive, places with shopping, dining and transit such as Bethesda and Arlington in the Washington suburbs will do just fine..."
Gen Y rejects McMansions
Contrarian Since you sold your house in the bubble, have you been renting since then or did you move into another property you own? If you are renting do you plan to stay in the same home for another 5 to 10 years?
While I'm not sure I agree with Contrarian's market and short-sale expectations (God willing, let that happen, as far-fetched as it is), I find the "govt won't let it happen" counter-argument pretty absurd. Was govt able to stop prices in Las Vegas from dropping 50%? Were they able to stop values of their own houses in DC from plummeting?
contrarian and kevin,
My "the gov't won't let it happen" referred to the absurd result of mortgages becoming unsecured.
By gov'ts, I meant State Legislature which determines recording and foreclosure processes.
Contrarian said..."And, it doesn't matter we are in the D.C. area. That excuse doesn't hold water this time around."
Translation -- its different this time.
Contrarian said..."We sold during the bubble. We will buy home again in 5 - 10 years"
Wow -- up to 10 more years in rental housing? To think, instead of selling, you could have stayed in your original house and pretty much have it paid off by then.
VA-I
it's not becoming, it already has.
The key is who tears what apart?
Anonymous That was what I was trying to figure out about Contrarian. He sells maybe 5 years ago, has been renting since then and intends to continue renting. At a minimum he could have refinanced to a 15 year mortgage in the last few months and paid off his house even faster and at a lower cost. Since he is so skeptical about the stock market, I wonder where he put the profits from the sale of his house? If he had put it in the stock market and let it ride to this year, he would be doing very well indeed. I am just not understanding his financial planning. It sounds like he is losing money rather than making money.
Cool "plan". Pay off your LL's mortgage instead of your own. I've got a terrific place for rent....
Pay your LL's mortgage... it sounds like we're listening to a realtor circa 2006.
kevin,
You aren't paying off your LL's mortgage? If they own free and clear, you aren't providing a stream of income to them? Do you live free?
I'm not referring to wannabe's who bought at peak and are negative. I've been negative in the past (late 80's) and I am sure that there are a number of people who are "accidental" LL's (or newbies,etc.) and are trapped in their mistakes. There is a ton of stuff out there now where the numbers work.
Are you really that naive?
reecon
I don't trust the stock market.
Right now the average length of time a stock is held is 22 seconds.
The price is driven by computers not real value.
Are you really that naive?
Are you naive enough to believe that renting is throwing money away, but paying interest on a mortgage is not? Or that by renting instead of owning in this market, I've somehow become the sucker?
Like I said, realtor propaganda circa 2006. In retrospect those sorts of comments were embarrassing, and a testament to how clueless and arrogant the RE rats were. To have the same lines parroted today is the ultimate display of naivete.
pat-
Computers move the stock price minute by minute, but value wins out in the several years time frame. Excluding a few REITs/risky companies you don't see that many dividends in the 7%/rate. So as companies become more profitable and increase their dividends eventually the stock will move to a reasonable price.
I agree if you are only going to hold for a few months stocks are a bad idea, but if you plan on holdings for decades stocks are the most likely instrument to significantly beat inflation.
kevin,
All I said is that renters buy houses for landlords. Period.
I'm not opining on your situation. I wouldn't have paid peak prices either. I stated that contrarian, by renting 10-15yrs, is buying his LL a house.
But now we see that, according to contrarian, his LL is an idiot.
I'd be happy to paint and install new carpet every 10 to 15yrs with no turnover in between. I've had more than a few such rentals.
Contrarian,
It seems that you speculate quite a bit on many things. LL will be 70% underwater in 5 or 10 more years? You've placed your bets, good luck.
"Contrarian said...If we had purchased, we would be in that same predicament."
Actually, it depends on when you would have purchased doesnt it?
If you had purchased 2 years ago your place would have gained approximately 12% in value. Instead, you flushed another 2 years of your life (and 24K+ in rent) down the toilet.
Moreover, instead of being trapped in cash and cash equivalents, you could have went long in the stock market and doubled your money. You could then have taken those gains and paid cash, living mortgage free for the rest of your life.
Instead, you plan to stay on the sidelines for another 5-10 years, paying another 125K to 250K or more in rent, all the while believing doom is just around the corner.
Cheryl
A Tenant pays a LandLords mortgage only if the rent exceeds PITI,
Maint, Hassle, Trouble, downtime,
There were lots of idiots who bought in 2005, who are not getting PITI covered, let alone Maintainance
costs.
If the place has lost 30% of the market price, and you paid $400/Month for the privelige, yeah, you may do okay in 15 years, but, it's going to suck for now.
contrarian,
That was clever. A very nice deflection. "My LL is losing his shirt!!!". I believe, however, that the issue was your "plan" and whether a 10-15yr rental makes financial sense.
Anon., imo, is entirely correct. Late 2008 and all of 2009 were excellent times to buy with great interest rates and little downside risk.
Of course you see much downside risk. How does your rent compare with the value of the house you are renting? Oh...nevermind, rents will crash as well.
pat,
I agree. I'd be hating life if I bought stuff in 2005 with big neg. and prices dropping.
Many of these specuvestor's are out by now. The one's still owning have assets they will lose (not to mention a credit rating) if they were to default. I'm sure a decent number have sold and brought money to the table to cut their losses.
I think you over-play the oft heard claim of LL's having to plunge toilets at 1AM. Just like any business, there are good managers and bad. And all leases I am familiar with require tenants to take care of those problems and many other repair/maintenance issues.
Do some of my tenants drive me nuts? Yes. It's the nature of the "business".
I don't understand why many renter's need to feel that their LL is getting creamed financially. It is simply not the case in most situations.
Kevin injects the "throwing money down the toilet" phrase and attributes it to me. I really don't care whether anyone buys or not.
contrarian,
Thanks for another non-answer.
Are we having fun yet?
The injected phrase was attributed because it's usually part and parcel with "paying your landlord's mortgage". Which, as has been pointed out, is only partially true when the cost of owning exceeds the cost of renting. It's used as a pejorative phrase to convince people they're giving their money away.
The truth is that you're paying for a place to live. Whether you're wasting money on rent or on a mortgage's interest is irrelevant, except for the tax benefits for the latter (which hopefully will go away). Whether the landlord bought in 2007 and is bleeding every month or they own it outright is irrelevant from the perspective of the person renting the house. Saying that a tenant is paying their landlord's mortgage is inaccurate at best.
Kevin,
I fail to see how the phrase 'paying the landlord's mortgage'is "inaccurate at best."
Doesn't this just depend on perspective? Just like the throwing money away on rent comment?
In other words, from the perspective of the person living in the home, you're throwing money away on either rent or mortgage interest.
From the perspective of the landlord, they have a tenant paying their mortgage.
My $0.02
It's inaccurate because the assumption is that a) the landlord has a mortgage, and b) the rent and mortgage are equivocal. I could just as well argue that by renting, my landlord is subsidizing my presence by taking a negative monthly cashflow on the buy/rent disparity, as well as subsidizing repairs and maintenance. I wouldn't make that comparison honestly though, since I find it and the original premise of paying for the landlord's mortgage to be inaccurate at best.
Whether renting or owning, you're in effect paying for a roof over your head. There are obvious trade-offs such as flexibility, situational security, and financial risk mitigation, but I regard the implication that a renter is on the hook for his landlord's mortgage as nothing more than another cheap NAR talking point.
kevin,
you forgot c) pocket the rent and default on the loan.
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