Home Leasing for Renters, Home Owners and Investors

Negotiating Rent

2012-02-08T07:26:00.000-08:00

Like anything else, you can negotiate the terms of a Lease. But be aware that negotiating rent is not like negotiating the price on a For Sale home. Real estate for sale is often advertised well above the seller's bottom dollar, anticipating a lower offer. For rentals, advertising at an inflated price will result in few inquiries, so owners advertise at close to the least they can afford to accept in rent.
For single family homes, the published rental price is usually very close to the cost of ownership, leaving little if any negotiating room. This is especially true of private owners who are leasing the property because they needed to relocate but couldn't sell or did not want to sell at a loss in the current market. Since those owners are leasing at their cost or even below they often cannot accept a significantly reduced rent.

A common fallacy is that offering the owner a multi-year lease will entice them to accept lower rent. While a multi-year lease may offer the owner some relief from a vacancy (if the tenant doesn't break the lease early), it also locks them in to the lower rent amount for a long period. For example, a $200/mo reduction on a $1500/mo home for 3 years costs the owner $7,200. The owner can wait for a full price renter, with the property vacant, for 4 to 5 months for that same cost. Most will take the risk and wait.

Another approach is requesting lower rent in return for a purchase option. If the owner really wants to sell the property, this can make sense - but only if the agreed purchase price is high enough and only if the renter can show that they will qualify for a loan at that price at the end of the lease. A purchase option will also most likely require a significant down payment.

Offering lower rent because you do not perceive the house to be worth the asking price is a possibility. Some homes are overpriced, usually because the cost of ownership is high. For a top quality renter, owners might take less if they can. Presenting actual examples of homes priced more competitively is important here. A copy of an ad for the alternative house is a good tool. Keep in mind, if the owner can't afford to take the lesser rent, you may be better off to just rent that alternate.

If you feel the rent is appropriate but only if some things are improved or repaired, you need to understand the owner's situation. An investor who wants to lease the property for long term gain may consider improvements like fencing, light remodeling, etc. Owners tryng to cover their costs until they can sell the home rarely will.

In winter months, the term of the lease can be a good negotiating point if you have some flexibility on the length of the lease. Owners would much rather have your lease end in the spring, near the end of the school year. The home is likely to re-lease faster at that time. A lease ending at the right time may reduce potential vacancy by a month or more. If so, the owner gets about 1/12 more total income so they may be able to pass some that back to you. A word of caution, Never commit to a lease longer than you think you will stay. The penalties for breaking the lease early are substantial and most leases require that you pay the remaining months' rent even after you move out (until the house is re-leased).

The most effective negotiation is offering a reasonably reduced rent for a quick move-in by a highly qualified renter. An excellent credit rating and rental history help the owner be confident the rent will be paid. A reduced risk of missing a rent payment may persuade them to reduce rent. That reduction has to be relatively small, almost never more than 5%-10%. Keep in mind that in considering an offer, the owner is looking at not just the rental income but the risk of damage to the property. Large animals or multiple pets increase that risk substantially and will almost always eliminate your negotiating position.

The least effective approach is "I love the house but I can't pay quite that much". This signals the owner that your budget is already stretched and will probably decrease your chance of the owner accepting a lease from you, regardless of rent amount.

Most owners, property managers and rental agencies will consider a reasonable offer. It just can't be a Big decrease in rent. Do your homework on competitive homes and get any information you can on the owner's situation and goals. Then, if you feel you will be a highly qualified renter, make an offer!

Getting through the Big Move

2011-05-19T14:12:00.000-07:00

Cut Back -

Moving can be a difficult task. Don't make it more work than necessary by moving furniture, clothing, art or other belongings that you don't actually want or need anymore. Look for opportunities to de-clutter your life and get rid of excess possessions.

Hand it Down: Tell your friends and family you're paring down possessions. You'll feel better, and it'll be easier giving up that expensive couch or antique bureau if you know your best friend will make good use of it.

Yard Sale: The tried and true yard sale can help you can get rid of things you don't use and avoid paying to move them. As a bonus, you'll make some extra cash that you can spend on new things in your next home.

Donate: Consider donating unwanted or unsold items to charity. Many charitable causes have free pickup services for donations that make giving your unwanted furniture and items as easy as picking up the phone and scheduling a pickup time.

Packing-

The thought of organizing and packing up a house's worth of clothing, kitchenware, and other items can be daunting to say the least. Even if you are using professional movers, you likely will want to pack and organize certain items yourself. By having a packing strategy, you can make it through the first stage of the move with your sanity intact and avoid last minute panic as the moving trucks pull up.

Inventory: Taking a rough inventory of your stuff will give you a general idea of how many moving boxes you will need. If you will be using a moving company, it's not a bad idea to make a written or photographic inventory to make sure you don't lose anything during the move.

Box Right: Make use of suitcases and plastic storage tubs you already own before searching out moving boxes. You can re-use old cardboard moving boxes, but make sure the cardboard is still in good shape rather than risk damaging any of your items. Purchase frame boxes to protect your pictures and mirrors.

Other Supplies: Purchase high-quality packing tape and plenty of bubble wrap to help safeguard your belongings during the move. Specialty packing paper or packing fill can be used for box fill instead of newspaper to remove the risk of scratching fragile items.

If you will be moving on your own, you should rent furniture pads, straps and furniture dollies from the rental truck company.

Have a Packing Plan: Begin by packing the items you use least often. Pack one room at a time, making sure to clearly label the contents and which room they are intended for. You can also use a numbering or color coded system to help indicate which boxes have the most frequently used items.

Pack Smart: Large boxes should be filled with lighter items such as clothing. Save heavy items like books and dishes for smaller boxes that for easy lifting. Make sure each box is packed full, but also check the weight of packed boxes before sealing.

"Essentials" Box: Pack one box to keep close at hand (i.e., not buried in the back of the moving truck). The idea is to have easy access to items you may need during the move or immediately after your arrival at the new home.

ID
Your wallet, checkbook and/or ATM card
Bottled water
Toothbrush, toothpaste and soap
Any prescription medications
Aspirin
Snacks that don't require refrigeration or cooking (granola bars, nuts, bread, PB, etc)
Paper cups, paper plates and plastic utensils
Towels
Sheets
Scissors and tape
Closing documents if you're buying a new home
Important files
Medical records
Pet food and pet littler, if applicable

Before Moving Day -

Keep People Updated: Contact or visit your local Post Office to obtain a Change of Address form. You can also obtain this form online at http://www.usps.com. Give a change of address to the following: Banks, schools, friends & family, insurance companies, doctors and specialists, cell phone providers, credit card companies and magazine and newspaper subscriptions.

Clean in Waves: Trying to clean your whole house at once (either before or after moving day) can be an overwhelming prospect. Instead, begin cleaning any rooms in your house that have been emptied such as closets, basements or attics.

Get Help-

One of the most important moving tips: you don't have to do it alone.

Move with the Pros: A professional moving company can take the care of all the hard work, leaving you to kick back and supervise. If you feel like avoiding the packing stage as well, most companies will pack your items for an additional fee. Prices and reliability can vary widely between companies, so compare quotes from at least three local companies before choosing a moving company. Don't rely on over-the-phone price quotes from the moving company you select: make sure the moving company comes to your home to accurately assess the space and approximate weight of your shipment. Make sure to check their history with the Better Business Bureau or American Moving & Storage Association.

Moving Consultant: If the mere sight of a cardboard box leaves you feeling overwhelmed, consider hiring someone to handle the nitty-gritty of your move. These consultants are the relocation industry's answer to wedding planners and travel agents -- they can arrange for movers, pack your stuff, switch over your utilities, and transfer school and medical records. If you can swing the price tag, or if your company is covering relocation costs, a consultant can make your move relatively stress-free.

Portable storage: Companies like PODS, U Haul and 1-800-PACKRAT will deliver a portable storage unit right outside your door. Before making the call, make sure you have enough parking on your property to accommodate the size of the temporary storage unit. Fill the storage space at your own pace. When you're finally ready to move, give the service a call and they will deliver the storage pod to your new home. Portable storage units still force you to do all the work, but they are a low cost solution and can serve as an alternative if there is a gap between the time you need to leave your old home and can access the new property.

Rental trucks: Renting a box truck can be a cost-effective alternative to hiring a moving company -- as long as you plan ahead. A 10-foot moving truck will generally hold an apartment's worth of stuff; while a 24-foot truck can accommodate a three-bedroom house. It's best to choose a larger truck; you won't have to cram items into a smaller space, and for cross-town moves you will avoid wasting time on multiple trips. Read the fine print about mileage allowances and fuel surcharges, and make sure you know the rules regarding when and where you can return the truck. Depending on the size of the truck and length of the move, you may consider adding supplemental insurance through the rental company in the event of dings or dents to the truck.

Friends and family: Free labor is great, but you'll likely still need to rent a moving truck (unless everyone in your family has a super duty pickup). Make sure you have every possible detail taken care of before your volunteer labor force shows up; the last thing you want is to leave your friends and family waiting while you pack the last boxes or run to go pick up the rental truck. Ask friends and family to help with packing and loading to a reasonable degree, and expect to return the favor when it's their turn to move. And common courtesy calls for you to provide lunch and refreshments for your friendly work crew.

After the Truck is Loaded -

Once you have everything packed away into the trucks, you'll want to pass through your house and check off a few final items before getting on to your new home.

Damage Control: Check for any damages to walls, doors or frames caused by furniture being moved. The last hassle you need is to lose part of your security deposit or have any issues with the homebuyers because your furniture dinged a door frame or left a scratch in the wall.
Leave Behinds: Re-check the house for anything you might have accidently forgotten. Look through the attic all closets, the garage, any crawl spaces, the medicine cabinet, and the drawer under your oven. Moving can be a difficult task. Don't make it more work than necessary by moving furniture, clothing, art or other belongings that you don't actually want or need anymore. Look for opportunities to de-clutter your life and get rid of excess possessions.

Hand it Down: Tell your friends and family you're paring down possessions. You'll feel better, and it'll be easier giving up that expensive couch or antique bureau if you know your best friend will make good use of it.

Yard Sale: The tried and true yard sale can help you can get rid of things you don't use and avoid paying to move them. As a bonus, you'll make some extra cash that you can spend on new things in your next home.

Donate: Consider donating unwanted or unsold items to charity. Many charitable causes have free pickup services for donations that make giving your unwanted furniture and items as easy as picking up the phone and scheduling a pickup time.

Packing-

Your wallet, checkbook and/or ATM card

Bottled water

Toothbrush, toothpaste and soap

Any prescription medications

Aspirin

Snacks that don't require refrigeration or cooking (granola bars, nuts, bread, PB, etc)

Paper cups, paper plates and plastic utensils

Towels

Sheets

Scissors and tape

Closing documents if you're buying a new home

Important files

Medical records

Pet food and pet littler, if applicable

Before Moving Day -

Keep People Updated: Contact or visit your local Post Office to obtain a Change of Address form. You can also obtain this form online at http://www.usps.com. Give a change of address to the following: Banks, schools, friends & family, insurance companies, doctors and specialists, cell phone providers, credit card companies and magazine and newspaper subscriptions.
Clean in Waves: Trying to clean your whole house at once (either before or after moving day) can be an overwhelming prospect. Instead, begin cleaning any rooms in your house that have been emptied such as closets, basements or attics.

Get Help-

After the Truck is Loaded -

2011-05-05T08:14:00.000-07:00

EXPECTATIONS ARE EVERYTHING

Most leases result in satisfied owners and happy tenants. Unfortunately, a few do not go well. The vast majority of those few problems come down to a mismatch of expectations between the landlord and the occupants. Not all home leases are alike and, like most agreements, assumptions will cause trouble.

It is CRITICAL that renters read their lease and raise any questions or objections before move-in. The most common expectations are outlined below but, please, read your lease document and make sure you can commit to everything that’s required of you and the obligations of the property owner meet your expectations.

RENTER EXPECTATIONS

You expect a home that is clean and everything works properly. You will want problems fixed right away. Repairs are the owner’s obligation, within the lease and under the law. Be reasonable about those that don’t pose an immediate danger or significant nuisance, but insist on quick correction for those that do.

Generally you are taking the home As Is. Be sure it is what you are willing to live with before you sign the lease. Any updates or changes to the home that you expect from the owner must be clearly defined in the lease agreement. Verbal understandings are a common cause of disputes. If you want to make changes on your own, get specific permission from the owner in writing.

Quiet enjoyment. That means you should be free from any inspections or other impositions by the owner or the owner’s agent that are not defined in the lease – as long as you are meeting the terms of the lease. It does not mean that the owner can’t do occasional inspections for mechanical or maintenance issues. Those should be reasonable and if there is any doubt about what is or isn’t reasonable, be sure it is defined in the lease. Owners can investigate if they have reasonable cause to believe the terms of the lease are being violated…so don’t give them a reason! Be aware that, once you give notice that you are not renewing your lease, your lease is likely to require that you allow showings of the home to prospective renters, usually only in the last 30 or 60 days you live there.

You will want your Deposit returned when you move out. To ensure that happens, make sure you understand your maintenance requirements, treat the home “gently”, keep it clean, and report any issues that do arise immediately. Anything that is not as it was when you moved in is likely to reduce the amount of deposit that is returned. Wall repairs are a very frequent need at the end of a lease. The best way to minimize surprises on the deposit is to do a thorough walkthrough with the owner or agent at move-in to document any problems that might look like you caused them at move-out. Finally, make sure you know about any obligations upon move out, such as professional carpet cleaning.

OWNER EXPECTATIONS

Owners want their investment protected and need enough rent to cover their mortgage and, sometimes a little profit. Most have primary goal of long term return on investment. Damage to a home will quickly offset any profits so excellent care of the house is critical.

Be honest. The owner accepts your lease based on the information you provide when you apply. Any false or misleading or withheld information will be a problem. For example, moving in people or pets that were not on the lease is never ok without the owner’s permission and an amendment to the lease. Pets are, unfortunately, the most common problem. They can cause a Lot of damage in seconds and may make the house unsuitable for future tenants with allergies. It is never ok to have a pet in the home without written permission in the lease. Never.

Pay the rent on time. Owners have to have that cash to cover their commitments. You are not allowed to withhold the rent because of unresolved problems with the house. Please see your lease for the proper way to get problems resolved. Also, it is never permissible to use the security deposit as the last month’s rent.

Report any structural or mechanical problems immediately so they can be corrected before they cause further damage. Water, gas or electrical problems are crucial, even if they aren’t directly causing you a problem.

Respect the neighbors and neighborhood regulations. Many rental houses are in areas with Home Owners Associations. The owner must comply with those rules therefore you need to make sure you know about them and follow them. Even if there is no HOA, neighbors will expect you to keep the house and surroundings clean and free of clutter and avoid any disturbances.

Leave the house just the way you found it. It is difficult to remove dirt and correct problems that accumulate over time so it is important to maintain everything all the time. A simple example is keeping the furnace filter changed.

Keep your lease commitment. The term of the lease is very important. Leaving early has significant penalties because it costs the owner a lot of money to re-lease the home. Most people move during the summer months so owners do not want their properties vacated during the winter, resulting in long periods with no rental income.

As stated above, the most important thing to do is read your lease thoroughly and negotiate any issues Up Front, not when a problem occurs. As long as both owner and renter are literally “on the same page”, the rental experience will be stress free for both parties.

Do you have thoughts or comments or stories to share? Please post them here!

Is Lease/Rent–To–Own right for you?

2011-04-12T08:14:00.001-07:00

People who are in the rental market because they don’t have the funds for a down payment on a purchase, sometimes look to Lease-To-Own plans. In some circumstances, these help build some additional funds toward a future purchase. They also can “lock in” a specific property that you want to buy in the future. BUT, there are some important questions you need to consider:

· What is the required down payment for the Lease-Option program? In what circumstance can that down payment be lost? It is common for a Lease-to-purchase agreement to stipulate that the down payment is forfeited in the case of any delinquent payments. A change in employment or marriage status or other personal changes can put that money at risk.

· What is the purchase price of the home at the time of purchase? In a market as volatile as the past three years, this can be a major issue. Generally the price must be at or below the appraised value at the time of purchase. In a changing market that is very hard to predict. One way to alleviate this problem is to state the selling price as an amount over or under the then-current appraised value. Be aware that if the value goes down substantially, the owner will not want to sell. And if it goes up a lot, you may not be able to finance that price.

· Is the owner charging above going-market rent to pay for the accrued funds from each month’s rent? If so, you may be better off renting at a competitive rate and depositing the difference in savings.

· Will this really be the right house for you several years in the future? Changes in taste, styles, family situation, employment, neighborhood environment and many other things might cause you to make a different decision. In most lease-to-purchase agreements, you will lose your down payment or at least give up the benefits of the agreement if you back out.

Lease To Own CAN be a path to home ownership. Just go into it fully aware of the issues above. Then move forward if it still makes sense.

Lease Now, Sell Later

2011-03-29T09:56:00.000-07:00

With the real estate market at a very low point, now is a poor time to sell a home. If you need to leave your current home, such as to relocate, leasing it may be a way to buy time, while the market recovers.

If you sell your home today, you may find, like many others, that you have no equity in the home, or may even be "upside down" where you would have to bring cash to close on the house. In that situation, you do not have equity to use for a down payment on your next house. Renting in your new location is probably a necessity.

But you may not have to sell now and take a permanent loss of equity. You can lease your current home. The rent will cover most or all of the payment on your current home, sometimes provide a little monthly cash flow. You can continue to rent it until the market moves back up, creating that equity for you again.

An interesting aspect of leasing is that expenses on the current home become tax deductions. If you do upgrades or repairs to sell your home now, those costs are entirely out of your pocket. Once you make it a rental, those costs are tax deductible. So it’s' it may be the perfect time to fix the roof, add or replace a deck, finish the basement or other projects that will add significantly to the value of the home when you do sell it. Depending on your tax bracket, you essentially get a big discount on those improvements.

This may sound great...but most families, especially if they relocate, do not want to handle leasing their previous home from far away. A rental agency and/or property manager can help. They will do all of the work to get a tenant into your house. And they can handle collecting rent, doing move-in and move-out inspections, arranging maintenance, scheduling any repairs and communicating with the tenant. Typical fees for a rental agent are less than a month's rent for a one-year lease. Property managers usually charge between 6 and 9 percent per month. Add those amounts to your monthly house payment to see what rent amount you would need to cover your costs. The rental agency can give you a good estimate on how much rent your home is likely to bring in the marketplace.

I'd like to hear your questions, thoughts or your own experiences with leasing your property.