Reader Question: Today’s Best Rental Strategies

A reader asked this question about strategies for today’s rental market:

Alright experts, I was going to buy a house this fall/winter but after following this blog for a few weeks have decided to wait it out.

Here’s my question: Given the current situation, what is your prediction for the rental market, specifically houses, in city for the near future? I am looking at renting a 2-3 bedrooom house (not apartment) and havent seen alot of downward trend yet, but there also appears to be very little availiable at the moment in 98109 or 98119 (small search area but my kids are in the schools).

Given the number of sellers that haven’t been able to sell, I thought I would have better offerings. Any ideas/strategies here? I don’t need to move right away.

With home prices still flat to down and foreclosures continuing to rise, it seems likely that we will see a steady increase of individual homes being added to the rental market over the short to medium term (at least).

Many of the current crop of “accidental landlords” are rationalizing their decision to rent out their home (often at a loss) as “only temporary until the market recovers.” Of course, if your home is underwater by more than about ten or twenty thousand dollars, it’s very likely that “until the market recovers” could be at least five or ten years, but it may take these landlords a while to come to grips with that reality.

As for finding a good rental, I recommend starting with these posts:

What strategies are you using to find good rental deals these days?

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

76 comments:

  1. 1

    With the Uncertainties in the Economy

    I’d make a deal with a landlord for a “very low rent” and a fixed rent lease for at least two years, with a two month rent penalty if you break the lease contract. Make a credit check a contractual obligation for both tennant and landlord.

    It’s win/win, the landlord gets to keep the unit occupied with a paying tennant and the tennant has some improved stability in rent.

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  2. 2

    I love the premise of this. Someone who apparently took financial advice based off of comments of largely anonymous people on the Internet is going to get more advice from anonymous people on the Internet.

    Let’s assume this was something else. Is there anyone who thinks someone should invest in stocks based on comments posted on an Internet forum?

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  3. 3
    ChrisM says:

    RE: Kary L. Krismer @ 2 – Not sure what you’re driving at, Kary. I research stocks all the time based on comments on the Internet. Are you personally acquainted with the reporters of the WSJ? I’m not.

    I’d rather get real estate advice from the regulars on this board (whom I’ve never met) than from my parents.

    On topic, I signed an 18 month lease a few months ago. I asked for the longer time period, as I wanted both the stability and to lock in the rate. My thought process was the housing market would hopefully stabilize next year. Of course, this was before the title fiasco.

    When looking, I offended one landlord by asking him about his creditworthiness after he asked about mine. Good times.

    If you find a house you like, do the research on the county’s tax website — if it was purchased after 2005, I’d be extremely leery.

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  4. 4
    patient says:

    You should of course only rely on the advice from your bank and a real estate agent. They know what is best for you and only have your interrest at heart.

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  5. 5

    RE: ChrisM @ 3 – I assume that is based on some facts being posted, not opinions on whether something is going up or down. Here the person acted based on opinions that real estate prices will be going down, and now wants opinions on what rents will do.

    Need I remind people of the predictions here on what interest rates would do when the government quit buying so many mortgage backed obligations back in about March?

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  6. 6
    WestSeattleDave says:

    RE: Kary L. Krismer @ 5 – Kary — there may be opinions on this site, but there is also a whole lotta data driving those opinions. That is one of the best features on this site; both the Tim’s data and the multitude of links provided by those posting here. I think much of the opinion here is backed up by the facts presented. If you want your opinions with a lack of facts, watch FOX news.

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  7. 7

    By patient @ 4:

    You should of course only rely on the advice from your bank and a real estate agent. They know what is best for you and only have your interrest at heart.

    To be clear, I’ve repeatedly said real estate agents should not make such predictions, and even support adding an ethical rule that would prohibit such predictions.

    Also, I think the key thing that will affect this is the result of the inflation/deflation issue.

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  8. 8

    By WestSeattleDave @ 6:

    RE: Kary L. Krismer @ 5 – Kary — there may be opinions on this site, but there is also a whole lotta data driving those opinions. That is one of the best features on this site; both the Tim’s data and the multitude of links provided by those posting here. I think much of the opinion here is backed up by the facts presented. If you want your opinions with a lack of facts, watch FOX news.

    Much data of the same type probably existed in 1978. How did that work out?

    As to the last reference, I think you mean NPR. ;-)

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  9. 9
    D. in Ballard says:

    The dilemma is landlord flexibility versus your flexibility. You want a flexible lease so that you can buy if the property you like comes on the market, but you don’t want your landlord kicking you out after a year if you’re not ready. I would caution people renting from sellers who are waiting out the market. If you’re in a trendy neighborhood, let me tell you that these people get impatient and they will want to sell. And the demand for cute houses in trendy neighborhoods will surprise you. I’ve been kicked out twice for this. Both times I thought the landlord would never find a buyer. Both times they did.

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  10. 10
    whatsmyname says:

    Data question: Do foreclosures create more rentals than renters? Or given standard bank practices, is it possibly the other way round?

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  11. 11

    RE: whatsmyname @ 10 – Very interesting questions.

    There are a lot of vacant houses right now for numerous reasons, so that’s not good for renters at the present time (less supply). But on the other hand, banks take a long time to foreclose, so that’s good for renters at the present time (less demand).

    Over longer terms, probably more people buy foreclosure properties to rent them out, than to live in them, but I don’t know I’d say that if you included in the latter group those that bought to flip. If foreclosures do create more landlords than people who ultimately own, then that would be good for renters (more supply).

    Those three things are probably just the tip of the iceberg on this topic.

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  12. 12
    The Kid says:

    Is it just me, or are delusional homeowners turned delusional landlords still asking delusional prices for their rentals, and throwing temper tantrums when no one will rent from them or tries to negotiate them down? Anyone else experienced this?

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  13. 13
    David S says:

    RE: The Kid @ 12 – Yes. Had our eyes on a new property built and sold in 2003 for $399k. Listing early this year started at $695k. Four price drops down to $615k, 270 days later, listing removed.

    It is now listed by a management company as a rental for $2790/mon. It’s 2900sf, 4 bd, on a little over an acre. Tell me $2800/month rent in South King County is realistic please.

    So yes, I have seen a delusional seller delist who is now asking for delusional rent.
    .

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  14. 14
    2kt says:

    RE: David S @ 13

    Rental market is at roughly $1/sqf. For small sqf property it is higher than $1/sqf, for bigger sqf it is lower than $1. $2,790 for 2,900 sqf home is may be over the market by $100, depending on condition. Renting it may take a while simply because few people can afford close to $3K for rent and those who can usually own.

    The rental market is lopsided. Any 3-bed home renting around $1,500 or lower will rent quickly, anything over $2,000 will require more time and effort, regardless of sqf of the home. It’s because most rich renters in Seattle live on this blog (and around the Lake WA in their $900/mo waterfront rentals), but out in a real world renters are not very affluent.

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  15. 15
    Poco Ritard says:

    Delusional or desperate?

    We rent a townhouse north of Green Lake. There are a dozen of them for sale just along my usual bike routes. Some observations…

    Lotta for sale signs but I very rarely see sold signs. Maybe one in the last year. The WHOLE DEVELOPMENT is under water. They all were sold at the same time for the same price. Now they’re all asking $359K for a 3 bedroom 2.5 bath 1300 sq ft unit that first sold in 2006 for $369K. And it’s not happening. The unit across the alley from us sold last April for $306K after a year. His next door neighbor (who is being transferred to another state) is understandably upset because he’s gotten no offers. Direct quote: “That guy (the one who sold at 306) really screwed us!” Another way of looking at it is that he didn’t “screw” you, he got screwed really hard and those same forces are hammering you (can’t figure that sale out, BTW, doesn’t appear to be short sale).

    Similar story with rents. Go to craigslist and count the number of these you see offered for $1795/mo. Hasn’t come down.

    So what’s up with the “delusional” pricing? That’s not the market price, it’s how much they need. There really aren’t a lot of choices. If you don’t have the cash to make up for a $60k drop in price (or don’t want to give it to the bank) you have three choices: default, short sale or wait it out. Most of them (usually ON THE ADVICE OF THEIR REAL ESTATE AGENT – think about that) are trying to wait it out, and will repeate stock phrases ad nauseam about “the market is turning around,” “still excellent value,” etc. If you want to wait, you have to be able to carry the mortgage (plus all the recasts which have hit most of them now). Offering a lease at a rent that reflects the market now will lock you into a negative cash flow for a year.

    The most common choice is to sit it out in the house, declining opportunities that require moving. These folks are stuck. The ones that are offering rentals are often still living there. Many of the units are not getting rented at that price, so they stay, hoping that sooner or later someone will either buy or sign a lease that will at least let them move. If they still have a job, they can handle the payments. But those houses are totally illiquid. Talk about pent-up supply. This stuff will flow onto the market at the first sign of improvement to keep it at an equilibrium point somewhere between “desperate” and “miserable.”

    That’s what I’m seeing in North College Park, anyway.

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  16. 16
    GrizzlyBear says:

    RE: Kary L. Krismer @ 2

    I think the internet is one of, if not, THE best resources for all housing related information.

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  17. 17
    matsayswhat says:

    People are “waiting it out” by renting their properties out, but for those that have a first AND second (as we all know is/was far too common), what else is there?

    It kind of seems like renting is the only chance a lot of people have unless they’re going to try to attempt a short sale or foreclosure, but with seconds that’s tough and they could end up paying a lot more than if they just ate it on renting at a loss for half a decade.

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  18. 18
    cutienoua says:

    RE: Kary L. Krismer @ 2 – I would not trust you to tell the weather!

    Rate this comment: Thumb up 0

  19. 19
    gues says:

    and now for “The Guest” to privide an exciting half time report! Sponsored by Zip Realty

    Kary’s really holding his own today! Go Kary! Let’s go shop for some shady pharmaceuticals on the internet! Work at home! Ask an internet blogger about what life is really about!

    This fun exchange and everyone picking on Kary for no good reason kind of makes up for Scotsman’s withdrawal. Hope he comes back before the world ends, ’cause I don’t want him to miss ARM – a geddon!

    Where’s Pegasus? He gets more crap than anyone for his opinions. Let’s all give Pegasus some crap while he isn’t looking! Wasn’t Pegasus the horse’s arse that flew too close to the sun?

    It’s Friday, – a good time for Jillayne to chime in. (everyone’s sweet heart – every blog needs one) I saw her put a plastic spoon in the paper bin once

    Let’s pick on ARDELL ’cause she likes capital letters!

    Are there any loser home owners we can round up and make fun of? This week let’s pit loser home owners against loser renters. Biggest wedgie wins!!!

    — Gotta go cry in my soup now –

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  20. 20
    ray pepper says:

    Strategy for rentals??………Since I deal with ALOT of landlords and investors I would offer the owner 6 months up front and paid at a 20% discount.. If it rents for 1000 a month give them 4800.00 and tell them you would be interested in doing that again in 6 months.

    I would caution to make sure the home is ACTUALLY OWNED by that owner. Nearly every investor I know would JUMP at the 4800 so he could forget about his rental for 6 months!

    Good Luck!

    On a side note this week Trustee Sale update for King and Pierce County today:

    249 Trustee Sales Held Off (most I have seen in awhile)
    101 Reverted back to the bank (soon to be a juicy MLS property or joining the throngs in the arena of waiting to be listed that the banks are STRATEGICALLY HOLDING ONTO so as not to collapse the market)
    15 Sold to 3rd Party (investor)

    And theres your Auction update and the last thing I smell is a housing recovery. What I do smell is ALOT of urine under carpeted floors that KILZ is the only remedy. I bet a good % of the above 350 have this lovely scent of decay brewing….

    http://www.angrybearblog.com/cat.jpg

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  21. 21
    Sniglet says:

    For what it’s worth, I converted from a lease to a month by month rental this year because I believe that rents will be going down (along with my prediction for a signficant decline in the broader economy over the next year) and wanted to have the flexibility to either move to a cheaper place or negotiate lower rates.

    Of course, as Deejayoh will point out, I jumped the gun by selling my Bellevue home back in 2003 because I was concerned about what was happening with housing and the economy. Timing economic trends is gollyably hard. All I can do is tell you what I am doing, and why.

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  22. 22
    pmseatac says:

    One thing I am noticing more and more is houses are entering the rental market advertised as duplexes, when they are in reality room mate situations. You need to question the prospective landlord very carefully before going to look at the property if it is advertised as a duplex. I define a duplex as a building designed with two completely seperate rental units with seperate entry, no common doorways between the two units, and seperately metered utilities. A single-family house with a stranger living in the basement, where you share the utilities, and keep the basement door locked is not my idea of a duplex.

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  23. 23

    By cutienoua @ 18:

    RE: Kary L. Krismer @ 2 – I would not trust you to tell the weather!

    That’s your choice. You do realize though that I don’t care what you think either right? So I’m not sure why you bothered writing what you wrote. You seem to be a rather pointless and insignificant presence on the Internet.

    More to the point though, you do realize that I’m not trying to offer an opinion on this topic, other that to say getting advice in this manner is rather stupid. Disagree with that at your own peril.

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  24. 24

    By GrizzlyBear @ 16:

    RE: Kary L. Krismer @ 2 – I think the internet is one of, if not, THE best resources for all housing related information.

    I would agree that the Internet can be a good place for information. So in that regard, if you learn from someone here that the median price of houses went down X percent over the past Y months, that’s a good thing. What’s bad is basing a personal financial decision on someone on the Internet (anonymous or not) saying that in the next Y months they think the price of houses will do X.

    Again I would reference the opinions of others here about six months ago of where interest rates would be at this point in time. They could tell you what the interest rates were then, because that was a fact. The rest was an opinion, and not worth anything.

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  25. 25
    David Losh says:

    RE: GrizzlyBear @ 16

    No it’s not. Housing is a subjective thing.

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  26. 26
    David Losh says:

    RE: matsayswhat @ 17

    You know that is an interesting point. There have been times when you met some one in a studio aprtment who owned a house that was rented out. They were just making the payments on the house to hold it until the market recovered.

    You are right that with a second mortgage that may be a good financial strategy.

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  27. 27
    David Losh says:

    RE: Kary L. Krismer @ 23

    So, Kary, is it your turn in the barrel, or what?

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  28. 28
    wreckingbull says:

    Don’t be afraid to low-ball the landlord. You will be surprised with the outcome.

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  29. 29
    Beekeeper says:

    It was I who posed the question yesterday. Yes, I wanted to get some ideas for a personnel strategy, but mostly hoped to open this topic up for greater discussion.

    As Whatsmyname said ” Do foreclosures create more rentals than renters? – fascinating topic with a number of interesting turns. let’s go there sometime.

    Kary – don’t be so literal. I came mostly for the data on this site, (which supports my own analysis) but enjoy a good economics banter as much as the next guy (or gal in my case). You missed a good oportunity to be complimented. You must gleen something from the discussion here too or you wouldn’t be here all day, every day…

    Since I’m not a committed renter and not a committed buyer, I want to maintain maximum flexibility and score a nice place to live for a nice price. By nice, I mean better than last year for an equivalent rental.

    There has been some good ideas: Ray Pepper – loved your idea, I too have thought of putting cash rent down up front, even consideriing 10 months rent cash up front for 12. However, what happens if the landlord is delinquent, could I end up losing all that cash?
    Software Engineer – Again, if the landlord goes into foreclosure, would a two year lease protect me at all? What was that discussion about 2 year leases the other day, not valid??
    D in Ballard – If the cute house in the trendy neighborhood just happens to be the one I’m renting and the price is (finally) right maybe its not such a big risk moving in there. I get first dibs and will subtract the agent costs. On the other hand, flexibility-yes. If the perfect REO comes up, I want to ditch the rental. What be the consequences? Can I expect to score the rental I want and ask for an out clause without giving up something in return?
    And finally — how does the rental market affect the bubble? Lots of room for economic theories here. More foreclosures = more renters, but there are also more rentals, which may be less “stable” because of landlord credit issues. How best to take advantage of all of the above?
    Thanks for your opinions and I promise not to take any of them without due diligence – you’re good – but you’re not that good!

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  30. 30
    Mike says:

    ray pepper wrote: “Since I deal with ALOT of landlords and investors I would offer the owner 6 months up front and paid at a 20% discount.. If it rents for 1000 a month give them 4800.00 and tell them you would be interested in doing that again in 6 months.”

    I see math is not your strong point. Since when is 20% of $5000 a $200 discount?

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  31. 31
    Alan says:

    It has been a while since I posted. I’m still renting. Probably will be for another year and a half at least. I have been seeing places I could imagine myself living in at a price I can afford (by stretching my finances), but I still think prices are going to drop further. I’m not as confident in that prediction as I was a few years ago. When people ask if I think housing prices will drop I generally answer, “I have no idea.” And I really don’t. But my money is betting against prices going up (since I’m renting).

    Anyway, the main point I wanted to make is that every single time I’ve rented I’ve tried to get a discount by paying six to nine to twelve months in advance. It has never worked for me. I’ve generally been told, “you can do that but it is your decision and we don’t care and won’t give you a discount.”

    I don’t think I would negotiate a rental price down from an individual. I don’t want to start a relationship with a landlord where we are constantly pulling back and forth on finances. I’ve hit brick walls with corporate rentals. I don’t know if it is even possible to negotiate with them.

    I found my current rental by looking at craigslist every morning for three months. I toured several places. I developed a sense of the market. Then one morning I saw my current place. I called immediately, made an appointment to tour that morning, found the best place I’d seen in three months and signed a lease that day.

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  32. 32
    Jonness says:

    By Sniglet @ 21:

    Of course, as Deejayoh will point out, I jumped the gun by selling my Bellevue home back in 2003 because I was concerned about what was happening with housing and the economy. Timing economic trends is “golly”ably hard. All I can do is tell you what I am doing, and why.

    The goal of market-timing is to make more profits than losses. You walked in 2003 with a profit. That means you won the game. You could have made more, but that’s not the point. Look at all the folks who refused to cash out, left their trade on the table, and wound up losing everything. You won, and they lost. Of course, your win doesn’t reveal how you reinvested the profits, so we don’t know how much you ultimately won or lost. Only that you won on that particular trade.

    The tendency for bright forecasters is to forecast events to occur way too early. I’ve seen this occur time and time again in the realm of scientific and technological invention. When you understand something about the future, you think everyone can see and understand what you do just because you do. But in reality, few are brave enough to walk away from society and take the contrarian view necessary to peer far into the future. Thus, real world changes will always lag the inventor’s timeline. The brighter the inventor, the more room there is for error. Take Nikola Tesla for instance. He had a difficult time adjusting his outlook for the future in a manner that could personally reward him within his finite lifetime.

    The key to being a futurist is to use established patterns of human nature as a guide to better refine timelines of invention. Ray Kurzweil is an extraordinary inventor, but IMO he is way too aggressive with his timeline of when the singularity will occur. Bright futurists need to inject more “market psychology” into their outlooks in order to prevent jumping the trade too early.

    In general, Fundamentals = long term outlook, Market psychology = shorter term outlook. Through fundamentals, we know what outcome has the best chance of eventually occurring. Through market psychology we know when the most likely time is that it will occur, and this outlook must be constantly scrutinized and adjusted as new events continue to unfold.

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  33. 33
    Jonness says:

    By Kary L. Krismer @ 23:

    More to the point though, you do realize that I’m not trying to offer an opinion on this topic, other that to say getting advice in this manner is rather stupid. Disagree with that at your own peril.

    I see no harm in getting other people’s advice. However, following others’ advice without thoroughly thinking through the problem yourself is less than ideal. Part of the process of thoroughly thinking through a problem is to gain ideas from others and figure how they fit into your own model or philosophy. I suspect this is the intention of the questioner in this particular situation.

    A minority of posters here sold too early or bought too late. Thus, we are as good of candidates as any to bounce ideas and opinions off of.

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  34. 34
    EconE says:

    By Mike @ 30:

    ray pepper wrote: “Since I deal with ALOT of landlords and investors I would offer the owner 6 months up front and paid at a 20% discount.. If it rents for 1000 a month give them 4800.00 and tell them you would be interested in doing that again in 6 months.”

    I see math is not your strong point. Since when is 20% of $5000 a $200 discount?

    Ray’s math was correct.

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  35. 35
    ARDELL says:

    RE: Beekeeper @ 29

    Renting in “rental only” complexes that have always been rental only seems the safest bet vs a privately owned and recently purchased and financed condo. When renting a house, one can check how much the owner owes. If he has substantial equity (60% or more) and the current mortgage is less than the current market value…not as likely he’s going to default and lose the property while you are renting it.

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  36. 36
    ray pepper says:

    RE: EconE @ 34

    Hes been drinking. Everyone knows Ray is ALWAYS correct……..Complex 20% formulas while drinking cause great mental anguish for many.

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  37. 37
    ARDELL says:

    RE: ray pepper @ 36

    Actually drinkers should “get it” instantaneously. Try this 20% example.

    Bar Bill – $100 so 20% tip equals $10 plus $10 = $20. If $20 is 20% of $100 then $200 is 20% of $1,000.

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  38. 38
    Scentsy says:

    I think we all need a crystal ball so we can predict the housing market. Perhaps it could help us predict the right time to buy or rent. I agree that renting in a complex that has always and will always be a rental, is the safest way to ensure you have a long term situation as a renter. I have seen a few renters in our neighborhood who thought they were home for a while suddenly be forced to move over fear of the market taking a bigger dip.

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  39. 39
    EconE says:

    RE: ray pepper @ 36

    Here’s one for you Ray.

    3 guys walk into a hotel. Clerk tells them it’s $30 for a room. Each person pays $10.

    Manager comes in and notices that the Clerk overcharged them and says that it should be $25.

    Manager gives clerk $5 to bring to room for refund.

    Clerk gives each person in room $1 ($3 total) and keeps $2 for himself.

    Each person after $1 refund has now only paid $9 (3*$9=$27 total)

    $27 total paid + $2 in Clerk’s pocket = $29

    Where’s the missing $?

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  40. 40
    wreckingbull says:

    By Alan @ 31:

    I don’t think I would negotiate a rental price down from an individual. I don’t want to start a relationship with a landlord where we are constantly pulling back and forth on finances. I’ve hit brick walls with corporate rentals. I don’t know if it is even possible to negotiate with them.
    .

    Why the fear of respectful negotiation? This has almost always worked for me. Usually the landlord realizes that the amount of money they are losing by holding out for their asking rent is more than they would lose if you offered them 20% under their asking price and moved in now. There are so many bad tenants out there, many landlords would take a price concession knowing that someone decent will be taking care of their place.

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  41. 41
    ray pepper says:

    RE: EconE @ 38

    no missing buck….

    house 25.00
    clerk got 2.00
    each guy got refund 1.00………..30.00

    heres one for U and Mike. Dont strain yourselves:

    A plane crashes on the border of Canada and the US. According to the Catastrophic and Disaster Treaty signed in 1902 between US and Canada where do they bury the survivors?

    on the border line ?
    in canada ?
    in the US ?
    Where ever the plane trip originated from ?
    Wherever the plane was in destination to ?
    Up to individual family discretions?
    other?

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  42. 42
    EconE says:

    RE: ray pepper @ 40

    You don’t bury survivors.

    ok,

    3 identical statues at a “fork” in the road. One path leads to heaven, one to hell.

    One statue always tells the truth.

    One statue always lies

    One statue sometimes tells the truth and sometimes lies.

    You get 2 yes/no questions.

    What questions do you ask, and to whom.

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  43. 43

    Here’s a good tip for the pay months in advance strategy. Go to Craigslist and find an owner that is out of town, preferably out of the country. They will typically take huge discounts if you offer to pay the first 12 months rent in advance. :-D

    (Just in case someone is really dense, that is a joke, and references Craigslist fraud.)

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  44. 44
    Beekeeper says:

    Kary, geez, it was a nice joke until you felt the need to explain it.

    The point really is that the money can be used as a potential reward, but it is not without it’s own risk. There are alot of “accidental landlord’s out there that are probably concerned about 1) keeping it rented for the term 2) making sure the occupants can pay the rent 3) be sure that the occupants DO continue to pay rent, regardless of ability 4) that their “valuable property” stays in very good condition for when it does ultimately go on the market again. Prepaying rent addresses concerns 1-3, and my charming personality eliminates concern 4 ;).

    This strategy probably won’t get you anywhere in a traditional apartment complex or managed rental property since the people you talk to there don’t really have a personal stake in concerns 1-4, above. Individual homeowners probably would, I think, at least consider it.

    The question being is it worth the risk?

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  45. 45

    RE: Beekeeper @ 44 – There are actually people that don’t know what an emoticon is.

    Seriously though, there are risks to paying in advance. I’m not sure where you would be if the place burned down (assuming you didn’t have renters insurance as is the case with about 80% of renters).

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  46. 46
    Haybaler says:

    RE: softwarengineer @ 1
    SWE, I recently posted an ad on Craigslist offering a similar deal on an 800 sq ft daylight basement mother-in-law in my Pierce County home. I was flagged off in about 15 minutes.

    I attributed that to the fact that most people searching for low cost ($500 p/mo) utils included, don’t have the $30K cash that I was requesting for a Five year lease, paid in advance, so the shoppers flagged me off.

    For anybody on here actually looking for a smokin’ deal ….

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  47. 47
    Snigliastic says:

    RE: Mike @ 30
    Since does 6 x 1000 = 5000?

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  48. 48
    Sniglet says:

    Do foreclosures create more rentals than renters?

    I don’t think that “foreclosures” themselves have much impact on the rental market. What DOES impact rentals is the over-all state of the economy. If unemployment is rising then the number of renters will fall, and vice-versa.

    Employment and income levels are the biggest factors behind household formation. When employment and incomes are low the number of households shrink as more people decide to live together (e.g. kids staying with parents, single people deciding to be roommates rather than having their own homes, etc). In a poor economy you also have people falling out of the housing market altogether by moving to tent cities.

    Since foreclosure rates tend to increase when unemployment is rising and incomes are falling you will most likely see rental rates fall as foreclosures increase, but the foreclosures won’t be the cause, it is unemployment and falling incomes which will be driving rents down.

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  49. 49
    D. in Ballard says:

    I read this blog, but I don’t know why I read it. It’s an addiction. But I certainly don’t read it to get advice from people on the internets. For one, no one is in exactly my same boat. Only a small section of us are actually looking for property in Seattle proper and that changes the real estate landscape dramatically. I would argue most of us aren’t renting in the Seattle proper market either. That again makes a huge difference.

    As much as I would like to say prices in my neighborhoods of interest are going down, I’ve seen several houses on my watch list sell for prices I wouldn’t pay. I think the top tier is going to continue to edge up. And I’ve never had much of a chance negotiating on a rental. Usually, I need to find a place fast because my last rental kicked me out because the landlord was selling. No time for negotiation. Or maybe I’m just bad at it.

    But the main reason why I don’t listen to advice from yous all on the internets is that omg have you noticed what people here read? If it’s not Sarah Palin’s Facebook page, or a fantastic economic blog recommended by “some other guy on some other blog” that isn’t even cited, or any of the other tin-foil hat armchair experts out there, it’s something even worse. There’s the bumper sticker that says “don’t believe everything you think.” So true.

    What I want to read here is analysis based on actual numbers, and I want to share experiences with those involved in real estate. Economic opinion? Advice not based on experience? Political opinion? I don’t really care what you have to say.

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  50. 50
    NESeattleSeller says:

    Just to put some real info in this discussion – I took a house off the market in NE Seattle in August and advertised it for rent. I had requests to view within 15 minutes of posting the ad and 3 qualified (I require verifiable income 3X the rent) couples come to the group showing and submit applications. I should have held an auction, but just rented to the best seeming applicants. Rent is more than they would pay in monthly mortgage if they put 10% down and just less than they would pay if they put 3% down in an FHA loan. For houses under $300K in NE Seattle the rental demand is very high and the buy demand is low. But rents are often at or very near purchase mortgage monthly payments. I think the problem is that the price range that used to be considered reasonable just wasn’t then and isn’t perceived that way now. People really can’t afford to spend 50% of their income for housing, especially when the probability of one spouse or the other having an income interruption in 3-5 years is so high.

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  51. 51
    corncob says:

    My advice is to definitely NOT pay any rent up front to a landlord in this climate. I am currently living in a rental which is now in foreclosure, it will be hard enough recouping moving expenses and security deposit from these jackasses. Unfortunately I was stupid and decided after looking at a bunch of properties where every landlord was underwater that I should just bite the bullet since I was not finding any non-risky situations. It is very hard to find someone renting right now who did not buy after 2005+ and is just “waiting out the market”, which is a code word for “going to be foreclosed before your lease is up”. Paying 6+ months up front right now is crazy, you wouldn’t see a dime of that back if they get foreclosed. You are lucky if you see the NOD and have 120 days rather than 90 before Bank of America is your new landlord.

    Now that I am back in the market I must decide if I want to buy a home and say screw it to probable future lower prices or wait it out at a corporate owned apartment building.

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  52. 52
    David Losh says:

    We have two cleaning companies, A Spring Cleaning that does whole house deep cleaning, like for rentals, and Seattle House Cleaning which is a regularly scheduled service. We work with a lot of home owners in a variety of stages renting, or selling properties. We don’t work with Property Management companies, principles only.

    If you are going to rent you should have a strategy, similar to owning a home. For me I would only rent a property that has equity. What’s happened this past year though is that home owners are watching equity decline. Many want to sell, and hold onto that cash while they still can. Others are working on paying off the debt.

    As a renter you should present yourself as a solution to a problem the land lord is having. You want to be stable, but also improve the quality of the property. Doing yard work, fixing things correctly, renting below your ability to pay. Being in a partnership with your land lord is a good thing.

    A greater problem is the reluctant land lord. My wife doesn’t want to do any more land lord business because the people we are meeting this year, land lords, are just nuts. There are a lot of very cutesy little houses out there with custom finishes that were never meant to be rental properties. We’ve been asked to clean things that will never be the same again. That designer tile looked great when the original owner lived there, but it’s trashed now.

    Land lords have very high expectations of renters that are unrealistic. That’s why you have such angry land lords, and tenants.

    My best advice is to find a place you want to be in for the next two years. Plan on one year with a one year extension. Starting now is a good time to rent. September is the best month.

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  53. 53
    Jonness says:

    By D. in Ballard @ 49:

    What I want to read here is analysis based on actual numbers, and I want to share experiences with those involved in real estate. Economic opinion? Advice not based on experience? Political opinion? I don’t really care what you have to say.

    You’ve come to the wrong place. You need to find your way back to the 2006, 2007, 2008, and 2009 environment when all of your vaunted experts were giving the “all clear” signal. There are a plethora of sites out there that will suit your purpose. I recommend you start with The National Association of Realtors:

    http://www.realtor.org/

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  54. 54
    D. in Ballard says:

    Right, saying that I don’t read this site in order to get Sniglet’s, Scotsman’s and Pegasus’ sound economic advice means that I’m a big supporter of NRA. Once again, I seem to be the only one ever accused of pulling a straw man despite the fact that commenters can’t seem to help but pulling those on me.

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  55. 55
    ray pepper says:

    RE: corncob @ 51

    Corncob I will post this again for you even though I have many times already. You have many rights if your home that you rent goes into foreclosure. Each and every tenant I have discussed this with was profoundly happy when the inevitable occurred pre and post foreclosure.

    http://www.nolo.com/legal-encyclopedia/article-30064.html

    You can be scared and run, or know your rights and stick around until the knock at the door from a real estate agent representing the bank . Have your lease ready and copies of your utility bill. You will be payed off in the end with either “cash for Keys” or a continuation of your lease to its term. Paying 6 months “up front” for a 20% reduction in rent over that term is smart money when you know your rights and have Obama at your back!

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  56. 56
    ray pepper says:

    One more for you Corn so you can see where the HIGHEST likelihood of your home (rental going) This was the past weeks Trustee Sale Auction in King County. There is about a 5% chance your home sells to someone looking to occupy. In this case you would get 90 days. In addition you will get the amount of time it takes him to take you to Court AFTER the 90 days and serving you properly at the residence. Nearly every sale at the Auctions involve the New owner approaching the home post sale, and the new owner offering you cash for keys for a hasty retreat. But, over 90% fall into the category of property reverting back to bank. In this highly likey case have PROOF what you paid, leases, and listen to what you get offered. I suspect you will find it favorable as well as everyone else I spoke with.

    BTW I don’t buy the story that MOST people have no idea the home was in foreclosure. The banks absolutely “pepper” the house with notices and letters to the residence. Tenants have MORE then enough time to prepare.

    249 Trustee Sales Held Off (most I have seen in awhile)
    101 Reverted back to the bank (soon to be a juicy MLS property or joining the throngs in the arena of waiting to be listed that the banks are STRATEGICALLY HOLDING ONTO so as not to collapse the market)
    15 Sold to 3rd Party (investor)

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  57. 57
    Beekeeper says:

    “You can be scared and run, or know your rights and stick around until the knock at the door from a real estate agent representing the bank . Have your lease ready and copies of your utility bill. You will be payed off in the end with either “cash for Keys” or a continuation of your lease to its term. Paying 6 months “up front” for a 20% reduction in rent over that term is smart money when you know your rights and have Obama at your back!”

    Thanks Ray, this is the kind of exchange I was hoping for. I have some friends in a similar situation, they rented a home in June that was sold two years ago for an astoundingly inflated price. Very soon it became obvious that the house was heading into foreclosure, notices nailed to the door and so forth. The owner of the home is choosing to not disclose anything, presumably under the ridiculous assumption that his renters are unawares.

    IMHO, this may turn out to be a very fortunate situation for my friends. They signed a two year lease for a great rate. The bank was set to foreclose around Oct 1, but it will probably be delayed for some time. The bank probably will see the house is an extremely hard sell and likely to take a major hit.

    My friends will get a minimum of 90 days and probably some sort of cash incentive to move out, and are waiting to find out who, if anyone, they are obligated to pay rent to when it’s final. I don’t mean to make light of the nightmare that it surely was for the homeowner, but there must be some renters who will come out ahead in these situations.

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  58. 58
    EconE says:

    Lovin’ the sockpuppetry!

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  59. 59
    Beekeeper says:

    EconE: you must be very paranoid. Don’t be daft, I wasnt talking about myself, and I’m certainly not Ray in disguise.

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  60. 60
    EconE says:

    RE: Beekeeper @ 59

    Why so defensive?

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  61. 61
    Beekeeper says:

    EconE: Who, me? I’ve nothing to lose. Sorry for the “daft” comment, it just rolled off my tongue.
    Let me change my remark: “Eschew obfuscation” ;)

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  62. 62
    EconE says:

    RE: Beekeeper @ 61

    No need to apologize. Call me what you will.

    I’m an assh0le.

    At least I’m an honest assh0le.

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  63. 63
    corncob says:

    By ray pepper @ 55:

    You can be scared and run, or know your rights and stick around until the knock at the door from a real estate agent representing the bank . Have your lease ready and copies of your utility bill. You will be payed off in the end with either “cash for Keys” or a continuation of your lease to its term. Paying 6 months “up front” for a 20% reduction in rent over that term is smart money when you know your rights and have Obama at your back!

    Thanks for the legal advice, however I know plenty of attorneys. First, I recommend people do not get into this situation in the first place. It is a pain in the ass and unnecessary aggravation. Second, the lease is a contract between you and the landlord, not the future owner of that property. If you are going to attempt to pay up front I would be extremely careful about how that is written into the contact you sign (and to make golly sure it is in writing somewhere at the very least). IANAL and neither are you, but I am sure you can see how it would be very easy to lose that money to the landlord with your remedy being small claims court, and having to pay up monthly to your new landlord who is forced by law to honor the remainder of your lease. Similarly, your security deposit is not something that just magically transfers to the new landlord, you are required to make a new deposit with the new landlord if they so desire and if you cannot get the old one back from the old landlord your remedy, again, is small claims court. Same with early moving expenses, etc. Basically it is an unnecessary, risk inducing hassle where you may or may not luck out depending on the asshole level of your former and new landlords.

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  64. 64
    jonasb says:

    RE: Beekeeper @ 57

    The house we’re renting was foreclosed in July of this year. We were offered cash for keys, but we refused since we needed more time to find a new place. Our lease expires in November 2010. Since the bank is not willing to rent out / manage the place, they did not require us to pay rent. We just recently received a 90 day notice to vacate, extending our stay here to January of next year. We had a problem in September when the bank sent us a 3 day notice to vacate, but a visit to a free lawyer and reference to the new law fixed that. We did not have to go to court, it was fixed in one day, it helped that we had all our paperworks – lease, lease renewal, bank notices regarding the foreclosure, and letters from the bank’s lawyer.

    There is a law that requires the banks to honor your original lease, unless you choose not to continue with it. They cannot force you to leave until your lease is up except for the usual causes – waste, nuisance, etc… So, if you sign a 2 year lease and the house is foreclosed & goes back to the bank, you can still stay there for two years, the bank should give you the information regarding payment, etc… essentially a new lease w/ them that expires on or after your original expires. If the house was purchased at auction by someone who wants to occupy the house, you will be given a 90 days notice to vacate.

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  65. 65

    RE: jonasb @ 64 – I’d heard and even mentioned here that the new owner might refuse to accept rent. Thank you for confirming that is actually a realistic possibility.

    BTW, if the new owner did want to collect rent, I’m not certain that having paid for the period in advance with the prior owner would be a defense. As someone mentioned, it could turn on how the lease was written. It could be a court would rule you simply had a claim against the old owner for the rent paid, like you would have for the deposit.

    Also, as a practical matter I’d be reluctant to deal with a landlord that would give a 20% discount for cash in advance. That would be like a business that “factors” its accounts receivable. Such businesses are usually in severe financial difficulty. Taking a 20% discount on rent would indicate the same.

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  66. 66
    wreckingbull says:

    RE: Kary L. Krismer @ 65 What? Many companies take payment for services to be rendered a year or more in advance. Furthermore, most of these situations almost always offers a discount for a longer contract. I don’t understand what you are saying.

    There are accounting implications to this, of course. One cannot book all the revenue upon receipt. But this is related to the business model, not the financial health of the company. I do agree with the risks of up-front rent though. I’m not sure I would go this route.

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  67. 67

    Corncob said:
    “Now that I am back in the market I must decide if I want to buy a home and say screw it to probable future lower prices or wait it out at a corporate owned apartment building.”

    Lovely predicament, huh?
    Does this mean that you feel that you’ll feel safe from foreclosure if you’re in a soulless corporate apartment building? And that you’re just not willing to take the chance renting a single family home because you think the risk of foreclosure is too high?

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  68. 68

    By wreckingbull @ 66:

    RE: Kary L. Krismer @ 65 What? Many companies take payment for services to be rendered a year or more in advance. Furthermore, most of these situations almost always offers a discount for a longer contract. I don’t understand what you are saying.

    What I’m saying is that if you have a contract that calls for monthly rent, to be paid on the first of the month, and you pay the landlord six months in advance, that the court might say you paid the wrong party! If the lease was written differently, the result could be different.

    By the time you pay an attorney to draft a contract for you, and consider the financial risk of dealing with someone willing to accept a 20% discount, I’m just not seeing this strategy as necessarily being that great of an idea.

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  69. 69
    ray pepper says:

    RE: jonasb @ 64

    Jonas every tenant I have spoken to was VERY pleased when the home went into foreclosure. Some did not have to pay ANYTHING for many months, most continue to reside in the home and fulfill their lease, and 20% seem to take the cash.

    The more “aggressive” tenants have done things that I will not mention here but needless to say they lived for free, completed their lease, and got cash for keys as well.

    Once again knowledge and saavy are all it takes.

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  70. 70
    ray pepper says:

    RE: Kary L. Krismer @ 68

    Kary I generally would always take a 20% off deal compared to no discount. There is risk in anything but once again…………knowledge and saavy…

    Again, I deal with many many property owners and a discounted rent should always be asked for with payment in advance. It never hurts to ask.

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  71. 71
    One Eyed Man says:

    When it comes to prepaying rents, renting a house from a mom & pop landlord is also different than renting from a large complex financed by a commercial loan. The commercial lending documents probably contain an “Assignment of Rents” and a covenant prohibiting prepaid rents of more than about one or two months because the lender wants to be able to get a receiver appointed to collect the rents and hold them for the landlord during the pendancy of any foreclosure.

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  72. 72
    David Losh says:

    OK, it’s been nice, but we are talking about residential Real Estate. There are no contracts or agreements of any kind, it’s all by shear will of the parties involved.

    If a bank takes over a property they have the right to inspect it, and correct any damage that they find, and renters are notoriously damaging to a property.

    There are no rules here. Just because lenders have chosen to play by a set of rules, policy, and procedures does not ensure they will continue.

    Never pay rent up front. Your situation can change, or the land lord may decide they want you out of the property.

    Some land lords will show a lock smith legal right of ownership, have the house opened for an inspection, determine the renter undesirable, remove the items in the home, change the locks, and secure the property. What are you going to do? Do you have rights? Prove it. In the mean time your stuff is on the sidewalk, and your kids have to go to school in the morning.

    The problem here is that most people are seeing today as a new phenomenon, but back in the day land lords would risk going to court rather than play stupid games with renters.

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  73. 73
    EconE says:

    RE: David Losh @ 72

    C’mon Dave. Show a little love to the renters.

    http://en.wikipedia.org/wiki/Scorched_earth

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  74. 74
    Mel Torme says:

    RE: Mike @ 30 – Since about the same time that a year lasts 10 months. Are you on the Mayan calendar? If so, let us know about that whole 2012 thing – one can only hope it doesn’t suck as hard as the movie.

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  75. 75
    Sara says:

    RE: Mike @ 30 – lol

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  76. 76
    Ahau says:

    By Mel Torme @ 74:

    RE: Mike @ 30 – Since about the same time that a year lasts 10 months. Are you on the Mayan calendar? If so, let us know about that whole 2012 thing – one can only hope it doesn’t suck as hard as the movie.

    I think Mike has discovered a new calendar all his own, to get out of Thanksgiving and Christmas. The Maya had three “calendars”, and none of them had ten months per cycle. Two had 18 “months” of 20 days each, and the third had 20 named days that cycled around 13 times for a 260 day cycle.

    To the question of paying lump sum rents–how much would it cost to put your lump sum in an escrow account, with instructions to pay the landlord every month, unless notified in writing (with sufficient evidence) that the landlord is no longer the appropriate payee?

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