Real Estate Question: Foreclosures and Rentals

[Angela Shelley]

The foreclosure statistics for 2007 are shocking.

My question:

With so many families losing "their homes", are there enough "affordable rentals" to meet the demand?

[yardwork]

1. I have only anecdotal evidence, but it looks like the answer is "no."

My area includes a city where housing prices have remained steady, but a large number of houses in low-income neighborhoods have undergone foreclosure. It looks to me like these foreclosures don't hit the market with bargain prices. They are snapped up by banks and investors and then rented or resold at market prices.

[Angela Shelley]

2. Where are the families moving to?

Those who lost their homes in low-income neighborhoods.

[yardwork]

3. I don't know, but there are a lot of homeless people around here.

And a lot of low-income families seem to move from apartment to apartment.

[Angela Shelley]

4. Which doesn´t make landlording attractive

if there´s alot of fluctuation and "wear and tear" on the properties.

Would you invest in "rental property" in your area?

[yardwork]

5. I have not done so, but it's probably a good investment.

There are four universities within a ten mile radius in my area, and another major state university 20 miles down the highway. Renting to students is a lucrative side business around here, but I've got too much else going on right now to get into that.

[KharmaTrain]

6. I'm Already Seeing An Increase In Rentals

There was a complex that was attempting to sell but switched back to rentals instead...I suspect the owners will take the $1,000 a month rent vs. an empty unit they can't sell. I've also noticed a rise in the houses for rent in the area...probably people like a good friend of mine who is stuck with two houses (and mortgages...renting and getting something back).

The law of supply and demand will work here...as people can't afford to buy or prerfer to rent, the value of the rentals go up and make it more profitable for the real estate companies...and if they can't make money selling homes, they'll do it by renting.

[Angela Shelley]

8. About your friend with two houses

Is he earning enough in rent to pay the monthly mortgage bill?

[KharmaTrain]

9. Unfortunately No

He had been out of work for over a year and finally was able to land a good position in another city. He's had his home on the market for over a year but hasn't had a bite...he was able to find someone to rent the house while he moved to his new job and hopefully will find a buyer next year. To be competitive, he's had to charge less in rent than he pays for his mortgage, but better to get something than nothing. The good side is he was able to get a pretty good deal on his new home and once he gets out from under that other mortgage he should be ok.

Welcome to DU

:hi:

[Angela Shelley]

11. Thanks for the welcome wave

It´s sad to hear the individual stories, because there´s always alot of sleepless nights involved with real estate decisions, and landlording is a science of its own.

[Quantess]

7. I think the rents are still high

because more people are renting than there are "affordable rentals". But that probably varies with the area / region.
I have heard that a buyer might shop for "tear-down" houses in areas where the zoning is changing from residential to commercial, then rent the houses until it's time to tear the houses down and develop commercial buildings on the lots.

[yardwork]

18. I've seen that in my area, too. It's disgusting. Smaller, affordable houses are allowed to decay.

There are people who own entire neighborhoods of small houses in my area. These are usually charming bungalows built in the mid-century, many with nice Craftsman details. They would be perfect for singles or couples looking for their first purchase or retired people looking to downsize.

Unfortunately, the owners have no interest in selling. They're waiting for a big developer to come along and buy them out. In the meantime, the houses are allowed to fall apart while being rented. The people who live in them get substandard housing, and eventually the entire blocks are condemned and turned into parking lots or strip shopping centers.

It's an example of how greed is ruining this country.

[Quantess]

20. Any interest in saving the nice old homes

would be purely sentimental, it seems. Even if they could find a way to preserve the houses, even to lift them off their foundation and move them a few blocks, apparently is less cost effective than to just tear them down. They would have to find a buyer for the old home, and a suitable location nearby to put it, all of which is time consuming, and time = money.

Money is the only factor.

[yardwork]

21. It's not sentiment, in my opinion. Those houses were perfectly fine for earlier generations.

Nowadays, you can't find a new house in my area for less than 3,000 sq. ft. Yet the percentage of people who choose to live alone in the country is growing rapidly. It's a shame to allow 1,500 sq. ft. houses in good neighborhoods fall into wrack and ruin until they have to be condemned. Instead of renting them and not putting a penny into upkeep, the landlords could sell and allow the houses to be maintained by new owners. But, they're too selfish.

[Quantess]

22. I agree.

What I meant was, any decision NOT based on getting the biggest profit is seen as sentimental, by developers. It's a shame. But that's how it goes in a cutthroat capitalistic society.

[yardwork]

23. Yes, it's awful isn't it? Our values are terribly misplaced.

This country spends billions waging war on innocent people halfway around the world while our own people go homeless, hungry, without health care or decent education.

[SoCalDem]

10. The ugly "flip-side" to foreclosure is the dreaded "credit check"

If you have "lost" your house, you are VERY unlikely to find a "nice" place to live.. You have achieved the real-life equivalent to "going past GO, without ever collecting your $200", for about a decade or so to come..

Unless you "know someone" or have a family member with a rental, your living accomodations are going to suck for a long time, and with it, your children's education may/will be seriously downgraded.. Gone are the "nice/new" schools, and the ambience of middle class..

If your children are adolescents, their formative years will be spent with a whole other "class" of neighbors, and there's no way to tell just how different their futures will be..:(

[Angela Shelley]

13. How long does one suffer economically

under a "poor credit rating"?

[SoCalDem]

14. All I can say is that a friend who had "negative" stuff on her credit report

STILL has it pop up from time to time..and it has been "corrected" more than a few times :eyes:

Her stupid husband sold a washing machine that "sort-of" worked, and when the lady asked for her money back, he said NO..she sued them and won in small claims court, and of course he decided to make her wait for the money (and court costs)..she reported them to credit bureau, and even after they paid her, that judgement STILL pops up every so often as an "unpaid legal judgement"..it was $500..and it happened in about 1991 :eyes:

[haele]

25. supposed to be 7 years-

But every time I've gone through one, they go back as far as you have credit. Made a mistake co-signing a loan with a friend who defaulted in 1987; it still shows up and "gets counted against me" even though it's not counted in the points.

Haele

[haele]

12. Nope - Homeowners usually have kids and pets

Which generally mean house rentals - and rental prices for houses or duplexes are up. Most of the "affordable" rentals are apartments and condos; at most two bedrooms, most rentals are traditionally set up for either singles or young families.
A lot depends on what happens to the forclosure properties. If they are being bought up by management companies as income property, the families that were foreclosed won't be able to have a good credit check for a reasonable rental.
Three years ago when we went through the process of leasing the not very cheap house we live in now, it was difficult to make the credit check due to outstanding medical bills, it took a lot of talking and a "poor credit" deposit of about $200 more on top of the additional deposit for pets. We also were required to pay with cashier's check or money order for the first 6 months of the year lease, just because of "the risk" of having credit averaging (around that time) in the low 600's.It also took about three months to find a place that would even "take those chances" on us - no one wanted to rent something halfway decent to anyone with a credit that didn't rate above 650 on at least one of the credit reporting agencies (according to one of the management companies that turned us down). The slum-lords, of course, could care less.

A family that just went through a for closure - oye. I can't imagine how difficult it would be to get a decent rental to live in. There's certainly no help from HUD or any other agency for those who are still employed but may need housing due to a for closure.

Haele

[Angela Shelley]

15. With your experience as a renter

would you invest in rental property?

The real question behind this question is, do you think that the large number of "families under foreclosure" will be buying houses again in the next 15 years?

[safeinOhio]

16. Pick up a copy

of the Nov. 19 Fortune mag. Very good story about the relationship of rents to the price of houses..Says it looks like at least 5 years for houses to bottom out. Depends on the area also.

[haele]

17. In certain circumstances - maybe.

The questions to think about are this -

1) How much of an investment and return are you willing to live with? After paying the mortgage, taxes, and management fees, how much will you want to put aside for maintenance on the property, and how much do you expect to get back as profit? Too many people think they can get renters if they charge a couple hundred over the mortgage - while that used to be the case, with the cost of housing as it is now, it's too often actually cheaper by half to rent than buy in a good area. If you buy a bank-owned home as a rental investment, you may still be looking at charging rent that is close to the over-inflated mortgage costs. In SoCal, $200K for a foreclosure house is still around $1500 a month mortgage with decent credit; to fix it up to rent and then have enough set aside for repairs and upgrades - as well as credit checks, etc... you'll have to charge at least $2K a month to be able to get around $200 a month return in profit.
John and Jane Working-Class Renter will probably have been paying that much in mortgage when they were getting foreclosed on, and they're the ones - the long-term renters with a fairly steady income- you want to rent to, not a bunch of singles who are going to sublet the rental property...
Speaking as a renter (and former home owner who had occasional rentmates), never rent from someone who does not have a management company - as a good management company is there to negotiate all the repairs and upkeep, escrow accounts and legal costs for the owner - chances are, unless the owner is really on top of and invested in the property, there will be more trouble than benefit to both parties. Especially since a good management company has their repair and upkeep people at a lower rate than the individual homeowner can ever get.
A home owner usually spends around $1K a year on average on repairs and upkeep. Can you afford that on your own?

2) Will you be selling the property eventually, or will it end up "family property" when you're ready - either a retirement home or something to pass down to the kids?
This generally determine what type of people you will be renting to, and again, how much you are going to spend on keeping up the property. A bad tenant can ruin a structure within a couple months; even a good tenant with kids will have occasional accidents you might get miffed at; a broken window because of a teenage tantrum, settling foundations cracking pipes or doorframes, rats and termites because of poor housekeeping, etc...
If it's a property you intend to walk away from eventually, that's not an issue. If not, it might be.

If I were a person thinking of picking up a foreclosure, I'd think long and hard about what I could afford and if I can find someone reputable to manage it for me, so I can still live a life rather than trying to take care of two properties - my own and the rental.

Haele

[SoCalDem]

19. My mother had rentals...and as a kid helping her with them .. it SUCKED

Most people who rent, do NOT take care of a place as if it were their own.. (very FEW do)..

and buying foreclosed property can be a nightmare of paperwork..I have a friend who does this and he has a lawyer on retainer to make sure he LEGALLY ends up owning these properties..and he pays a rental agency/management company..and it's still a hassle sometimes..

He had one place a few years back that was STRIPPED, after he had the audacity to ecpect them to pay the damned rent..

when we were renting places, they would leave them in such a mess, it would sometimes take us a few weeks to make them rentable again..

[Darth Lenore]

24. "Affordable rentals" are being foreclosed on too!

I work for a law firm in Ohio that handles foreclosures and I can tell you that, no, there really aren't enough affordable rentals for the people being foreclosed on, and part of that is due to the large number of foreclosures on rental properties! Over 1/3 of the complaints that I file every day have us notifying a "John Doe occupant" at the property address, which means the owner doesn't live there and it is therefore likely a rental. So, not only does that person have to find somewhere else to live, but that's one more possible rental property being taken out of the rental pool altogether!

I feel especially bad for the renters. One of our process servers told me a story the other day about how he went to serve one of those Doe occupants and the poor guy was moving in that day! He'd given the landlord over $1,500 earlier that week!

It's awful.


edited because I can't brain today. I has teh dumb.

[Mike03]

26. Renters are being evicted too, through no fault of their own

because the landlords/owners are defaulting on mortgages. Thus, apartment complexes are being foreclosed on, and all tenants evicted.

This is one aspect of the real-estate crisis I never even considered.

[dysfunctional press]

27. not all of the foreclosures are about people losing their homes-

LOTS and LOTS of the foreclosures are on "spec homes" that people built/bought as an investment- hoping to "flip that house" for big money. the big problem is that WAY TOOO MANY of them were built, and there's not enough people to buy them all. that's usually the case in the areas with the biggest foreclosure rates- in a lot of cases, the only thing the people are losing is their 20% downpayment and their credit-rating.