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A Convenient Truth

By
Services for Real Estate Pros with Classic Property Management

    An interesting phenomenon has come to my attention lately.  With foreclosures on the rise and people struggling to make their mortgage payments, it seems as though people would be anxious for a way out.  Surprisingly however, very few of them will even consider renting out their properties.  I have had a hard time trying to understand what could possibly keep someone from considering that route as an option.  For example, I spoke with someone not long ago who had their home on the market hoping for a sale.  They had it listed at about $60,000 higher than the competition, and decided to explore the rental avenue.

   They gave me a call and I told them that they could realistically expect about $1,900 in rent each month on their property.  Unfortunately, he didn't realize how the rental market works.  He called me fully expecting to achieve the same amount in rent that he had to pay out for his mortgage...he thought he could break even.  He hung up with me abruptly and I haven't heard from him since.  This guy was going to lose his house if he didn't do something fast, and he wouldn't even give me the opportunity to help him out!

   Despite the fact that he was hemorrhaging money faster than Al Gore at a global warming gift shop, he refused to accept his own Inconvenient Truth...the fact that this may be his best shot at keeping his home!

   Hopefully, more people will realize that selling their home isn't the only alternative to losing it!  If any of you know someone who is having a hard time with their home, find a reputable property manager to look into the matter.  There may be a way to help them out of a bind.

Show All Comments Sort:
Randy "Lazarus" McAtee
Lazarus Realty - Fresno, CA
Owner/Broker, Lazarus Realty, Fresno California
For many it AINT EASY.  I know an agent who is renting the house he intended to flip and he's carrying it to the tune of $600.00 per month.  OUCH. Lucky for him, he splits it with his Aunt who is co-owner with him.
Oct 22, 2007 09:16 AM
Jon Mitchell
Classic Property Management - Santa Clarita, CA
Ouch is right!  I have a few owners here that are doing the same thing (one is carrying about $1,000).  It makes it tough for them, but they are looking forward to the day that the market swings back up and they can still pull a profit!  Tell your friend to hang in there!
Oct 22, 2007 09:21 AM
"The Lovely Wife" The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

Jonathan...

This is happening all over the U.S.

The sad part is that it is hard to get them to cut their losses and rent it out. We have been able to convince some of our Seller's to rent out their houses. 

Personally...I would rather break even or lose money than lose a house to foreclosure.

I understand why they don't want to rent. I have been known to leave one of my rental houses vacant for six months and just pay the mortgage.

So I can relate to not wanting to rent and...Yes. I know that's not my best foot forward :)

TLW...ROAR!

Oct 22, 2007 09:35 AM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

I do something similar here with lease options. They work here because the market is still going the right direction, but you are right, people just need to try to save themselves. Would they rather go negative $2500 a month or only $600? Hmmmm, people save your selves and your homes. Rent it out for a little while until you can get back on your feet or until you can get the price you need.

 

Oct 23, 2007 06:08 PM
Rich Jacobson
Fathom Realty West Sound - Poulsbo, WA
Your Kitsap County WA Real Estate Broker
Okay, so I understand that Al Gore started the mortgage lending business?
Oct 24, 2007 09:51 AM
Laurie Mindnich
Centennial, CO
Jonathan, we recently spoke with someone whose adjusted payment hit $4100./month.  Rent for her place would be $1500. a month.  Not only would she have to pick up the deficit, but she's facing renting her own place as well, at $1500; she can't afford $4100, no matter how it's doled out!  Hopefully, this was an aberration- I had NO IDEA that some of these mortgages, like hers, adjust every three months, and hit outrageous payment.  For those facing a manageable deficit, pleasepleaseplease rent it out, and get it off the market!
Oct 24, 2007 10:22 AM
Jon Mitchell
Classic Property Management - Santa Clarita, CA
Wow Laurie, that is brutal!  That is probably the worst case I have heard of so far.  She must have gotten a horrible loan!  I will do my best to clear the rental market for you!
Oct 24, 2007 10:29 AM
Sal Poliandro - Helping People Win
RE/MAX Properties - Ridgewood, NJ
Broker Associate
Wow!  For many the realization of having to rent their home is a foreign thought.  They do not want to even consider this and will stick it out to the end.  I wish more people would begin to realize that renting is a perfectly good alternative to selling.
Oct 24, 2007 01:08 PM
Martin Rodriguez
Pacific Funding - Valencia, CA
Senior Loan Consultant

Jon

Good advice in deed.  Unfortunately many clients also forget to consider the long term effects of damaged credit.  If they can't sell the house and pass up on renting for however much they can get.  The next step is often missed payments and damaged credit.  In many cases they will find themselves in default on their loan and now risk losing the invesmtent property.   The long term effects of damaged credit will cost them thousands.   The loss of the property itself is hundreds of thousands flushed down the drain and they the credit damage may prevent them from owning rental property again for many many years.  

Now whats the cost of that???  Certainly its more than covering the payment gap no matter how much it is..

MR

Oct 25, 2007 05:44 PM
Jon Mitchell
Classic Property Management - Santa Clarita, CA

Martin- You should write a post about these consequences!  You have me hanging on every word...

Sal- Take a look at the post from Martin.  He has a way of telling it like it is.

Oct 26, 2007 04:22 AM