Renters are BAD for your home value? Are you cereal?
That's the word on the street from some communities out there. They'd rather have your house empty and foreclosed upon than rented out and occupied! I'm not digging that boss.But according to an article i just read in Feb's SmartMoney mag (pg. 91), that's what a good 40% of homeowners associations are restricting - your option to rent out your own place!
Did you even know they could DO this? Maybe I'm naive, but i've never heard of this before. Granted i'm not living in a fancy-pants community, but if i want to rent out MY house, then i should have the right to do just that (and luckily our association agrees). Here's a quick excerpt:
"For owners who have to move or who own houses as investment properties, short-term rentals can bring in some cash and keep them from having to sell at a big loss. But instead of greeting renters with hosannas, many towns and subdivisions are barring their doors, arguing that tenants usher in neglect, misbehavior and even violent crime."Yikes! I'm no theory expert, but I'd MUCH rather take the chance that a few neighbors get a bit rowdy than have them file for bankruptcy or leave the house empty for all sorts of vagabonds to convene. Plus, you have to remember that if your neighbors can't pay their mortgage and can't sell/rent it out, your own home will eventually drop in value.
As many of you know, there are already 2 houses sitting empty in my very own cul-de-sac!!! And i gotta tell you, i often get the shivers when i walk by and see those dead-dark windows w/out a hint of movement in them. We're lucky enough to not have to worry about crack houses springing up and all, but it's still not a cheery site to see. Of course, there are plenty of pros and cons for every situation, and below are a few of these. I tried my best to be fair here, but i'm sure it'll still come out biased ;) But hell, i'm a blogger not a journalist! Here's what i came up with:
Pros to renting out your house:
- You don't have to foreclose!
- Your neighbors are HAPPY you don't have to foreclose ;)
- You can wait out the downturn w/out selling at an incredible loss.
- You can move to another home quicker.
- You help a renter live in a nice home!
- Chance of sucky-a$$ renters causing trouble & making noise.
- Chance of sucky-a$$ renters causing a lot of damage.
- Chance of community losing value if ratio of renting/owning gets pretty high.
Labels: home ownership
posted by J. Money at
7:32 AM
41 Comments:
you have NO LIFE, j. money. NO LIFE.
who would get up at 7:32 am and posts this stuff?
are you CEREAL?
Before I moved to D.C., I lived in a condo that had renting restrictions on it. I, of course, was a renter, but I was renting from my parents, and as I was a grad student, for all intents and purpose of the homeowners association, they considered that owner occupied. I don't think it's all that uncommon. Renters get a bad rap sometimes.
I'm pretty sure Britney would be a sucky-a$$ renter...."Gosh Mister Money, I'm sorry I was a little late with rent this month. I was in the hospital and couldn't get ahold of my dad to cut the rent money loose. See, he has the checkbook...blah, blah, blah"
@Anonymous - i would have to agree with you had i physically posted it myself this morning, but luckily for my life there's something called "future posting". i was actually drinking beer while getting a lap dance and making it rain at 7:32 a.m. this morning.
@Megan - yeah, i bet a lot of that goes on even w/ the restrictions set up, and i'm pretty sure i'd try and get away with it too if the case ever presented itself.
@Boomer - haha, you may be right on that one, but i'd still give her the chance any day ;) Unless my wife had something to say about it...
I rent right now, and I just got out of college so I was previously surrounded by TONS and TONS of renters. I can understand the 'worry factor' in neighborhoods, but that is generally why responsible landlords do background checks and include maintenance in the lease agreement. The awesome things about contracts is that they are legally binding........
I am really disappointed that some places would bar the opportunity to rent out a home. You are right...if I'm gonna fork out money to buy MY house...and I OWN MY house...I'm gonna do whatever the #*$% I want with it...
:)
Kinda sucks for us renters. I'm a renter and it really blows when you have to settle for less because HOA's wont allow someone to rent out houses in that subdivision, blah blah. I guess thats what happens when there are more 'bad' renters than there are good??
I wonder if buyers of rental restricted homes are aware of this restriction when they buy? I'm sure the restrictions are in bold print and clearly visible in the CC&Rs and aren't buried in small print on page 87 of 353 (*snort*). I can understand restricting the home sale only to buyers who intend to occupy the property for a certain period of time. But associations really need to have some process in place to make exceptions to exigent circumstances. Like, say, ummmm..... the credit crisis???
I had something like this happen when I closed on my 2nd house... the HOA had a fine print clause that prohibited a certain percentage of renters from invading a neighborhood if they saw fit. Of course, their decision was completely subjective and undefined. I was told 10%, but that wasn't on paper.
Kinda shady if you ask me, but I think it was more of a don't ask - don't tell policy. It would have been difficult to discover as long as it was my name on the mortgage payment check and HOA check.
J. I can not believe you also say cereal instead of serious. I always always say cereal when I speak to Mr.Finance just to be cute :) as far as HOA limiting renting rights is ridiculous! They dont let you change your curtains only certain colors many other restrictions come with HOAs but not be able to rent your OWN house is plain ridiculous.
I'm a renter living in a city of renters in what is amongst the most expensive real estate in the world! Renters don't seem to be doing any damage to this property market!
And Anonymous, are *you* CEREAL???
My old homeowners association had rules against that. Only a certain percentages of houses could be rented at a time. I have mixed feelings about it. Our HOA now does all the front yard landscaping so empty houses don't look that bad. The grass is still mowed and stuff.
This post actually reminded me of a post I was going to write. I'll link back to you when I write it. :)
My condo association has a good compromise - no renting out for less than 12 months, there is a $100 move-in fee, and the contract has to be on file with the mgmt company (so renters are "registered" basically). Also, there has to be language in there saying that renters will abide by "house rules", and if not, condo association has rights of eviction. And I provide a copy of "house rules" which has stuff on security and noise and moving stuff, etc.
It seems absurd, but after hearing one particular horror story about a condo owner renting to a couple, I can see why some HOAs would try to limit the number of renters.
I am a landlord living in a sea of rentals. While there can be problems, one advantage is that homes with tenants usually have some life about them - far less likely to be vandalized. Also, the landlord does have responsibilities for maintaining the property, more than the bank does if it is foreclosed upon.
That is ridiculous! Especially since my sister's house just flooded, so she and her husband + 4 kids are now renting a very nice house in the same area...rather than going crazy in a hotel while their house is being fixed up. It's not like ALL renters are bad. Yikes!!
We are renting a two bedroom house that’s "worth" $800K in an area where the real estate value actually went UP 3% in the last quarter. Though we are probably the only renters in our block, we take very good car of the home and it helps that our landlord is very pro active. Good tenants + good landlord = good situation all around.
@Brandi - heck yeah! i bet college neighborhoods are totally different too - our old places were RAKING in the $ from us college kids...esp when we left and had to pay all the fees for partying ;) but that's a whole other ballgame...
@Anonymous - Crappy to hear that :( Let's hope some regulations start changing up in hurrrr.
@ShtinkyKat - haha...*snort*! you silly girl...but yeah, i wouldn't even THINK about checking for that clause and all when looking to buy a house. But you better believe i will be going forward!
@Matt SF - For sure - i'd totally keep paying everything in my name and checking in and all that stuff to keep everything flowing nicely. And to be honest, we might even have some % clause in our contract, i'm not even sure. I just know of a lot of renters around these parts.
@Chicky - Word up Chicky girl! You know we're alike already, come on now ;)
@FruGal - Yeah, i wonder how big a difference that makes in big cities like NYC, London, etc...it's full of beautiful renters!
@Ashley @ Wide Open Wallet - Woohoo - i'll look forward to reading it :)
@ParadigmShifted - NOW WE'RE TALKING! Agreed, that's def. a nice compromise. Sure it'll be a bit annoying at first getting it all together, but now you've got protection from all over! And maybe the renter will think twice knowing so?
@Budget Save Buy - For sure, I can "see it", i just don't "like it" ;)
@Dawn - Yeah, that's what i'm saying - it's not like the renter has the only say in the matter, it's all about the landlord doing their thing and watching their investment at the same time. Sheesh.
@Carrie - Carrie, my girl! Nice seeing ya here ;) I'm sorry to hear about your sister's situation, but i'm glad they have a nice place in the meantime!
@Carla - Couldn't agree more! If only there were away of filtering through the idiotic ones....
I swear, this is exactly why I would NEVER buy a house with a homeowner's association. They are run by micro-managers with no lives and bitter marriages, who have nothing better to do than run your business.
Bottom Line: Empty houses are more dangerous than rented-out houses. People frequently die in empty houses, empty houses increase the instance of drug-related theft in the immediate vicinity, water lines can break and not be fixed, squatters could show up... really anything and everything that you can imagine to happen DOES. It is especially dangerous if you have kids to think about as kids often go into unsecured houses (and ones that have been broken into).
PS: empty houses give me the creeps too.
One more reason I hate HOAs! It already irritates me that they can dictate where you put your garden, what color your porch is, and some of the most trivial aspects of homeownership. But to actually tell someone they can't rent out their home is beyond ridiculous! Of course, I shouldn't be surprised. My boss lives in a neighborhood where the HOA says you can't operate a home-based business. How they'd know, I have no idea, but it is literally in her paperwork.
I'm with Griffin on this one. When I get to the point where I'm ready to buy, I'm looking for a neighborhood that doesn't have an HOA. Otherwise, I'll be fined every week for breaking the rules. And I'll do it on purpose to be contrary and piss 'em off!
ha, CEREAL. you make me laugh, kid. also, i had to discretely ask my hip friend what 'making it rain' meant after i heard it in that song...you don't want to know what i thought it meant.
i don't have a new opinion about empty houses/renters/homeowners/HOAs to share, but i thought i'd comment anyway.
Yeah, i'm with you guys! It's a scary thought for sure, ESP if you have kids (i hadn't thought about that previously). I'd be interested in hearing a point of view from a "bad" renter though and see what he/she feels ;) So if that's one of YOU out there, holla at your boy!
(and you are too funny Sense! i'm glad you commented, it gave me a quick laugh ;) and feel free to email me what you thought it meant anytime, i could always use another!)
I am so glad I don't live in an area like that, it is part of why I didn't buy a condo. I hate people telling me what to do with my own property, I may rent out our house in the coming years. Hopefully to decent tenants. Like people, some renters are good and some are bad. You can't make a blanket statement about them, most of us have been renters at some point in our lives.
This is one large reason I never want to live in a community with a homeowner's association. I think it is totally absurd that you can be told what to do with the home YOU own, on YOUR propery. I wouldn't be able to tolerate it, and the entire idea upsets me. Renting is not necessarily a bad thing, but it should be the homeowner's risk to take. It is not their associations risk to take, you know?
J. Money, I dont think your wife would be very pleased to see some of the stuff on this site...
wha? nahhh she's cool. she reads almost every single post ;) i think she likes to find all my errors and misspellings, which is great! i'm horrible at all that grammar stuff (actually just had to google both "misspellings" and "grammar" to make sure i got it right....i was 1 for 2)
where do i find someone to rent my house?? It is empty for 5 months while I am working in another state...
Here in Vancouver, we have a huge issue with grow-ups - people rent houses and then grow marijuana.
Basically, the house gets crashed, and worst of all, it gets full of mold, so the repair bills are huge.
@Jackie - Sucky to hear that :( The one and only place i'd suggest is Craigslist.com, but it depends on where you live really...we're thinking of renting out our place in a year or two, but haven't given it a shot yet. GOOD LUCK!
@TStrump - OMG that is the funniest/most horrible thing i've heard today! i would be absolutely pissed if someone pulled that junk on me...and i'd probably never rent out again ;)
J, I was with you. I was totally there. Here are the two things that flipped me for good.
1. Landlords by default. So many folks get the hot idea to, for whatever reason, rent out their house. Trouble is, they know nothing about being a landlord. Here is a hint: there is a lot more to it than cashing checks. There were some deadbeats in an nearby subdivision that went from rental to rental, paying only the first month and hanging out until the idiot landlord worked up the balls to kick them out.
2. Someone in our niegborhood did rent out their house. Was not against the HOA covenances, and everything was fine... until her two sons got out of jail and moved in. It was AMAZING how fast them and their buddies turned our quite neighborhood into a ghetto. It was bad, and all from ONE house. The HOA was looking to adopt anti-renting clauses, and I was all for it.
yup, that would do it! and i agree on that first one - i often think i could pull it off myself w/out any knowledge at all! haha...if i ever dared though, i'd have to hire one of those management companies or something to do it for me ;)
the whole thing is sad as hell though, sorry you had to deal w/ that.
Agree with Mr. not the jet set, we moved from our old neighborhood because of the renters. They turned a good townhome neighborhood into a nest of drug dealers. Our HOA does allow rentals, and I have received a notice from the IRS looking for one of the individuals drifting in and out of a maxed out house. BTW we rented for many years, and were good for the neighborhood. So until we bought I had no idea this was such an issue.
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I know I am late joining the party. I completely agree however that a rented house is better than a vacant house. I recently rented out my primary residence when I had to move out of state due to a new job. Foreclosures already run rampit in the neighboorhood making selling my home w/o a loss impossible.
I am now running into a problem with the bank. Apparently my loan doesn't allow for me to rent. You would think that they would just be thankful that the payments are made every month on time but no, I now need to refinance. Thank goodness rates are good but I have next to no equity in the house so we will see how that goes.
I think it is incredible how some people live - both homeowners and renters! I have seen places absolutely trashed by renters in a rental subdivision that I used to live in. It was a pretty expensive place to rent too. My husband who used to residential phone installation would relate to me the state of some of the houses he had been in - it was disgusting....Even some people that you know can be disgusting tennants. I would have to know the renters really well before renting out a house. Also, it can be very difficult to evict tennants....
@andie - that def. blows! i'm sorry to hear that...guess there's a lot of circumstances we can't control even if we wanted to.
@SAHM4now - the BANK wouldn't allow you to? wow - that's messed up. so if you're no longer living there, you just have to pay while it's empty? i SO hope you can get it refinanced, esp at these great rates :)
@Anonymous - oh yeah, i bet he sees all sorts of nastiness. we actually got our kitten from a home that was TORE UP from all the animals in there (they were literally everywhere - i'm talking like 25+ cats, dogs, you name it). at that point it's really just a matter of cleanliness, nevermind the value in the house! *shiver*
I am a happy renter of an apartment, and I have absolutely no interest in home ownership. I tremble at the idea of being trapped in a declining neighborhood or metro area because of mortgage.
Anyways, I'm a great tennant, and I live in a community with great tennants, too. We keep our surroundings very clean. We even take turns cleaning the stair case and the walls outside of our units. We look out for each others' apartments when we go out of town. When new tennants move in to our section, we reach out to them by introducing ourselves and so on. Rental situations can be successful, landlords just need to be clear about their duties and expectations, and -- as someone else mentioned -- landlords need to do background checks and ask for references. Also, be flexible with renters. I've found that renters who ask to make "minor" changes to the property (for example, planting a garden or re-painting the kitchen) tend to take better care of the property.
My tenant of 6 years just moved out last week. Good God, what a mess! It looks like he hadn't vacuumed...ever! There were 2 inch high piles of dust all around impressions in the carpet where he stacked books. The bathtub is pretty bad, but I think he must have cleaned that maybe once a year. I vacuumed twice, but I don't think I can save the carpet. I guess I could get a deal installing laminate wood flooring in this economy. The joys of being a landlord.
When I was stationed in Germany for 2 years, I rented out my modest 980 square foot home. Rent was pretty low and I had a rental company manage the property for me since I was going to be out of the country, nevermind out of the city.
After coming back and finding the washer and dryer gone, (Rental company couldn't pinpoint which out of the three renters took it) nails in the BRAND NEW siding, (Rental company couldn't pinpoint which renter did that), a DISH on the NEW ROOF, (Can you guess what the rental company couldn't tell me?) EVERY door in the house broken (Which one did it?) and numerous other things that I couldn't get money for because I didn't know WHO DID IT, I am not sure if I would ever rent out again. At the very least, I would do more research on the rental company that would be managing my property and have more stipulations on my part rather than just be happy that someone else is paying the mortgage while I am gone.
In my neighborhood, the people renting houses are easy to pick out. They don't really do anything to improve the image of their home. I don't mean landlord responsibilities; I mean simple things like taking care of the lawn or planting a garden. Right now, everyone who owns their home is out gardening. Everyone who rents is sitting outside in lawn chairs watching. It is surreal. Take pride in where you live!
WOAH! that stuff is horrible...and really makes me second guess this idea. I think you're right in that at least you can do some research upfront on the rental company - you may not catch everything, but it's def. a great idea :)
I live in a neighborhood of mixed rentals and owners. The house next door is a rental and the new tenants have put out decorations and flowers. In the past we've battled with the tenants about wild parties. The home owners who have lived here for two or three generations do nothing to keep up their houses or make the street look nice. Some of them are behind on their taxes. That said, the renters in this neighborhood have given the area a regional reputation of being a bad place to own and live. As an owner, I agree. I am furious when it's time for the kids to go to bed and there is screaming, cursing, and loud music from the college kids on the next block. As a renter for most of my adult life, I know it's not renters who are bad. It's the lax attitude of the city, police, landlords, parents, and colleges. If there is no enforcement, then the renters will be bad, whether in a HOA or suburb or small town. That said, I want to get into the landlord line of work and am very worried about being told that I cannot rent out unit. Many people buy condos to live in until they can buy a new place and rent out the condo or they rent it until they want to retire there. It's not a good idea for HOAs to prohibit renting or they will lose their buyers and see their sales drop. As for rental management companies, it makes perfect sense to avoid them. You want positive cash flow and you don't want to pay them much. Naturally they will cut corners to keep as much of your money in their coffers as possible. When they cut corners, your property suffers.
Yeah, I'd be pissed if we couldn't rent our townhouse out if needed...esp if I'm trying to veer towards the more "minimalistic" route I've been in lately. I def. don't need 3 levels of house at this point, although the wifey may ;)
I still think getting a management company to help out may be worth it though if you hate dealing with that sorta stuff (like me). Would suck spending extra cash for it, but depending on how much it would be I'd prob. still try it out at least once.
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