I'm reading these articles with a great deal of interest. I'm wondering if it's really worthwhile for me to make that level of improvements on my rental house. I'm not seeing how it pencils out. I keep wanting to renovate and put in new carpets and flooring, but apparently--im told by the property manager I hired--It's not worth doing because tenants will just ruin the improvements. I saw this recently where I put in some nice new light fixtures in the bathroom and nine months later they are broken and need replacing.

Have these investors factored in this kind of replacement cost because of careless tenants? I'm not seeing this mentioned as part of their model. Long term those costs are significant.

The details of decoration are not important.

Keep raising the rent. When they threaten to move chop $10/mo.

That is how this stuff works.

quote:

Originally posted by piqué:
I keep wanting to renovate and put in new carpets and flooring, but apparently--im told by the property manager I hired--It's not worth doing because tenants will just ruin the improvements.

I guess one only puts in new carpet/flooring (or any major "new" stuff for that matter) when that is necessary to attract the next tenant? Logistically, it's convenient to do "major work" on a rental property only when it is "between tenants."

quote:

Originally posted by Steve Miller:
The details of decoration are not important.

Keep raising the rent. When they threaten to move chop $10/mo.

That is how this stuff works.

Is it really? I don't know anyone who threatens to leave. They find a new place, sign a new lease, and announce they're leaving. At that point, chopping $10 off the rent accomplishes nothing, because they're already obligated under a new lease.

piqué, do you rent to college students or working adults? I wonder if that makes a difference? As rental tenants, we were probably ideal because we took *very* good care of the house. I don't know how common that is though.

The investors, if they have maintenance teams to fix things that break, I would imagine their budget includes general upkeep?

quote:

Originally posted by QuirtEvans:

quote:

Originally posted by Steve Miller:
The details of decoration are not important.

Keep raising the rent. When they threaten to move chop $10/mo.

That is how this stuff works.

Is it really? I don't know anyone who threatens to leave. They find a new place, sign a new lease, and announce they're leaving. At that point, chopping $10 off the rent accomplishes nothing, because they're already obligated under a new lease.

Actually I have had tenants tell me their intentions ahead of time. Two months before their lease expires I ask them their plans. Only one tenant said he wanted to spend less money, but he was single, lived alone, and could easily have spent half as much rent and been very comfortable in a much smaller place. The families who have lived there wanted to buy and left when they sent under contract on a house.

SK, I have always rented to working couples with infants or young children. The house has a huge, private, fenced yard, and the elementary school is an easy walk down the street.

I think the benefits of home ownership are oversold for many people, and renting homes might make sense.

Sure, you can build up equity if you stay in your home a long time. Trouble is, many people cannot afford the mortgage, taxes, upkeep, and insurance while also owning cars and taking care of kids and aging parents. They start taking second mortgages to get by, they wind up not building much equity.

For many people with kids, if you buy a home you cannot afford something in a safe area with a good school district. It may be better to rent in a better neighborhood -- which has to be cheaper than trying to send your kids to a private school.

As for the economics, the economies of scale for a large company owning a bunch of homes makes some sense. When I call a plumber, I pay retail. When one of these companies calls a plumber, they already have her under contract and pay much less than I would have to pay.

If a mortgage for a home in a good neighborhood is, say, $2000 a month, I would say renting a home there for a bit less per month would be a good move. You could bank the taxes, upkeep, and insurance, and you would be banking more each month than you could possibly build in equity.

Cindy -- who wonders whether she would have made as much by renting than owning the same house for 26 years given all the money she has poured into it

This is actually a timely discussion for me, since Mr. Nina and I purchased an investment property near downtown Portland last summer. We are currently renting it to our daughter and a roommate, and charging them exactly enough to cover the mortgage (which we made sure resulted in monthly payments that were similar to the monthly market rate). We're not making any money on it at the moment, but that was always the plan when we rented to our kid. However, we are building equity, and it's as good a place as any to put our money (as opposed to money markets, bonds, etc.). It's been a year--the jury is still out. We've had only 1 minor repair so far, and since we're renting to a family member we can be much more demanding about upkeep and cleanliness than we could be with a stranger.

We'll see how it goes.

piqué

quote:

infants or young children

Maybe that's why things get broken? Or maybe it's just the case that renters care less and are less careful? Again, back to economies of scale, these upkeep and replacement costs will hit you harder than the investment group with a million properties.

Back to the "rent or own" question,
Cindy's comment:

quote:

If a mortgage for a home in a good neighborhood is, say, $2000 a month, I would say renting a home there for a bit less per month would be a good move.

I think this, in combination with the question of whether the actual house and neighborhood itself is better when renting or owning.

Our mortgage payment (the minimum amount, not including the additional we pay) is slightly more than what our rent was, but it was very close. If it was significantly less, like maybe half of a mortgage payment, then I don't think we would have considered buying.

But the other piece is that, the house we bought is nicer than the rental was, and has room for a grand (something that most potential buyers aren't thinking of) and other things we wanted (studio space for Mr. SK!) and the neighborhood is nicer.

Now that is this particular market. For the investment group, it sounds like they are probably able to offer better houses and neighborhood than what the tenants could afford if they bought. If the option is a fixer-upper that's both a time suck and a money-pit, then we would have continued renting.

So all of these pieces (plus incomes, student loans, etc.) are at play in guiding people to opt for renting or buying.

It will be interesting to see how Mr. SK and I are doing a few years down the road from now, will we still feel the same as we do now that buying was the right choice? Will our house value have gone up, will the market here be much more expensive to the point that we wouldn't be able to buy if we waited 5 years? (which is what I am predicting)? More importantly, will there be a grand piano in my living room?

Time will tell!

Nina, that sounds like a very smart move!

quote:

Originally posted by ShiroKuro:
piqué, do you rent to college students or working adults? I wonder if that makes a difference? As rental tenants, we were probably ideal because we took *very* good care of the house. I don't know how common that is though.

The college students I've rented too took much better care of the house than families did. Putting their parents on the lease probably helped with that.

quote:

Originally posted by Nina:
We are currently renting it to our daughter and a roommate, and charging them exactly enough to cover the mortgage (which we made sure resulted in monthly payments that were similar to the monthly market rate).

I have several friends who used the money that they might have wasted on student housing to buy a condo near campus. One kid lives there and the other two bedrooms are rented out to cover the mortgage, taxes and upkeep. The one friend has had 4 kids attend the same college and has not only saved a fortune but has paid off the condo.