Bargaining leverage for renters

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Submariner1980
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Bargaining leverage for renters

Post by Submariner1980 » Thu Apr 29, 2010 12:50 pm

I have read with interest a few threads about buying homes, Nspirius' "Predator Real Estate Buyer" guidelines, and multiple articles about whether now is the time to buy or not. However, does the "buyer is king" philosophy apply to renters that are looking for a single family home to lease? That is, does the current housing slump offer the same benefits to renters that it does to buyers? I feel that since I have time, am in no rush, and can stay in my current place indefinitely, I have some bargaining power, but that isn't how it is currently playing out.

I ask because as I am searching, I am realizing that rent prices seem to be a bit steep for what is being offered. One example is a house that is for sale or lease, where the asking price for rent was 233% of the mortgage I would pay if I bought the house at the asking price and put 20% down (asking price of $150,000, asking rent of $1500, assume 30yr mortgage at 5%). Would this justify an offer to lease the house at 20% lower than the rent they are asking?

Also, several homes have "improvements" (ornate tile backsplashes, decorator paint) that increase the rent. Is this justification for a higher rent price? Should I care if the owner has to recoup his costs of improvement?

A side thought also popped in my head as an alternate strategy. Would it be worth calling the listing agents of houses for sale, and asking if the owner would be willing to rent for a 1 to 2 year lease? I thought that out of 10 homes, 8 would say no; but really, I only need a handful to say yes and then start negotiating rent.

I realize this is perhaps a complex discussion, but I would be interested to hear thoughts on the matter. For reference, the real estate market I'm referring to is Houston, TX. Recent "buy vs. rent" articles on the internet have made the case that Houston is a place you should buy instead of renting. But there seems to be a "glut" - several HUNDRED houses fit my criteria in a very small portion of town (minus cost - they seem to be a few hundred bucks too much). Ultimately, what is the best strategy to get the best price on the right house?

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femur
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Post by femur » Thu Apr 29, 2010 1:48 pm

Hi!

I just rented a 2 bedroom house in the Montrose area of Houston last month. I found that it is ABSOLUTELY a "renters" market right now. I found many houses for rent and landlords wanting to fill vacancies quickly.

After I submitted my rental application to one house i really liked, the landlord was able to see that i had immaculate credit and good references from previous landlords. I immediately asked for $50 off of rent. Then, I offered to pay 3 months up front for an additionally $25 off. The landlord accepted and I am now renting a great house.

Edit: Basically, you CAN negotiate on rent. Just ask!

Submariner1980
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Post by Submariner1980 » Thu Apr 29, 2010 3:12 pm

Thanks femur, I hadn't thought of pre-paying. I'm in a position to do that, so that may help.

I would think that I would be a "quality" tenant since I have pristine credit. I guess I need to submit the application so they can see that and then start negotiating, vice negotiating before they understand my credit history (and getting shot down before they ever see it).

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femur
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Post by femur » Thu Apr 29, 2010 3:34 pm

No problem. Just be sure to do the math and confirm you are getting a "good rate" by pre-paying.

Landlords love good tenants. If your credit and references are good, make an offer.

Good luck!

maxinout
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Re: Bargaining leverage for renters

Post by maxinout » Thu Apr 29, 2010 3:34 pm

It seems like a lot of people renting houses ask for what they need, not necessarily what the market will bear. People have to cover mortgages, taxes, insurance. While that's not your problem, it is oftentimes their motivation. Some realtor convinced them to try renting since it won't sell.

crumbgrabber
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Post by crumbgrabber » Sat May 01, 2010 8:14 am

I would highly recommend against asking random home-sellers if they want to be landlords. Many folks selling homes (in some places probably upwards of 50%) are selling due to financial distress. Having experienced first hand a landlord that doesn't pay his mortgage I can tell you that it is very unpleasant. Our top priority when finding a new place to rent was a landlord who knew what they were doing, and inserting various provisions into the lease to protect us from s landlord's financial problems.

CaptMidnight
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Post by CaptMidnight » Sat May 01, 2010 10:55 am

The best renting deal I have heard of recently is a couple who decided to sell their house and become renters. They knew of a house in their own neighborhood that was for sale, but was overpriced and was sitting on the market completely empty. They made an offer to rent, negotiated a rent that was about 30% less then the owner was asking, and now live in a house that is about twice the size of their old house for half the monthly payout.

I would consider inquiring with RE agents for houses that have been listed a long time and that are not occupied. My friends keep the house presentable and co-operate with showings. The landlord benefits from free "staging" and running slightly in the black, if only because she has no mortgage.

If you go this route, check with the municipal property listings to avoid a property that is severely underwater and in danger of foreclosure.

Good luck.
The history of thought and culture is ... a changing pattern of great liberating ideas that inevitably turn in suffocating straightjackets... | --Isaiah Berlin

Gekko
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Post by Gekko » Sat May 01, 2010 11:24 am

22 Apr 2010 at 6:04 PM

Fabrice Tourre Tried To Exploit The Housing Crisis…
By Bess Levin

…by convincing his landlord in London to lower the rent on the apartment his shared with his girlfriend in Myddelton Square, Clerkenwell.

“He tried to get the rent down,” his landlord, Julian Jones, said. He renegotiated because there was a housing crisis. He said: ‘I think you should bring the rent down in line with the 20 per cent drop in house prices.’

http://dealbreaker.com/2010/04/fabrice- ... ng-crisis/

btenny
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Post by btenny » Sat May 01, 2010 4:20 pm

I've been renting single family houses a long time due to high house prices. Rent has been cheaper than owning for long time and still is in parts of the country. I have negotiated rent reductions in all cases. I am a very good renter. I pay the rent early regularly. I keep the property in better condition than most homeowners. I only use it part of the year (we travel). I have good credit. I have no pets and just my wife an I use the property.

All kinds of property rent is negotiable and always has been. Commercial property rent is always negotiated a LOT. Retail rent is also negotaible. So is house or apartment rent in many cases. You just have to ask.

So ask. Plus if the terms are not to your liking ask for changes. Think about asking for a longer or shorter lease. Do you want no furnishing or fully furnished. How about the owner providing some utilites. How about a month at half rent in exchange for a full year lease. You get the idea......

Good luck
Bill

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tetractys
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Re: Bargaining leverage for renters

Post by tetractys » Sat May 01, 2010 5:03 pm

Submariner1980 wrote:However, does the "buyer is king" philosophy apply to renters that are looking for a single family home to lease? That is, does the current housing slump offer the same benefits to renters that it does to buyers?
Twice over the years I've informed my landlord that I was moving because the rent was too high. Both times I accepted offers of a substantially lower rent, just before the deadline. I've never been successful bargaining for a lower initial rent.

It seems to be the case that initial rents are pretty much set by the local market; and when rents are above the market, the landlord is only going to lower them if cornered.

Best regards, Tet
RESISTANCE IS FRUITFUL

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ladders11
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Post by ladders11 » Sat May 01, 2010 11:11 pm

The rent is just based on demand. First step is to try to figure out how many showings they have had and how much interest there is in renting that house. If it is listed, see how long it has been listed for. If it's been vacant for a while, and their phone hasn't been ringing, they're probably going to be willing to lower the rent.

Your credit is a big deal. Most people's credit sucks these days, and the average landlord has trouble qualifying people. Also a surprising number of renters have pets, and are trying to rent with big dogs. If you have a good income, good rental history, good credit, no pets, no smokers, or no kids, just come right out and say it and they will be happy to deal with you. Tell them you're clean and neat.

If you are flexible as far as the time of your move, consider the seasonality. After school starts, especially Nov and Dec, it is absolutely flat in a real estate office and you might have more bargaining power at that time. Spring is the busiest season. Also, if you are ready to move-in when you apply and don't have to give notice somewhere else, that's a plus. (A lot of prospective tenants will like a property but want to move-in 30-60 days in the future.)

Renting an individual home can be one of the most negotiable things in your budget, depending on demand. Right now, vacancies are running higher in most places b/c the buyer's credit and the soft job market - carpe diem.

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