patrick.net

To follow up, one logical fallacy many individual landlords use is this:

Price of rent= mortgage payments + property expenses + other costs

It's a very self-focused formula that doesn't take into account what truly determines price, which is supply/demand. This sort of calculation may have worked in the past (as this sort of price may have equaled supply/demand equilibrium), but since house values (and other rents) are down, it doesn't work anymore.

For example, let's say as a landlord, you bought a house at $300k with a 6% mortgage four years ago. Now, someone across the street bought the same house at $250k with a 4.8% mortgage last year. Both want to rent it out. What you'll find is the person who bought it recently will often offer you a much better rent deal than the previous owner. While it's the same damn house and should cost the same amount, the $300k/6% guy is unwilling to accept a small monthly cashflow loss (though in reality, he may be able to get enough to cover the interest/taxes) and will instead just let the place sit on the market indefinitely. He'll even do this if you currently rent from him, and instead of lowering it to the new market price, he'll end up having to put it on the market, pay a realtor 1 month commission and undoubtedly have at least a few vacant weeks!

It's something I've learned over the past month or two looking for places. Renting individual houses is a very inefficient market like this, much moreso than the apartments. I've seen houses listed for months now, where if they knocked the price down 10% or so, it would probably lease. Instead, another month vacant.

House next door to me has been vacant for nearly 2 months now. Owner lost job here a while back and finally got an offer in DC had to follow it. So now they are renting there, and still paying mortage on empty house here.

Their asking rent is something like $2K for the 2/2 side of a duplex. It does have a pool, and with a toddler I consider a huge red X mark. It's funny when I was in my 20's I would have said OH COOL but now all I think about pools is what a monstrous money-hole you offered to throw it in free with a right-priced house, I'd ask how much to remove it.

The other side is 1/1 think they are asking $1400 for that. I really wonder if they are going to let it sit empty until next school year not much rental interest in a college town before tail end of summer.

Vicente, where is this?

My rental just decreased from $3400 per month to $2900 per month for a 3395 sqaure foot home purchased in 2006 for 1.1 million dollars. The home is currently valued at $770,000 and I would be lucky to get that much from an educated buyer, because 216 homes in my zip code are now in pre-foreclosure status. The property will more than likely drop another 100-200k in 2010.

If you are looking for cheap rental East Bay, Danville, Black Hawk, San Ramon, Dublin, and Pleasanton, Livermore are the places to be. Going rate is about $1.00 per square foot and less on larger homes.

Great Time to be a Renter!

sybrib says

Vicente, where is this?

Forgive my paranoia, not sure I should share the address "next door" on a public forum. It's in Davis, CA though no secret there I've mentioned it enough times in posts. Wow I looked it up on Zillow though, and it's a poster-child for the Prop13 disparity. They are paying less than 1/3 the property taxes of my landlord because they bought in 1997 versus my LL who bought in 2005.

Samsmom, from other posts you've made I assume you're paying rent in the 3-4K/month range. These are upscale homes. How telling is it that two upscale homes are both for rent across the street from each other?

On the east coast this just doesn't happen. First of all, upscale homes above $500K selling price just aren't available for rent, period, much less 2 on the same street.

Look out below... I would say every house in the neighborhood has a high risk of foreclosure in the next year.

getting a rent reduction without signing/extending a lease probably WONT work. Remember it is a give/take. HE gives you a lower rent, you give him some security for the next few months.

What you can DO is negotiate the lease terms. HE says 1 year, you say 6 months. You will probably agree some where in the middle. THat is waht I did. signed a 8 month lease :-)

good luck

@Ptipking222

Smaller apartment complexs, run by one person might be smarter at rent divergence, but not the larger ones. They just use simple programs to keep their places rented at the maximum possible. I was talking with one before and they had a unit for like $1200, by the time I got there, the last unit was now $1500. They said if I did a 15 month lease it would drop to $1400 because their computer program deemed that the best lease. Longer leases, cost more! I'm guessing the program was figuring out when people were likely to move, and when all their leases ended, thus they were trying to keep a steady stream of vacancies vs one month having half the building empty out. They jacked up the rent for the last unit because they knew the chances of having it rented at that price were pretty high now, and they had less to lose. For them it's a computer program. They figure out how to really maximize their returns! And offering discounts only when they absolutely have to!