Most renters are not ready (or willing) to buy

The rent may be too damn high, but it’s not enough to turn most renters into buyers.

The gap between rental costs and household income is widening to “unsustainable levels” in many parts of the country, new research published Monday by the National Association of Realtors found, “and the situation could worsen unless new home construction meaningfully rises.” In the last five years, a typical rent rose 15% while the income of renters grew by only 11%, the study found. The top markets where renters have seen the highest increase in rents since 2009 are New York (51%), Seattle, (32%), San Jose, Calif., (26%), Denver, (24%) and St. Louis. (22%).

“Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities,” Lawrence Yun, NAR’s chief economist said in a statement. “With a stronger economy and labor market, it’s critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices.”

But most renters are reluctant to buy. Only 12% of current renters say they plan to buy a home within the next year, according to the latest “Housing Confidence Index” published last week by real-estate company Zillow, although this was up 25% on the previous year. On a scale of 1 to 100, with a reading of more than 50 indicating general confidence, the housing confidence index rose to 70.6 in January 2015, up 4.4 points over the previous year.

Zillow polled more than 10,000 households about housing market conditions, expectations for the future and their attitudes toward homeownership across 20 of the large metro areas.

What people say they would like to do — and what they actually do — are two different things. “While the increase in confidence among renters is heartening,” Zillow chief economist Stan Humphries said that it’s important to take a reality check. Among renters aged 18 to 34, 66.2% said owning a home was the best long-term investment, up from 61.4% last year. “Not all renters who want to buy this year will be successful,” Humphries says. “Saving a down payment, qualifying for a mortgage and finding an affordable home to buy all remain formidable challenges for many.”

And some cities are proving more popular for would-be buyers than others, Zillow found: Of the 5.2 million renters who say they would like to buy within the next year, there were an estimated 241,562 in the New York and Northern New Jersey metro area, 225,821 in Dallas, 199,146 in Los Angeles, 161,052 in Miami, and 149,744 in Chicago. But there were only 25,411 in San Jose, Calif., 31,117 in Las Vegas, and 34,898 in Boston. And renting isn’t cheap: U.S. renters paid around $441 billion last year in rent in the 25 largest metro areas, up 4.9% on the previous year.

One reason for renters staying put: Housing construction has been slow and has, for the most part, not addressed the problem of low inventory (and choice) for buyers. U.S. housing starts decreased by 2% in January from the previous month to a seasonally adjusted annual rate of 1.065 million, the U.S. Commerce Department announced last month, and applications for building permits also declined by 0.7%, indicating that this situation is unlikely to immediately change.

To put that in perspective: Construction of housing units averaged around 1.5 million a year for the past five decades.

And people are still rattled by the 2008 property crash, despite the increase in Zillow’s index. About 43% of Americans say owning a home is no longer “an excellent long-term investment and one of the best ways for people to build wealth and assets,” and over half say buying a home has become less appealing, according to the “How Housing Matters Survey,” commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation last year. Although 70% of renters aspire to own a home, some 58% believe that “renters can be just as successful as owners at achieving the American dream.”

But the long, slow rise in house prices has at least made some homeowners feel more secure. “While consumers think 2015 will also be a better year to rent than 2014 was, rental affordability is a big and growing challenge, especially in coastal markets,” says Jed Kolko, chief economist of real-estate website Trulia, which merged with onetime competitor Zillow in a deal that closed last month. “Optimism is increasing most for selling a home, thanks to price increases.”

Saving for a down payment is still the highest hurdle, as it was last year, followed by poor credit and the inability to qualify for a mortgage, he adds. In 2015, Kolko says, “The rental market will remain vigorous.”

This article originally appeared on Market Watch.

8 Tips for New Landlords : For Rent by Owner

Landlording is a tough business, but it can be a moneymaking one, too. If you’re considering renting a home, you can hire a Realtor or property manager to find your tenants–for a fee. The other option is to offer your house for rent by owner. –

Legal Compliance

Learn about your state’s, county’s and municipality’s laws before you make a move. A consultation with a real estate lawyer is the best way to make sure you don’t overlook anything. Some of the issues landlords encounter are escrow account management, proper handling of tenants’ security deposits, discrimination avoidance, building codes and zoning regulations. Your attorney can also advise you about the type of–and amount off–insurance you need.

Gather the Paperwork

Professionally written legal documents are an absolute requirement. You can purchase pre-packaged leasing documents from most office-supply stores. Make sure the package you choose is compatible with your state’s laws. Alternately, hire a real estate attorney to write your lease, rental application, eviction notice and a form that allows you or your tenant to request that the lease be terminated.

Get the House Ready

The fresher and cleaner the house looks, the faster it’ll rent and the higher the rent it’ll get. At a minimum, paint each room and repair or replace damaged flooring. In addition, faucets and faucet handles should look new; shades or blinds should be clean, functional and new looking; caulking and grout should be clean and crack-free; and the entire home, including its appliances, should be spotless. Finally, you can head off costly emergency repairs and potential lost rent by getting heating/AC, electrical and plumbing inspections before your tenant moves in.

Figure out the Money

You have to spend money to make money. Your expenses include your mortgage, taxes, insurance, maintenance and repairs and any time the property is vacant (anticipate at least 10-percent vacancy). The rent you charge must be consistent with the local market value. It may not cover all your expenses. Even if it doesn’t, you still stand to profit from tax savings and appreciation of the home’s value.

Handling Repairs

Although you may be able to handle many repairs yourself, you should put together a list of professionals you trust to do work you can’t do or choose not to do. Include plumbers, heating/AC technicians, electricians and general handymen–two or three of each so you can get work done quickly even during busy seasons.

Finding Tenants

Local newspapers and online classifieds such as Craigslist are the most common resources tenants use to find housing. Also consider positing notices on store and employee bulletin boards and, if you’d rent to students, in student unions of local college campuses. If in doubt, run your ads past an attorney to make sure they comply with anti-discrimination laws.

Screening Tenants

There’s no way guarantee you won’t be burned by a tenant, but you can reduce the odds by screening prospects carefully. Check their credit references, especially past landlords. Also, verify employment and income with their employer reference. Credit reports are useful, too, but know that many renters would be buyers if they had the credit and cash to purchase. Unless your property is in a larger city where people frequently choose to rent instead of buy there could be a high probability that your pool of applicants are credit-challenged.

Move-in Inspection

Tour the property with the tenant before you hand over the keys. Make a list of any damage you find so that you’ll know what’s tenant damage and what’s normal wear when the tenant moves out.

This article originally appeared on American Apartment Owners Association.

6 Tips for Being an Effective Landlord

If you want to be an effective landlord, there are some specifics you need to consider. Here are 6 tips to help you do a better job and feel more comfortable in your role.

1. Put it in writing

Make sure you put everything to do with your rental in writing. Don’t rent to someone with a verbal agreement, because it’s far too easy to get into a “he said – she said” type of argument that can be very hard to sort out. Emails and texts count as “in writing,” but make sure your lease is actually on paper, and that it’s signed by both parties. Having an attorney review it is also a good idea.

2. Don’t bend your rules

Even if you want to help out one of your tenants, don’t help them in a way that requires to you bend (or completely break) a rule you have for your rentals. If you do that, and word gets around, other tenants will be wanting you to bend and break rules for them, as well. Since you don’t want to play favorites, it’s best to say no to any request that would go against your rules.

3. Reward the best tenants

Not bending the rules doesn’t mean you can’t show your appreciation for good tenants. A small gift card during the holidays, or another small way of letting them know you think they’re great is certainly acceptable. Just make sure you don’t chose a reward that breaks or bends any rules you have.

4. Be present but not overbearing

You want to make your presence known, and you want to be sure your tenants are aware how to reach you. At the same time, though, your tenants should feel as though they have privacy in the place they’ve rented. If you’re always around, they’re going to feel too much like you’re checking up on them – and that can make them uncomfortable. Check in only when you need to, and only for valid reasons, but be accessible when tenants need you.

5. Remember who you are

Regardless of how nice your tenants are or any other factors surrounding your interaction with them, you are the landlord, which means you’re in charge. Staying within the law and within the confines of the lease agreement that you signed with your tenants, but be bold about setting and enforcing the rules. Tenants should know they can’t get away with things that you don’t approve of, and that you’ve prohibited in the lease.

6. Be open to learning as you go

Being a landlord isn’t a completely static job. Things are always changing. That can include the laws and regulations for having rental properties where you live, and the types of tenants you have in those rental apartments, too. The more open you are to learning new things as you go along, the better you’ll do at working as a landlord and making sure your tenants stay happy.

This article originally appeared on American Apartment Owners Association.

Q&A: Can landlord charge different rents for lease vs. monthly tenants? By ANKY VAN DEURSEN

Q:  Can landlord charge different rents for lease vs. monthly tenants?

Q:  Is it common for landlords to charge tiered rents based on the duration of the rental agreement?

Q:  Is it discriminatory for landlords to charge monthly tenants more than tenants who sign leases?

QUESTION:  In the past, I have routinely renewed my one-year lease with no hassles. This year, however, I told my landlord that my company might be transferring me as part of a reorganization. Because of this uncertainty, I asked my community manager if I could simply convert to a monthly rental agreement rather than commit to a one-year lease.

To my surprise the manager said that a monthly agreement was acceptable but that I would have to pay $200 more per month to move from an annual lease to a monthly rental agreement. Can landlords impose a price differential depending on the duration of tenancies or is this some type of hidden price discrimination against monthly tenants? I have always paid my rent on time and, in my view, been a model tenant.

ANSWER:  Sadly enough, it is becoming increasingly common for landlords to create and implement a tiered rent structure based on the duration of your rental agreement.

This makes sense from landlords’ perspective as they feel more secure with a longer rental commitment. In exchange for a tenant’s written promise to rent for six months or one year they are much more willing to give a more competitive rental rate.

When a monthly tenant decides to vacate after a couple of months, a landlord will incur additional “move out” expenses, in addition to possibly losing rental income until the unit has been rented by a new tenant. The landlord may have advertising expenses, cleaning expenses and perhaps even repair expenses if the short-time tenant has caused damage to the unit that is unrecoverable.

Your thought that a tiered rate might be a form of price discrimination is not valid. Monthly tenants are not a protected class under the discrimination laws. Also, there is no landlord tenant law apart from the discrimination statutes that would prohibit such price differentials.

Your best bet in this situation is to approach your landlord to try and make the case that your positive rental history at the property justifies giving you the lesser rate; though, as previously mentioned, the landlord is under no obligation to grant this request.

This article originally appeared on Los Angeles Times