patrick.net

The landlord might not be able to lower the rent because they already have a negative cash flow on the place.

Landlords generally don't reduce rents for existing tenants, as tenants don't move until rents fall 10%, which isn't likely even in this recession. (Tenants want to make back the cost of moving within a year, and a rent reduction of 1.7% just isn't going to do that.) Many landlords automatically (without thinking) raise rents on their units when a tenant moves out, as this has worked for most of the last 40 years.

Currently landlording is a tricky business. every vacancy costs money. If you lose one month in rent the fact that you would have made a hundred or so extra per month for a higher advertised rent is shot for the whole year. for your advertising costs and one lost month. There are fewer qualified tenants because of the flood of people choosing to rent instead of sell their house in such a down market.
Depending on where you are i would imagine that landlords with the inability to be flexible will have serious problems, or may just go broke. In addressing the poster that recomended renting from wealthy landlords,- its a litttle bit of a different deal having a landlord that owns a spare house or 2. Than being a landlord that owns 50 or more houses and rental apts. Paying an extra mortgage payment isnt so hard but try making 20 extra morgage payments. Successfull landlords arent uber wealthy that set on high and let their underlings handle every detail of their business.
Landlords deal with situations that would make normal people fall to their knees in tears. Most are hard working and if they make a dime after, mortgages, taxes, insurance, maintenance, lieing tenants, purposeful damage, vandalism, court costs, being sued for things like people triping in the yard while drunk, and the insurance company opting to pay a small claim rather than legal fees. They deserve every penny!
In ther current climate survival is primary/ then profits. If you dont show some flexibility with rents, lifes gonna be tough.
Personally my opinion is worse than the great depression.Theres certainly more money at at stake. All the stocks in the world equal a mere fraction of the equity in normal everyday peoples houses Nothing is selling but forclosures. at fractions of true value. normal people basicallly cant sell their houses. And no matter what your credit or financial status banks will not lend for non owner occupant homes.
Its kind of the perfect storm - in my opinion normal houses are down 35%, multi family is down 45%, and land is down 55%.
However much you think you lost on your indivivdual house then apply that to landlords who lost millions on their properties that had taken their lifetime of sweat , blood, tears and money, to acquire. And vacancies went through the roof at the same time. Good luck to my fellow landlords, "you'll need it"

Question. How can anyone commenting on this blog talk about TRUE or REAL millionaires on the West Coast? Do you not read any of the articles on this site?? What a joke. Here is a reality check for you. Almost all of your home values, jobs, most importantly INCOME for the last 30 yrs was a high finance Ponzi sheme fraud. Ask yourself how these so called rich people came to be. I will bet that most of them were either long term trust funders of parents who probably had average jobs that cashed out a fake home appreciation to call themselves millionaires ,or they themselves did the prior, or they were paid a salary based on millions of Californians being able to pay their salary based on false wealth of their homes. Here is a note for you. Since the rest of the US is having to support the entire West Coast from going under due to materialism out of control and a childlike belief of entitlement. Please be more humble and thankful. Without the government welfare, your so-called millionaires would be mostly wiped out, as they should be. And before you try to tell me how they had lots of cash, answer this question. Where was it? in real estate investments? in the stock market? bonds? All on welfare from the govt. All would be worth less than half if left alone to survive and to have to face the reality of a 30 yr Ponzi sheme. Now, if they had cash in their savings (which I doubt) then I apologize.

I drive a 1989 Toyota. Bad landlord? Or is that only Nissan owners? I suspect I'm a "bad landlord." I have lowered rents on one bedrooms, because the market for them has dropped, from what I can see. I see the same thing of owners sitting with vacant properties for long periods of time because they are asking too much. It is somewhat different between renting a house and an apartment. If you have a house, you can lower the rent and that's it. In an apartment building, if you lower the rent on one unit, it's pretty hard not to lower the rent for all similar or lesser units. It may be better to accept longer periods of vacancy than to do that. I try to price at a level that will attract applicants quickly. Having done that, if someone comes in and the first thing out of their mouth is, "Will you discount the rent?" then I figure they will probably be a demanding, difficult to work with resident and I am very, very reluctant to rent to them. That said, in this market, you do what you have to do.

i think for some of the renting properties sitting vacant there's a reason aside from price.

Lowering the rent isn't always the solution.

I've listed my house for rent and had it sit empty with no takers. lowered the rent still no takers. Raised the
rent back up, changed my marketing strategy and the place rented in a day.

I have been a landlord for past 10 years. All my tenants becomes a long term any where from 5-7years or longer. Even the ones that signed 6 month lease ends up staying for 4 or more years. When I see a good tenant, I knock of $100 off of rent from $1650 to $1550. And I treat my tenants like gold... Good long term tenants are hard to come by and I do whatever I can to make their lives easier while they are living in my properties! Taking a couple of hundred dollars more is not important as having great long term tenants who pays rent on time and takes care of the property! I am not a millionaire, I have mortgages to pay and I do not own these properties out right. I just realize that high turn over and vacancies is much greater loss than making my tenants feel that they are getting a good deal.

We negotiated a discount rent on the property we are living in before move in a year ago. We asked for a rent reduction a few days ago and were told no. The place is literally half empty.
Even more amusingly the landlord said we had to move out on Monday or sign a lease for another year. We pointed out that this was illegal but our landlord insisted this was the way it worked! Playing hardball in a rental market like this is hilarious.
To the "true millionaire" argument - we live in a modest apartment, drive an old car and have high six figures in the bank. Judging someones wealth based on their car is something only a poor person would do.

nobody want to rent to cheapskates. I did that before and it was a year of constant complaining
Needless to say that lady is living somewhere else now.

In my experience It's actually cheaper in the long run to leave the place vacant for a few months.

I must be a bad landlord too with my 86 honda and 87 subaru. I have noticed all my tenants drive much nicer cars. I own the very well maintained buildings and have money in the bank so that's fair. I haven't had to lower rents since my rentals are in the Rio Grande valley where there was never any boom.

Misstrial only generalized the "wealthy landlord" statement. Obviously not ever one of them running an old car is going be bad. Like wise the rich ones might be bad as well, but in general she has found them to be better.

No one wants to deal with the miser. LL's or the Renters. It's far more likely they aren't a miser if they're driving a nicer car. It could mean they don't manage money well, but it at least shows they have found access to it.

I watched one of those apartments with the moving rental prices. I decided I didn't want to deal with them, they just annoyed me. A 12 month lease would be like 1400, 14 month lease was 1200, 16 month least was 1300. The day before the places were $200 less, but they had rented all but one place. The program essentially tried to keep minimal units open, and would adjust the prices based on available units AND it was trying to tie people into leases where the likely hood of leases expiring at the same time was less likely. That way they were less likely to have 6 units open at any given time, by having the leases spread out over a larger time period, thus having a more even spread of rentals happening. I'm guessing it reduced staffing costs, and kept marketing costs at a constant level, by essentially always having one place open, but no more than that.

Thank you pkennedy for coming to my defense.

Interesting how there are those who picked out of my post the one thing they could find fault.

READ MY ENTIRE POST PEOPLE!

And as for bob2356, I rented in the Rio Grande valley for 3 years before moving back here to Cali.

88007.

Las Cruces.

And there are many absentee landlords who run rentals there who are completely ignorant of local wage and living conditions when fixing rent prices. Check out Las Cruces Craigslist (considered part of the RG valley): $600+/month for a run down single wide -

http://lascruces.en.craigslist.org/apa/1672481539.html

Many of those other rentals that rent for less are infested with rats and mice.

Bear in mind that the average wage in the Rio Grande valley area is less than eight dollars an hour and if someone can get a job that pays $10/hr then that person is considered to be doing great in NM.

Show a lack of mercy and you'll wind up with socialism. Some people just do not get it.

Like I posted above, there are landlords, and apparently on this Forum, who are driven by The Bottom Line.

toothfairy:

I suggest you post pictures of your rental along with your rent requirement. A lack of pictures to show renters what you are offering could be the problem, and not your lower rent (thank you for that btw).

Reason why I encourage you to do this is because I always "under-rent" and I value pictures in the ad because that gives me an idea of what I'm getting.

Translation: most people in my income bracket who are renters, rent at the $3500/mo level. I rent for less than half that even though it means living in a non-sexy community. Nonetheless, when the time comes, I will pay all cash for a house in Coto de Caza and will probably continue to drive my 2000 car. :)

Funny how everyone caught that one about the old car and yet failed to read further down in my response to ptiemann that my description was intended to be humorous. lol

~Misstrial

I was in San Francisco rental market last summer. The going rate for a decent 1bd/1ba in a good neighborhood was 1600 back then. That was just the beginning of a downturn for rental rates. We found a great, freshly remodeled place with a great caring landlord in a small apartment building for 1550 and actually were able to negotiate it down to 1500. That's our rent right now.

Throughout this year I actively kept an eye on my neighborhood's rents. Saw an increase in available units and rents dropped to 1500-1550 on the average. I do see a lot of places sitting for months and months vacant. I guess somebody figures it's better to loose 100/m but rent within a month than have the unit loosing 1500 for 3-4 months.

And let me remind you that this is SAN FRANCISCO, a place where rents are stable and unfortunately very high for the last decade. A lot of people of all walks of life think that SF/Bay Area is immune to economic downturn. I hear all the time that RE in here will not be affected. Good luck, try taking that to the bank. We are all in the same boat, somebody just gets washed out with the first wave, others later.

There's no point of paying 600K for a house that would be a shame to live in in most decent countries of the world, even in many other US states. Prices still have to come down big time.

Misstrial says

Thank you pkennedy for coming to my defense.
Interesting how there are those who picked out of my post the one thing they could find fault.
READ MY ENTIRE POST PEOPLE!
And as for bob2356, I rented in the Rio Grande valley for 3 years before moving back here to Cali.
88007.
Las Cruces.
And there are many absentee landlords who run rentals there who are completely ignorant of local wage and living conditions when fixing rent prices. Check out Las Cruces Craigslist (considered part of the RG valley): $600+/month for a run down single wide -
http://lascruces.en.craigslist.org/apa/1672481539.html
Many of those other rentals that rent for less are infested with rats and mice.
Bear in mind that the average wage in the Rio Grande valley area is less than eight dollars an hour and if someone can get a job that pays $10/hr then that person is considered to be doing great in NM.
Show a lack of mercy and you’ll wind up with socialism. Some people just do not get it.
Like I posted above, there are landlords, and apparently on this Forum, who are driven by The Bottom Line.

I'm at the other end of the RGV by the gulf (Harlingen, Brownsville, McAllen) so I have no idea what happens in NM. I rent nice properties at slightly less than market, but am very picky about tenants. Or used to be since I'm now overseas. My rental agent reflects my values and runs the properties as I would which is very pleasing. I'm not sure what offering a service at the going market rates has to do with mercy.

@besakirskis

We pay for location. 600K might buy a kingdom in some african country, but we don't want to live there. 600K might buy a mansion in fresno, in the US, in California, but we still don't want to live there! SF is highly desirable. It has a lot going for it.

A few places not renting for 4 months doesn't mean much. There are a lot of people renting in SF, and they're all in their places right now, in leases. No one is leaving enmasse, and they'll pay whatever it takes to stay there. They were willing to pay it when rents were even higher, now with them coming down they're going to pay them as well.

Some people might be out of work and unable to afford SF but there are plenty who can and still want to live in SF.

besakirskis:

What I know from my line of work, is that many landlords need to charge higher monthly rents and will intentionally let a unit sit vacant - all over a $100+/mo price differential for one reason in particular that I'd like to highlight:

In order to have their investment property appraise for a certain amount, they need to show that they are successful at charging a certain level of rent.

EX: A client (of an opposing counsel) lied to a bank appraiser when she wanted to take cash out of her property via a refinance. She stated to the appraiser that she was getting $1800/month rent when in fact she was only charging $1075/month in rent.

The purpose of this conduct is to misrepresent the property's value, to mislead the bank/lender into thinking the property has a higher market value than it really does, and so qualify for a refinance when in fact this transaction should never take place.

So, that could be one reason why you see places sit empty, it does not apply to every unit owner, however, the above-situation I described could come into play more frequently than you may think in today's economy.

~Misstrial

bob2356 says

"I’m at the other end of the RGV by the gulf (Harlingen, Brownsville, McAllen) so I have no idea what happens in NM. I rent nice properties at slightly less than market, but am very picky about tenants. Or used to be since I’m now overseas. My rental agent reflects my values and runs the properties as I would which is very pleasing. I’m not sure what offering a service at the going market rates has to do with mercy."

Thank you for being a considerate landlord.

~Misstrial

For what it's worth, in my experperiece by and large most small time landlords are basically slumlords. A lot of the big apartment complexes are pretty well maintained. Single family homes seem to be managed on a shoestring and when something goes bad and needs work or replacement it might as well be the end of the world. I have never once seen one of these folks ever do an inspection to see if everything works properly. And most work done to make these places livable between tenants is so shoddy cause they don't pay anybody who actually has a clue what they're doing to do the work. We moved in one place and they were still installing the plumbing under the sink. After they left we were going to use the sink and water started pouring out under the sink. Opened the door and looked and they had packed gobs of plumbers putty around all the joints. Oh my God, what micky mouse morons! Unfortunately, this kind of stuff is more the rule than the exception. It runs the gambit from plumbing to electrical to the heating and waterheater to lousy carpet, paint, fencing, not to mention rotting wood and nonwork8ng appliances. And what is the deal with not having venting for the stove? Sorry folks, if you don't give enough of a shit about your property to properly maintain it for your tenants don't expect them to lift a finger to fix it up for you. It's your house and investment- you take care of it.

pkennedy says

@besakirskis
We pay for location. 600K might buy a kingdom in some african country, but we don’t want to live there. 600K might buy a mansion in fresno, in the US, in California, but we still don’t want to live there! SF is highly desirable. It has a lot going for it.
A few places not renting for 4 months doesn’t mean much. There are a lot of people renting in SF, and they’re all in their places right now, in leases. No one is leaving enmasse, and they’ll pay whatever it takes to stay there. They were willing to pay it when rents were even higher, now with them coming down they’re going to pay them as well.
Some people might be out of work and unable to afford SF but there are plenty who can and still want to live in SF.

Yes!

http://www.naturefootage.com/video_clips/BG68_093

My family moved to SF over 110 years ago when the streets were still packed-dirt and people moved via horse wagon.

No place like it on earth. I love the City and the people who live there.

Excellent charitable fund for SF'ers:

http://www.openhand.org

Interesting perspectives here.

Kinda going back to original question, it just seems when a place is above market value by a certain %, it has a lower chance of renting out (so it may take longer). But at some point, it reaches zero.

For example, if there's a place most people think should rent for around $2500 (when you're at this level, there's a more limited amount of comps), if the landlord wants $3000, he may be able to rent it, but pretty much zero chance at something like $4000, and defintely zero chance at like $8000.

So, I suppose, how long do you think something needs to sit on market before it's become clear there's near zero chance (or it's extremely low). Seems to me about 4 months is a good sign. Two months and it's kinda clear your chance is at best 50% each month it's out there (if it's 50% each month it's sitting, then there's a 75% chance you would have rented it after 2 months).

I have been a landlord for over 20 years. I would look at your question differently.
If you have a house that is not rented out in 3 or 4 months, you had misjudged the market badly.
Before you set the rent you should see what is moving out there. I like to price at the lower end and get a good pool of candidate so I can choose the better ones. If you price it too high, the scums will apply since they are going to jack you over in the end.
If it is not renting, take it off the market, do some improvements and give it a rest. Just like selling, if the price is right, there will be takers.

ragingpinko says

Landlords generally don’t reduce rents for existing tenants, as tenants don’t move until rents fall 10%, which isn’t likely even in this recession. (Tenants want to make back the cost of moving within a year, and a rent reduction of 1.7% just isn’t going to do that.) Many landlords automatically (without thinking) raise rents on their units when a tenant moves out, as this has worked for most of the last 40 years.

You either have no clue on rental market of last 3-4 years in california OR we are talking about different things.

1. These days, 100% of landlords are lowering rents for existing tenants if the tennant signs a new lease of 6 months or longer (assuming the existing tenants moved in within last 5 years).

2. Official stats on california rental markets around 3-5% decrease in rents. These are stats for ALL rentals. Market price for ALL NEW LEASE have been going down 10-20% per year (for last 2-3 years).

3. This is nothing really new. Maybe the magnitude is somewhat unprecedent but same thing has happened numerous time in last 40 years.

I a landlord and an obsessive finance person. To me the math says if I took a discount of $100 or even $200 a month and was able to rent in month one I would be so much better off financially than waiting two or three months for someone to pay my full asking price, (say $3000.).

In two months I lost $6000. The discount of $200 gives me a loss of $2400. for year one. I also now have someone fully nested in their new home. When I raise the rent they are more likely to pay the new rent then go through the hassle of moving.

John Galt?

Here is applicable comment that I copied into my Rental File on my desktop.

Sorry, I cannot recall who posted it or on what site, however this comment bears repeating:

"3 Jan 2010, 9:36AM

I remember a time when people knew it was wrong to make money off of someone else's ability to have a roof over their heads, then everyone started doing it and it suddenly became OK because, well, why the hell not make cash.

It's not OK to make money out of property in France because people have morals, they also haven't suffered the same property crash because of it. I think there's a lesson to be learned."

Submitted by Misstrial

Do they make money off of people's ability to eat in France? I know they do here in the US. I guess farmers are immoral?

Hi middleman:

The thread topic was centered on rent increases. Try to stay on topic.

The poster I quoted was commenting on the trend, over the past 15 or so years, for boomers to raise rents on good tenants, whereas in the past, the Greatest Generation would not.

btw, my husband's family were ranchers and farmers in the Sacramento valley and my great-grandparents were Kansas wheat farmers. As you may know, the price of food has increased but not nearly at the same rate as shelter.

~Misstrial

Misstrial says

Hi middleman:
The thread topic was centered on rent increases. Try to stay on topic.
The poster I quoted was commenting on the trend, over the past 15 or so years, for boomers to raise rents on good tenants, whereas in the past, the Greatest Generation would not.
btw, my husband’s family were ranchers and farmers in the Sacramento valley and my great-grandparents were Kansas wheat farmers. As you may know, the price of food has increased but not nearly at the same rate as shelter.
~Misstrial

The "Greatest Generation" is simply a label that some old fart in the media decided his generation should be called. And WTF does your husband's farming history have to do with the topic about rents? You make no sense. You tell another poster to stay on topic and then go on to give a history of your family background. So who didnt come from from a farming background ? And back to the statement that the "Greatest Generation" didnt raise rents compared to boomers, I dont know who thinks that is the case but all you have to do is look at ANY chart and it is plain to see that someone raised rents all these years and it couldnt have been boomers only.

Rents here used to be $450+/- for a 1br; there are no bad areas in this town altho there are some that aren't as desirable as others. They shot up at least $100 during the bubble, as did house rents. Now they're back down to pre-bubble prices.

A woman that I work with was renting a 2 br in a complex for $700 that offers one month free after you've paid 5 months with a signed lease agreement; when her lease was up the LL enticed her to sign a year lease by offering the same rent for a 3 br. They told her that they don't lower rents for anyone, but would rather fill the 3br than to have it sit empty.

Then she found out they've lowered the rents on the 3br, offer the same 5/1 free deal to new or existing renters, and that she was screwed.

Just a story.

marko:

I was responding to "middleman" - in that context my post makes sense.

Sorry you are offended!

http://www.boomerdeathcounter.com

~Misstrial

Hi E-man:

The poster did not say that France had a smaller bubble than the U.S., just that they "haven't suffered the same property crash because of it."

I guess we are reading it differently, however, I can see your point of view. imo, the poster (highlighted) is also stating that the "morals" behind their property rise is different - not sure about that since human nature is the same everywhere.

Not sure what France is doing to cushion their deflating bubble, however I follow the international financial scene daily (sometimes hourly when things are getting intense) and so far I'm not reading or being sent email alerts about France or their housing deflation.

Greece yes, Eastern Europe yes, Ireland and England yes, but not France.

In any event, the point is what I highlighted in my original post.

Additional to address the OP upset rant and to stay on-topic:

Renting and living within a budget in America (note comments from renters):

http://www.mybudget360.com/going-broke-on-50000-the-story-of-the-struggling-american-middle-class-the-50000-median-household-budget

Like it or not, stratospheric rent increases developed on the Boomers watch and during the timeframe they have had to "cash-in" and pad their retirement accounts.

It is also my personal experience having rented from two different generations.

Boomer landlords raise rents just for the hell of it. Every year when the lease is up. No reason, even in a bad economy.

There are exceptions, I'm sure, however, the majority of them have a completely different view of landlording as opposed to the generation previous to them.

My opinion probably mirrors the experiences and opinions of my generation (Gen-X) and not to upset you or anyone else further, but Millennials who have discussed this situation with me hate the Boomers with a particularly negative energy.

I am aware that I am not the first to express this bad news regarding the perception of Boomers.

Here you can read the vitriol in some of the comments:
http://thehousingbubble.blogspot.com/2005/04/baby-boomers-are-el-nino-of-housing.html

Patrick has an interesting article up which looks at one Boomer couple's journey through the buying and selling of their homes and thus contributing to the housing price run-up along the way:

http://www.oftwominds.com/blogapr10/housing-demographics04-10.html?source=patrick.net

I have attempted to convey my point of view diplomatically.

Unfortunately, Boomers are not going to have a historical reputation as honorable ancestors with my generation or with Millennials.

~Misstrial

Where'd you find that e-man?

Interesting that Japan has steadily gone down over the past 13 years (is that really true?). Guess deflation can be a bitch like that.

Guess my landlord wasn't blessed with tenant-reading skills for my next-door neighbor had one too many demands from roofing problems in Santa Clara to the ever-increasing rent. Poor guy still puts up with said neighbor, for some reason, that he called some roofing contractor http://www.workforceroofing.com/roofing-services.html. Why, roofing repairs and whatnot in Los Gatos, Santa Clara and our other surrounding areas are anything but cheap.

I agree about raising rents. I'm fed up with my current landlord. She SEEMED OK for the first few years. But starting 3rd year it became "well I need to raise rent $100/month due to rising costs". What rising costs? I did nearly every repair and just billed her for the parts. I used quality parts instead of cheap junk and she got a better outcome. If there is a need for outside service I'm the one sitting around the house all day seeing that they have access they need and do the job right. Yet she tries to complain I spend too much even when I'm the one on the ladder saving her money. "Sure I suppose you need to replace those 20-year-old smoke detectors....but do you really need to replace ALL of them, maybe you don't need to replace the one in the hallway it hardly matters...." Yeah a $20-$30 smoke detector is a good place to save money isn't it? What do I get for it? Oh I'll only increase by $50/month instead of $100 if you guys are really thinking about moving...

She hasn't been paying attention I think to rental market. She only lives one street over and hasn't stopped by the house in 2 years. The house next door has been sitting empty since December with a FOR RENT sign hanging out front. I got furlough pay cut, and can't see her justification for wanting rent increase larger than alleged "inflation". I'm actively shopping for better digs, will give her the contractually agreed minimum notice before moving out.

Dropped the rent on my tenants $250 per month on both houses.
I'm not hurting for the money.
I like them.
I don't want to have to roll the dice again and 2 dark months can really screw me (take 10 months to recover in the discounted rent).
Rent =$3000
Discount = $250
Being a hard-head = Tenants leave (approx) 2 months lost rent = $6000
Will take 24 months to recoup the dark months (based on the $250)
I can always raise the rent again when (if) things pick up.

I find a lot of people become landlords by mistake, or at least unintentional. There are also those who are investors and just look at it as P/E ratio. I think the best landlords are like business managers. You can organise, plan and have a huge human resources department.

Your rental homes are not the source of income. It's the people in them.