Buying a house in this era of the coronavirus is an intensive experience: homes are selling faster than anyone imagined. You might think that renting is a temporary solution, but you should be aware of today's realities.
As a result of the pandemic, people are on the move in record numbers across the country. With the buying craze in full swing, along with low to no inventory in many real estate markets, buyers and sellers (who are would-be buyers) may turn to renting — at least temporarily, until they find what they want. It might also allow them to try out the area they want to settle down in before committing to a purchase.
Renting is typically underestimated and thought of as the path of least resistance.“If nothing else, I can always rent,” I often hear many buyers say, only to be sticker-shocked and frustrated when the available choices are underwhelming and cost more than what they wanted to spend.
There are also many other misconceptions about renting in today’s landscape, too. With that in mind, if you are considering renting, here are 10 important things they need to know:
1. It’s priceyIt’s going to be more expensive than what your clients think. Rents have risen in many areas of the country over the last few years. In spite of urban markets, which are seeing a decline in rental prices due to the pandemic, many suburban, second-home and resort markets are experiencing a huge increase in demand that’s driving up rental prices.
In many cases, it’s much less expensive to buy the same property at today’s interest rates than pay that monthly rent.
2. Move-in ready? Not so muchDo not expect turnkey. As a treasured customer of mine once said when he wanted to turn his home into a rental as he was moving away from the area for a couple of years — “it’s a rental.” He scoffed at the recommended repairs and improvements I suggested to make the home more livable and certainly more rentable from a marketability perspective.
Many rentals are full of Band-Aid fixes when they are really in need of new flooring, paint, appliances and bathroom and kitchen remodeling or at least substantial updates, not to mention structural fixes.
Prepare your clients for dated kitchen and baths, older flooring and yes — lots of carpet. There are always landlords who try to defy the useful life of a home’s mechanical components until they literally break down. Same goes with the roof.
The amount of repairs and replacements escalate, and oftentimes, landlords don’t have the money to spend on them or simply don’t want to allocate the resources needed. Yet, somehow, they expect tenants to pay top dollar to live there.
3. Planning aheadRenting a property may not be as easy as people think. Not everything you see online is really available. This is especially true with consumer websites, where you’ll likely see something marked as available — when, in fact, it was rented out several weeks ago.
When it comes to MLS listings, as an agent, you have to double-check the availability of each and every one before arranging a showing. That’s because applications may have been submitted, and the owners might be in the process of evaluating them. Or maybe they’re waiting on a buyer to submit a deposit.
All to say, there’s a very good chance that several of the listings your clients picked out might not be available for various reasons.
4. Access deniedShowing rentals is typically much more difficult than a property that’s listed for sale if it’s occupied. Tenants rule the roost and are usually not flexible about showings. They may require 24 to 48 hours notice, and in some cases, they may not comply with a showing request.
Many rentals are listed near the end of the lease term, which means tenants are often packing. The place is likely full of boxes and may not show well, which could be a potential turnoff for a prospective tenant. This is why most rentals tend to be listed once the tenant has vacated and after any cleaning, repairs and other “prep for rent” work is done.
5. Multiple applicationsIf you thought multiple offers were challenging when it comes to buying a home, be prepared for multiple rental applications per property. Just like homes for sale, the rentals that are in the best locations, are the most turnkey, and have a yard, a view and ample parking space will go super fast.
Your clients should have their ducks in a row and be prepared to fill out a complete application and supply all requested information down to the last detail. Incomplete applications or pieces of information that cannot be verified will make the process that much harder, and their applications may get passed over for one that is 100 percent complete.
In addition to a rental application, your clients will need to supply a copy of their driver’s license (or other official photo identification), agree to a credit and criminal background check, and provide two to three months’ proof of income or bank statements.
If your clients’ are self-employed or working as independent contractors, they should have a letter of explanation prepared about how their income is derived. If your clients fall into this category, they might also be required to provide two to three years of tax returns.
If living expenses are generated from investment income, tell your clients to prepare a detailed explanation of the financial statements they’re providing, making the source of the funds and their total monthly income clear to the listing agent.
Depending on the specific market your clients are located in, there may be an application fee per applicant as well as a fee for running a credit report and a lease preparation fee.
Each landlord or property management company will have their requirements with respect to a security deposit, and some may want the first and last month’s rent.
6. Fido and fluffyTell your clients this: No matter what kind of pet you have and have happily co-existed with over the years, what you don’t think is an issue might be a big deal to a landlord. Do not assume that every landlord will accept pets, and if they do, there are often restrictions on what they will agree to take.
Large dogs, cats and pets that fall outside the scope of normal household animals may simply not be allowed. Your clients’ beloved potbellied pig that roamed acres in their backyard may not be permitted at a new rental house — and the same goes for the pet iguana.
As renters, your clients are not in control of these decisions, and the landlord will often require a significant pet deposit for bringing in a furry friend. Some landlords are allergic to certain creatures, and some simply want to avoid the wear and tear caused by animals on their property.
Everyone says their pets are well-behaved, but unfortunately, many landlords end up spending far more than the pet deposit to restore a property to a rentable condition after tenants (and their pets) move out.
Scratched-up floors, window sills and doors, pet hair and unpleasant smells are typically what an owner has to deal with. Many landlords don’t want the lasting remnants of the last tenant’s pet to detract from their ability to rent their property out again — which is why they often enforce strict pet policies.
In addition, many communities, particularly condominium and townhomes have restrictions on the size, kind and number of pets allowed. If a landlord will work with your client and their pets, they might still have to pay a hefty — and often nonrefundable — pet deposit. They might also have to provide a photo of the pet along with an immunization record.
Gently inform your clients that if their pet doesn’t fall into the accepted category of animals, they might have to come up with a backup plan and decide where their pet will go if they can’t be a roommate in the new place.
If your clients think they can skirt the system and try to classify their pet as an emotional support animal (otherwise known as ESA), they should be careful. Terms, conditions and fine print apply. It may not be as easy as they think.
7. TimingTrying to time a move-in date with a rental can also be a challenge. Your clients may have to wait for another tenant to move out or for the landlord to take care of cleaning, repairs and painting before they can move in.
Their desired move-in date may not be accommodated. Prepare them for the idea that they might need to extend their current living situation to allow for some time to move.
8. AppliancesEvery market is different, and not all rentals come with a refrigerator, washer and dryer. As an agent, you should let your clients know what’s customary in your marketplace so they can plan accordingly.
If your clients are selling their home and have included those appliances with the sale, they might end up having to buy or rent those items — even though they may not potentially work in the next home they buy.
9. Who are you going to call?Most people don’t think twice about this when submitting an application for rent. However, it’s important to understand if the property is managed by an owner or a property manager. Your clients should know who they’ll be paying rent to and who to contact when something on the property needs attention.
Tenants should know: Is the owner local or out of the area? What kind of response time can you expect from them or the property manager? Will you be authorized to take care of repairs directly up to a certain amount and ask for reimbursement?
10. The leaseA lease is a contract — just like a real estate purchase agreement — to buy or to sell property. However, people who rent often fake amnesia when it comes to signing a lease and think they can get out of it whenever they want.
While they may intend to use this time to shop for a home or decide if the area is right for them, your clients should keep in mind that if they find something they want to buy or wish to pull up stakes, it might not be as simple as notifying their landlord that they want to move out.
Leases typically spell out the ramifications of breaking the term — you just don’t get out of them for free. They typically prevent you from being able to sublease to someone else unless you’ve negotiated otherwise.
A landlord could enforce your ability to continue to pay on the lease until it runs out if they choose to, so proceed carefully. Clients also need to be aware that the lease they sign will tend to be more in favor of the landlord. It’ll have all sorts of rules, regulations and requirements tenants are expected to abide by.
The chances of being able to negotiate or rewrite this document is slim, so don’t plan on it. The answer isn’t always to try to negotiate a shorter lease, either. In a competitive rental market, the landlord is looking for long-term stability and minimizing the cost of having to prepare the property in between tenants.
While a six or seven month lease may seem reasonable, short-term rental regulations in a particular market may subject shorter leases to a hotel tax and/or the community regulations may not allow anything less than a year.
Also, just like a mortgage, a late fee is typically charged for not paying rent on time, and the landlord or property manager could report this to the credit bureaus. While this information seems obvious, it bears repeating and reminding — especially for those who haven’t rented since their college days, back when things seemed a whole lot simpler.
While renting may seem like a flexible option, and market dynamics may dictate that necessity, there will be a substantial amount of planning and logistics involved to secure a property. In some cases, an apartment complex may be better suited to work for your clients, depending on their circumstances and pet situation. It’s important for clients to stay flexible with their options in order to find what will best fit their goals.