Is there a Rental Crisis Looming?

Just when you thought you had heard enough about the economic crisis, the credit crisis, the real estate crisis, the foreclosure crisis or the construction crisis, and lately the real estate agent crisis, add one more as fallout from the others. A rental crisis is coming, as sure as the heat comes to the desert every summer.

The number of households looking to rent is going up every month as foreclosures take away their homes. While homes sit empty either not for rent or at rents higher than these households can afford, the demand for cheap apartments is on the rise. 

What makes this a crisis, is that construction of affordable rental property is declining significantly, rents are going up, unemployment is going up, and those who are employed are seeing their real income fall. That adds up to a crisis. 

Have you seen a tent city in your town? You may have one or more, but they simply may not be on the roads you travel. 

As rents go higher and renters get poorer, despite the demand for cheap rentals, landlords are likely to be faced with potential renters that either fail credit checks or whose credit scores are far lower than they would like.

Estimates of when the real estate crisis will end are now being extended farther and farther out. When it was estimated that the real estate market in California would not recover until 2009, people thought such estimates were crazy. Now experts are predicting a turn around won’t occur until 2011 and no one is calling these experts crazy anymore.

This situation may have one silver lining. If demanded for rental properties continue, and land values continue to decline, this may be the next area of growth for California’s construction industry.

In October 2008, the U.S. Commerce Department announced that new home and apartment construction fell in September 2008 by 6.3 percent to the lowest pace since 1991. The report indicates that the housing market correction has actually gained speed in recent months as foreclosures have flooded the market.

Just when you thought you had seen the worst of the real estate crisis, it seems to have become worse again with the stock market crash. Whatever month or year people thought the real estate market would recover, we can probably push that date another six months to a year farther out and the rental crisis looming in California is likely to loom even larger.

Tenant Rights in a Foreclosure

In California, over a third of all homes in foreclosure are rentals, and more than 77,000 rental units foreclosed in 2009 alone, according to a report by Tenants Together, a statewide tenants' rights group. Lenders, loan servicers and private investors sometimes harass tenants whose homes are in foreclosure. Scare tactics include asking tenants to leave without a just cause for eviction, changing the locks and shutting off utilities. Tenants in California are protected during foreclosure by federal, state and local laws.

Stay in Your Home! Tenants have the right to stay in their home during foreclosure until their lease ends. Foreclosure proceedings are not a just cause for evicting a tenant. If a just cause for eviction is filed, tenants have the right to stay in their home for at least 90 days after an eviction notice.

Notification! Tenants have the right to be notified if their home is in foreclosure. The California Foreclosure Bill of 2008 requires lenders to provide the tenants of homes in foreclosure a plain language notice explaining their rights. Previously, tenants would often not realize their home was in foreclosure until the foreclosure sale notice was pinned to their front door.

Utilities! Tenants have the right to basic utilities, such as water and electricity. Utility companies must inform tenants of shutoffs so that they have time to contract utilities in their own name. Tenants can then deduct the cost of utilities from their rental payments.

Rent Ordinances! Cities with rent ordinances, such as San Francisco, Santa Monica and Palm Springs, provide additional rights to tenants. For example, the San Francisco rent ordinance of April 25, 2010, declares that a foreclosure is not a just cause for evicting a tenant.

Beware of Fraudulent "For Rent by Owner" Scams

As the demand for rental homes increase the likely-hood of a “Rental Scam” becomes inevitable. To avoid being scammed, Applicants / Potential Tenants should stick with homes that can be verified through some means such as a Property Management Company. It’s a good policy to approach by-owner rentals and web classifieds carefully! This is especially true now, with the proliferation of foreclosure scams and the ever common ripoffs happening due to the challenging economic conditions.

Craigslist can be a minefield when trying to separate the good from the bad! One common online scam is the advertising of foreclosed and abandoned homes as “For Rent By Owner - Rental Homes.” The goal of this scam is to take your money and, literally, give you nothing. The typical scam process here is that someone (the scam artist) who does not own the home, will attempt to rent the foreclosed or abandoned home online by posting an online ad to a site like Craigslist. The scam artists will find subject homes by using online advertisement sites, where they will place a property to "rent" advertisement as if they owned it. The scammer then steals the advertisement site content to create their bogus vacation rental ad.

Once a scammer has the interest of a potential renter, they will ask for an Application containing information such as credit card or social security etc., as one might expect when renting a home. The scammer will then process and deposit checks and credit card payments from the customer for the rental. The customer will probably not find out about the scam until they attempt to take possession of the non-existent rental. Once they do, they are left without their money or anywhere to stay. Obviously one way to avoid this problem is to ask to see the home in advance of making your commitment. But unless you live reasonably close to your destination, this is probably not practical. Nonetheless, ask if you can see the home first and take note of any resistance. Quite simply, do not rent from anyone who is not willing to comply with that request.

Many homeowners have made their homes available for rent to stave off foreclosure. But ask yourself, is this really who you want to send your money to? Are you really going to give thousands of dollars to someone on the brink of bankruptcy? Be reasonable with your expectations. Nobody can stay solvent when they are giving everything away. As always it's caveat emptor, let the buyer beware. Again, try to avoid using only price as your criteria. Homes priced too low are likely in distress. A little common sense could save you hundreds of dollars and many nights of headache and distress.

Rental Housing Rental Market Trends for 2012

This year will go down in history as the year when the rental housing and multifamily apartment rental markets began to tip in favor of owners and landlords. In many areas in the U.S. like Los Angeles, Dallas, Phoenix, Chicago and Miami, the vacancy rates lowered compared to 2010.

Other areas like the San Francisco-Oakland Bay Areas of California saw vacancy rates flatten out or improve somewhat during 2011, according to the National Association of Realtors (NAR).

The 2012 Forecast for Multifamily Rental Markets

The apartment rental market is expected to see vacancy rates drop from a nationwide average of 5.0 percent in the fourth quarter of 2011 to 4.3 percent in the fourth quarter of 2012, again according to the NAR. Multifamily vacancy rates below 5 percent generally are considered a landlord’s market with demand-supply factors usually leading to higher rents and higher capitalization rates for owners.

Areas in the U.S. with the lowest multifamily vacancy rates currently are Minneapolis, Minnesota, 2.4 percent; New York City, 2.7 percent; and Portland, Oregon, at 2.8 percent. According to the NAR, the average apartment rent was projected to rise 2.5 percent by the end of 2011 and another 3.5 percent in 2012. That’s an amazing 40% increase year-over-year! Multifamily net absorption is likely to be around 238,400 units all tolled for 2011 and 126,600 in 2012. The number apparently drops in 2012 because of a considerable reduction in supply. The true measure of change in total demand is net absorption. Gross absorption is often an inappropriate and potentially misleading indicator in terms of understanding and evaluating changes in total demand for rental units.

How Rental Housing is Being Advertised and Vacancies Filled 2012 will see the expansion of rental housing being advertised online or via sites that correlate to the explosive growth in the usage of Smart Phones and tablets such as the Apple’s iPad. The following video is a reminder of how many property managers around the nation are choosing to advertise vacant rentals using the worldwide web and why (click here). Property managers are also finding that social networking sites, like Facebook and Twitter, can be another great channel to market vacancies. Specialty websites like RentVine.com have been used by an increasing number of owners and property managers to expand their advertising of vacancies online. That trend should continue and grow in 2012.

The number of houses going into foreclosure increased exponentially in 2011. As a result, the number of displaced former homeowners looking for rentals increased to record levels. The good news is that the year 2012 looks very bright and promising for the property management industry and for both single and multifamily rental housing owners.

California “Notice to Quit” Requirements Change

As of January 1st, 2007, new legislation has changed “notice to quit” requirements for California landlords. A notice to quit is a formal notice ending the rental agreement or a request that the tenant relinquish the rental property to the landlord. The new legislation requires landlords to give tenants a 60-day notice to quit, rather than the former 30-day notice requirement. The law only applies when the lease term is month-to-month and the tenant has rented the property for a year or more. If you are a California renter, keep these facts in mind:

1. If any tenant in the household has lived in a property for less than a year, the landlord is only required to give 30 days notice. The new legislation does not affect fixed-term leases.Renters are still only required to give landlords a 30-day notice to terminate tenancy.
2. If the rental property is sold and the buyer plans to live in it, a 30-day notice requirement may still apply.
3. Even if your landlord services you with a notice to quit, you are still required to pay your rent through the last day of the notice.

Watch Out For Craigslist Rental SCAMS!

The number of fake rental scams on Craigslist and other online classifieds continues to grow, with new aliases appearing daily. But while the names may change, the methods are always the same.

These thieves, mainly based in Nigeria, the U.K. and the U.S., are out to steal your money and your identity.

They use yahoo, ymail, rocketmail, fastermail, live, hotmail and gmail, and they also post ads under anonymous craigslist addresses. They frequently change their aliases.

They use photos stolen from other property advertisements or from home furnishing catalogues or hotel websites.

They use fake names, often stolen from Facebook profiles or networking sites. Often they assume the identities of previous victims.

What they all have in common is that sooner or later you get a request to transfer funds via Western Union, Moneygram or some other wire service.

NEVER, UNDER ANY CIRCUMSTANCES, WIRE MONEY AT THE REQUEST OF ANY PROSPECTIVE “LANDLORD” VIA WESTERN UNION, MONEYGRAM OR ANY OTHER WIRE SERVICE. EVEN IF THEY TELL YOU TO WIRE THE FUNDS TO A FRIEND OR RELATIVE’S NAME “TO BE SAFE,” IT’S A TRAP!

NEVER SEND A SCAN OF YOUR PASSPORT OR OTHER ID. THESE THIEVES WILL USE YOUR IDENTITY TO SCAM OTHERS.

5 Things You Should Know Before You Rent!

Are you considering renting a house? Here are five things you absolutely must know! If you do, you'll be better prepared to sign a lease with confidence and get the most out of your new residence.

Know Your Rights as a Potential Renter

Before beginning your search for a rental property, you should be aware of federal protections against housing discrimination. The Fair Housing act forbids landlords from choosing or discriminating against tenants on the basis of race, sex, religion, ethnicity, mental or physical disability, or family status. Some states and metropolitan areas also have laws that prohibit discrimination based on sexual orientation or marital status.

On the other hand, it is okay for a landlord to pick or exclude tenants based on valid financial reasons. It is not considered discrimination for a landlord to require a certain income, number of references, or job status, as long as these conditions must be met by all tenants, regardless of their identification in any of the categories above.
If you believe that you are facing discrimination in violation of the Fair Housing Act, either as a tenant or a potential tenant, you can contact your local HUD office and file a complaint. Complaints about violations of state or city fair housing acts should be filed with the appropriate local office or enforcing agencies.

Know what your lease can and can't do for you… before you sign

Many new tenants assume that local laws govern the conditions of tenancy and leasing agreements. Not so. When it comes to your new living arrangement and your rights as a tenant, in many cases, your lease is the law. So take the time to review it carefully - the thirty minutes spent reading and understanding the terms of the lease will be well worth it. Don't just assume that the conditions are acceptable, or that there is nothing you can do to change the wording of the lease. Using your potential tenancy as bargaining power, you have more control over your future living conditions at this point than any other. However, once you've signed your name, there will be little you can do to change the agreement in the lease.

If something in the lease strikes you as unfair, don't be afraid to speak up. And don't accept verbal assurances - demand to get it in writing. Even if your potential landlord assures you that some clause of the lease will not be enforced, or promises additional benefits or concessions, he has no legal obligation to keep these promises. And likewise, you will have no way to enforce a mere verbal agreement. So make sure that all assumptions, agreements, and assurances are mutually approved, in the lease.

Know What to Get in Writing

If you've never rented a house before, there may be new aspects to residency and property care that you haven't yet considered. For the most part, these conditions will be defined solely by the lease. Don't make assumptions! Make sure you and your landlord are on the same page, particularly regarding:

• Who is responsible for caring for the yard? Keep in mind that if you're the one responsible, you may have to invest in lawn tools - like a lawnmower. If you're living within city limits, there are frequently city codes that require that your yard is kept up. Don't forget about raking leaves in the fall and shoveling snow in the winter, either. Make sure the lease specifies who is responsible for yard care.
  
• Who is responsible for maintaining large appliances? If the house comes with appliances like a washer, dryer, refrigerator, or oven, don't assume that these appliances will necessarily fall under the landlord's responsibility. Ensure that the lease is clear on who will fix or replace these appliances should they break.
  
• What are your privacy rights? Is the landlord required to give you a verbal or written notice before entering the house or coming onto the premises, or is she free to enter at any time? If she is required to notify you ahead of time, how much warning can you expect? Many leases reserve the right for the landlord to enter at will.

Getting it in writing is a habit that starts with the lease, but it shouldn't end there. It's a good rule to follow as a tenant, too. Any correspondence with your landlord should be put in writing, and then filed in your records. Having a written record of all correspondence is the best way to fairly and diplomatically negotiate any problems or disagreements that might arise.

Know How to Protect Your Security Deposit

When is the best time to start thinking about getting your deposit back? Before you even move in! Plan strategically to protect your deposit by doing a thorough walk-through and recording any pre-existing damage.

The best time to do your walk-through is just before you move in, while the rooms are still empty. Create a written record by commenting as specifically as possible on the current condition of the house. If there is any existing damage, note the exact type and where it is located. The more specific and detailed you are, the more useful your record will be, and the better it will hold up should disagreements about damage occur later on. "Mildew spots in left inner corner of tub" is much more difficult to argue with than "Water damage in bathroom".

It's also a good idea to take a camera with you and take pictures. Create a visual record to back up your written list, taking detailed snapshots of all aspects of the house and property. These pictures may come in handy a year or more down the road as additional bargaining power in securing the return of your deposit. Of course, this record won't prevent you from getting charged should you do any damage to the unit, but it can help protect you from being blamed for pre-existing damage.

Think like a detective when doing your walk-through, by looking beyond the surface. Make sure that any appliances work and take note of any performance problems. Turn on the faucets and check out the water pressure and sink drainage. Look inside closets and open and close the windows. Pay attention to how things in the house work, not just how they look.

Know How Renter's Insurance Can Help You

If you are renting a house (or any kind of rental unit), you need renter's insurance! Renter's insurance will protect you against losses or damages due to fires, flooding, robbery, electrical damage, or similar adverse events. Unless your landlord actually causes the disaster, his insurance will only provide coverage for damage to the actual unit. Anything that you lose in the event of damage is your responsibility. If the house burns down with all your belongings in it, or flooding ruins all your furniture, the cost of replacing these items will be your burden alone. And, so will the cost of staying somewhere else while repairs are made to the house.

Renter's insurance can help you prepare for these types of events. In addition, renter's insurance protects you from personal liability for accidental damage to the property of others in your care, or for harm done to visitors in your home. If you were to be sued because your dog bit the neighbor, or because your child's friend was hurt while at your home, renters insurance will extend coverage to cover these costs. In general, renter's insurance is fairly affordable, averaging $150 to $300 a year. Accidents happen, and being prepared is always a good investment.