Author Topic: Help me understand - who rents here?  (Read 3339 times)

rentalnewbie

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Help me understand - who rents here?
« on: March 15, 2016, 08:54:04 PM »
I live in a LCOL area where a home can be had for 150k in a good area, less than 100 in sketchier ones (by "sketchy" it's still safe but maybe slightly run down).

So other than students, which we have lots of around here, what financially stable people are renting here? The rent prices are still pretty decent (1%+ seems easy enough to find), so I would think the market is strong but is the tenant pool going to be limited to recent college grads before they their own places and financially unstable problem tenants?

Perhaps I'm strange in that I bought a place while still single and lots of stable people in their 20s rent for years until they get married even though buying is very affordable? Can I be reasonably confident these people are out there?

What sort of people apply to your rentals in non student, affordable areas?

more4less

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Re: Help me understand - who rents here?
« Reply #1 on: March 15, 2016, 11:08:02 PM »
1% rule basically means that one can get mortgage for a price of rent. Who rents there?.. People who cannot get mortgage mostly. That's why I try to manage my expectations about tenants' behavior.

justchristine

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Re: Help me understand - who rents here?
« Reply #2 on: March 16, 2016, 07:28:10 AM »
There are lots of reliable people that rent besides 20 somethings that are just out on there own.  I'm 40yo, make over 3 times the median income in my area and I have been renting for 4 years despite very reasonable priced homes being available.  Just looking at the folks that live in my complex, here are some of the situations for dependable renters:  Recently divorced, elderly retired who don't want home maintenance headaches, young couples who want cheap living so spouse can stay home, young person just out on their own, recently moved to the area middle aged folks that want to get a feel for the area before buying.

mskyle

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Re: Help me understand - who rents here?
« Reply #3 on: March 16, 2016, 08:05:12 AM »
Maybe single people looking for a long-term relationship in the near future? That is, people who don't want to buy because they hope to be moving someplace different in a year or two? Or younger couples who are planning on moving when they have their first kid? People doing short-ish term jobs (if you have a lot of students in the area, you probably also have visiting and adjunct professors, and maybe postdoctoral fellows, people like that).

Also some people are flaky about big decision-making (like deciding to buy a house) but may still be on the ball about making on-time rent payments.

Personally I like renting because I don't need to worry about maintenance, and I dislike renting because I know I could get kicked out, so good maintenance and tenant-friendly lease terms would go a long way in attracting someone like me.

I'm very financially stable and I rent, but I'm in an underpriced apartment in a HCOL where my numbers come out strongly in favor of renting, so not your target audience at all.

I don't know how you find out what the renter pool in your area is like before you buy a house and start interviewing tenants...

rockstache

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Re: Help me understand - who rents here?
« Reply #4 on: March 16, 2016, 08:05:24 AM »
We (early 30s) rent because:

-We don't want to stay in our current area indefinitely, and don't like the thought of being 'locked in' anywhere
-We don't want anything to do with home or yard maintenance
-We get a small discount on our rent to live near an elderly relative and care for her

rentalnewbie

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Re: Help me understand - who rents here?
« Reply #5 on: March 16, 2016, 10:31:19 AM »
Ok this is really helpful, I think I just never related to these situations personally but clearly stable non-student tenants are out there. It seems like most of the responses are short-term, like you might only rent for 2-3 years until you have kids or decide to stay in an area long-term but are still stable.

I looked a potential rental a while back with my SO and he was like "who would live here?" and I did not have a good answer, now I am more prepared and should look in areas like the people you described will want to live.

Thanks everyone!

Syonyk

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Re: Help me understand - who rents here?
« Reply #6 on: March 16, 2016, 12:07:31 PM »
I rent (mid 30s, married, one kid) because I won't buy a house when I'm new to an area, and we knew within a year of moving to our current area (Seattle metro area) that we weren't going to stay here forever.  That the housing market is stupid ("Asking is $500k, won't accept bids below $600k, inspections waived, cash only") doesn't really incentivize me to buy either.

I'm in the process of buying a house, just somewhere a bit more remote and close to family.

JZinCO

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Re: Help me understand - who rents here?
« Reply #7 on: March 16, 2016, 12:23:14 PM »
Ok this is really helpful, I think I just never related to these situations personally but clearly stable non-student tenants are out there. It seems like most of the responses are short-term, like you might only rent for 2-3 years until you have kids or decide to stay in an area long-term but are still stable.

I looked a potential rental a while back with my SO and he was like "who would live here?" and I did not have a good answer, now I am more prepared and should look in areas like the people you described will want to live.

Thanks everyone!
I'm in a stabl(ish) position. I've been around for 4 years and plan to be here for the next few at least.
I've hem'd and haw'd over purchasing a house where I live and it took me a year or so to decide that wasn't in the cards for the foreseeable future. I get along fine having roommates and renting homes I would not want to afford.
 I only have to shell out <10% of my gross income to live in a house with a price to rent ratio of 14 (soon to be 23:) ).

Us2bCool

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Re: Help me understand - who rents here?
« Reply #8 on: March 16, 2016, 02:19:27 PM »
When I started buying investment properties, the best advice I got was to remember that people rent for a multitude of reasons, only one of which is the inability to afford to buy. I followed that advice by buying houses as if I was going to live in it: decent structure, safe neighborhoods, good schools, etc. Of course they cost more and you need to keep them up (as you've seen my rant elsewhere in this board) but you get higher rents, a higher quality of tenant and surprisingly, more longevity. Oh, and the value of the properties will go up a lot faster as well.

Some reasons people rent instead of buy:
-They are empty nesters who aren't ready to retire; they've sold the big house they raised their kids in but can't move to their Retirement Dreamland for another couple of years
-They are relocating and waiting for a favorable market to buy
-Same reason, but want time to become familiar with the city before they buy
-They feel that buying isn't the best option financially
-They are saving for a down payment to buy a house
-They make enough money, but can't get their financial act together enough to save a down payment

....and the list goes on and on.

Tigerpine

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Re: Help me understand - who rents here?
« Reply #9 on: March 19, 2016, 11:58:09 AM »
I would consider myself financially stable, and I rent.

I knew when I moved into this area for work that I was only going to live here maybe 3 years maximum.  I've consistently read that you should plan to live in a house for 5 years to make it financially worthwhile.

Also, I tend to work long hours.  I don't see much benefit in buying a place that I mostly only sleep in.

My rent is reasonable (about $500/mo), and I don't have to do maintenance.

I don't own much.  If I had a house, it would be mostly empty space.  In my apartment it feels cozy.  In a house, it would feel almost post-apocalyptic!

Also, being single, I don't have to take into consideration anyone else's ideas about how to live.  I like the freedom of being able to up and move at a month's notice.

forestj

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Re: Help me understand - who rents here?
« Reply #10 on: March 19, 2016, 01:24:37 PM »
I live in a similar area. Everyone that I know personally (mostly younger people, a large % of the population here) rents because they all have student loan debt, their wages are crap, and they have no savings to invest in a home. They afford rent by grouping together into communal homes with 3-6 friends living together. They view the financial industry as liars and thieves and refuse to do business with them. 

Some of the people I know professionally own homes. Most of them are not getting a good deal.. They are paying mortgage insurance, buying a house that is bigger than what they need,  living in the burbs and getting stressed out by the commute, etc.

Some of them have so much money that even though buying a house cost them a lot and would not really be worth it in the long run, it doesn't matter for them. Its a status symbol that they can afford.

Some of the people I work with are smart about it, they probably have enough money to buy a house, but they recognize that the opportunity cost is too great, so they rent and invest, or rent and spend money on whatever their version of "hookers and blow" is.

Personally I am in the "rent and invest" category and I plan on staying there.
« Last Edit: March 19, 2016, 01:28:07 PM by forestj »

cschx

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Re: Help me understand - who rents here?
« Reply #11 on: March 23, 2016, 03:56:40 PM »
I'm in my mid-30s, financially stable (FI by some measures) and have been renting all my adult life, for a variety of reasons:

  • I live in a HCOL area where the sunk costs of home ownership easily exceed the cost of my (small, underpriced) apartment.*
  • I'm single with few possessions and have no need for lots of space.
  • I don't like being on the hook for maintenance and replacement, will gladly outsource that to a landlord. Also get my utilities and such rolled into the all-inclusive rent, which is convenient.
  • Don't feel ready to put down roots (and yet have been here for 10 years... hmm).

* The only case I can see for buying would be to rent out rooms and make a small positive cash flow while building credit and equity. In the past I always dismissed this idea because... I hate living with other people.

Now the next-door neighbor I rent from has become an empty nester and for the past year or so has been bugging me to buy the place. This would actually be kind of cool, because I could keep living in my own little space and rent out *his* house (a modest 3br/2ba). I can't seem to figure out how I would evaluate this deal based on the guidelines found in this forum, though. I suppose I should include my own current rent in the rental income, since I could erase rent payments from my budget.