Author Topic: Students Renting  (Read 4018 times)

curlycue

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Students Renting
« on: June 17, 2014, 08:17:14 AM »
So I am going to be moving to Baltimore soon, and the real estate is cheap. I could "rent" a three bedroom row house and sublet two rooms to two other students. Has anyone else ever done this?
« Last Edit: June 27, 2014, 11:50:35 AM by curlycue »

waltworks

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Re: Renting with no credit
« Reply #1 on: June 17, 2014, 09:23:13 AM »
Speaking as a long-time landlord, you are kinda hosed. I always require a cosigner if the renter doesn't have any credit (usually college kids). I know the whole credit reporting system is unfair and sometimes a scam, I understand the desire not to have credit cards and participate in the whole thing - but sometimes you gotta play the game. Go get a couple credit cards, buy some stuff (that you would have bought anyway) and pay them off immediately. Start now. It's easy to establish some credit though if you're about to move you might have waited too long.

You may be able to find some like-minded folks to go in with you (who have credit) and split rent 3 ways. Not as cheap as subletting to others to cover everything, but still a good deal for everyone.

-W

waltworks

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Re: Renting with no credit
« Reply #2 on: June 17, 2014, 10:53:43 AM »
I'd rent to you and I only really have pretty high end places (ie rent to residents/postdocs/professionals). Sounds like you don't have a problem after all! Awesome!

-W

OK - so I checked my credit score. TransUnion says I'm a 710. This was listed as "good" on my credit report. Does anyone know if this is good for renting? I have no idea how it would be so high but I'm happy it wasn't as bad as I thought.

Mississippi Mudstache

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Re: Renting with no credit
« Reply #3 on: June 17, 2014, 11:52:34 AM »
OK - so I checked my credit score. TransUnion says I'm a 710. This was listed as "good" on my credit report. Does anyone know if this is good for renting? I have no idea how it would be so high but I'm happy it wasn't as bad as I thought.

You're not just in the upper tier of renters with that score, you're above most homeowners with a 710. I think that having a credit card that you pay off every month is still a good idea, though.

gimp

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Re: Renting with no credit
« Reply #4 on: June 17, 2014, 01:59:11 PM »
If there's no proof of income, usually a cosigner does the trick. When I rented I either had proof of income at the time, or it wasn't asked for.

Angie55

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Re: Renting with no credit
« Reply #5 on: June 17, 2014, 02:03:10 PM »
So you have no income and you are trying to get other renter's to pay your share? I'm not sure this is a viable long term option...

First off, subletting is usually not allowed in leases without landlord permission. Secondly, what happens when your roommates figure out that you aren't splitting the costs in thirds but you are really just having them pay your rent? If that was me, I would leave due to an untrusty roommate and you'd get stuck with the bill. Also, think about the liability you are taking on if they destroy the property YOU are the sole person on the lease.

rocksinmyhead

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Re: Renting with no credit
« Reply #6 on: June 18, 2014, 08:13:13 AM »
So you have no income and you are trying to get other renter's to pay your share? I'm not sure this is a viable long term option...

First off, subletting is usually not allowed in leases without landlord permission. Secondly, what happens when your roommates figure out that you aren't splitting the costs in thirds but you are really just having them pay your rent? If that was me, I would leave due to an untrusty roommate and you'd get stuck with the bill. Also, think about the liability you are taking on if they destroy the property YOU are the sole person on the lease.

yeah, I don't know who you're going to find that's a big enough sucker to be your subleaser/roommate. I've never heard of this kind of situation.

waltworks

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Re: Renting with no credit
« Reply #7 on: June 18, 2014, 08:31:44 AM »
Wait, if you're not there yet, how are you finding these "below cost" places? There might be a good reason they are cheap...

-W

curlycue

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Re: Renting with no credit
« Reply #8 on: June 18, 2014, 08:35:05 AM »
I'm in proximity, so it is easy for me to head there for day trips. I also have multiple friends in the area who have helped me out so I know which neighborhoods/streets are safe, which houses are on free bus and shuttle lines, and I have a place to stay when I visit properties.

There is a lot of cheap rent in Baltimore, most students don't have the time or resources to find it. The places that "market" to students make it easy to rent, but are super expensive. I know how to look locally.

johnhenry

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Re: Renting with no credit
« Reply #9 on: June 18, 2014, 10:14:41 AM »
That's not a bad plan if you can get a landlord to allow you to sublet.  And you can get renters to agree to each pay half of the rent while you pay none.

If I were in your position and OK with multiple roommates, I'd be looking for a place to buy instead of rent.  My brother did this successfully while he was in med school.  He bought big 4-5 BR house and his 2 or 3 roommates paid more than enough in rent to make his mortgage payments.

waltworks

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Re: Renting with no credit
« Reply #10 on: June 18, 2014, 10:22:29 AM »
That is awesomely bad advice. Google 1%/50% rule, or transaction costs for buying/selling real estate, or typical maintenance costs for a house... covering your mortgage is not making money.

-W

That's not a bad plan if you can get a landlord to allow you to sublet.  And you can get renters to agree to each pay half of the rent while you pay none.

If I were in your position and OK with multiple roommates, I'd be looking for a place to buy instead of rent.  My brother did this successfully while he was in med school.  He bought big 4-5 BR house and his 2 or 3 roommates paid more than enough in rent to make his mortgage payments.

curlycue

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Re: Renting with no credit
« Reply #11 on: June 18, 2014, 10:42:34 AM »
That's not a bad plan if you can get a landlord to allow you to sublet.  And you can get renters to agree to each pay half of the rent while you pay none.

If I were in your position and OK with multiple roommates, I'd be looking for a place to buy instead of rent.  My brother did this successfully while he was in med school.  He bought big 4-5 BR house and his 2 or 3 roommates paid more than enough in rent to make his mortgage payments.

Thanks JohnHenry. I've thought about buying, however I think I will only be in the area for one year, if I stay long-term it is likely I will buy, but I don't know if that will happen yet. I figure once I'm in the area and have the time to look it will be easier for me to wait and find deals if I do decide to stay longer.

curlycue

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Re: Renting with no credit
« Reply #12 on: June 18, 2014, 11:47:23 AM »
That is awesomely bad advice. Google 1%/50% rule, or transaction costs for buying/selling real estate, or typical maintenance costs for a house... covering your mortgage is not making money.

-W



Thanks W - I did google it and I'm still learning about money and real estate so that was helpful and informative.

waltworks

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Re: Renting with no credit
« Reply #13 on: June 18, 2014, 11:57:38 AM »
Wait, you're moving for one year and you are going to have a job, and you need to take out loans for living expenses to cover a few hundred bucks a month in housing costs? WTF?

This whole idea seems more and more bizarre to me. Just rent a room for cheap and live frugally for your one year stint. Some crazy scheme involving subletting *might* save you money, or it might cost you a fortune if you have a vacant room for a few months, or a roommate breaks stuff, or you don't get along with someone and they don't pay the rent. Have you ever actually lived in this sort of situation? I've done it many times in college and it's much more work/harder/costlier than you think unless you are living with people you know and trust. You are basically being a landlord but without a lot of the powers to evict/keep deposits/etc that a landlord has.

-W

johnhenry

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Re: Renting with no credit
« Reply #14 on: June 18, 2014, 12:59:36 PM »
Quote
That is awesomely bad advice. Google 1%/50% rule, or transaction costs for buying/selling real estate, or typical maintenance costs for a house... covering your mortgage is not making money.

Not trying to pick a fight with a "handlebar" or hi-jack a thread :) , but Walt, the rules you are quoting are typically invoked when evaluating a property for it's investment potential.  That's not what's going on here.  This thread and my example are exploring ways to save/make money in a situation where a person a) needs a place to live and b) is comfortable having multiple roommates leasing from them.

In my brother's situation (while he was also a med student like the OP), he was able to buy a home that met his immediate needs, as well as providing enough space in the case that he started a family.  All this, while consistently making enough to cover his mortgage payments, even with only 2 tenants.  For the record, more than half of the time, he had 3 tenants and the utilities were always split equally among all residents.  And when my brother lived in Europe for 1 year, there were 4 tenants in the place.  During this time, the place was at it's income-producing maximum and met not only the 1% rule, but the 2% rule and obliterated the 50% rule!!  And don't forget that it provided him free lodging for all the years except when he was in Europe.  Seems pretty Mustachian to me...

I'll plead guilty to leaving all those details out of the original post.  But that's because the goal was not to educate the OP on the 1% or 50% rules of evaluating real estate, since that wasn't the question at hand.

The advice was targeted for someone in a very specific situation, not someone evaluating rental real estate in general.  And I still contend the 1% rule should not need to be met here (where the owner will be a resident) because, as you can see from the example I provided, there is value to the owner in the form of having others cover their lodging cost.  After all, the alternatives were: a) paying rent and b) paying rent and trying to line up roommates to pay you enough to cover your rent.

Using your logic, anyone who owns the home they reside in, but doesn't collect enough monthly rent to cover 1% of the cost is on the bad end of a real estate deal. 

If you buy a quad-plex and it doesn't quite meet the 1% rule because you only rent out 3 of the units and live in one, is that a bad deal?  Probably not!!  Does it require further investigation?  Sure.  But to say it's and "awesomely bad" deal before running all the numbers is a little silly.




waltworks

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Re: Renting with no credit
« Reply #15 on: June 18, 2014, 01:13:41 PM »
To be clear, I meant that it was bad advice in this context (someone with little/no credit history, no job, short timeframe). Just based on transaction costs you have to *really* kick ass to make it work.

Obviously YMMV and evaluating a residence as a rental is silly, so I agree with you there. Renting out some rooms is a great (I've done it) way to make a few bucks. But that has to be put in the context of paying ~3% to buy the place, then another 6-10% to sell it. If you assume no appreciation, that free room might not look so great when you're paying 10's of thousands for the privilege.

-W