My ex-landlord experience might be useful to you. He and his wife, working in the banking industry (mortgages in particular), bought a house in the summer of 2005 for $890K or $895K. They put 20% down and financed with a 5/1 ARM. Their monthly payment, including escrow account for property taxes and insurance, came close to $4500. Three years later they saw their jobs threatened by the crisis, and decided to sell and move back to the Bay Area (where they had been born and raised).
So, it’s Spring or late Spring 2008, the house is worth at best $730K. At this point their down payment has been wiped out. It’s prime selling season, but there are no buyers. Naively, the couple lists the house for $799K. It doesn’t sell of course. So, they decide to rent, and list the house for $4000 or $4200. (Bear in mind that comps were renting for only $3000 or so!!!)
Eventually they reduced their asking rent to $3200. I came in, saw the house, and offered them a 2-year contract for $3000. They used the same realtor that had listed their for house for sale. I was also using a realtor to help me find a rental. What surprised me was how my realtor went to great lengths to make me pay more for the rental. He kept saying that $3000 was way below market and would not be accepted.
I overruled my realtor, of course, and my offer was accepted. But I couldn’t help thinking that my landlord was bleeding close to $1500 a month. I went to my county recorder website, made sure there we no liens on the house, etc., I even paid $35 to get a copy of the mortgage docs, that’s how I knew the details of their financing. I researched all this, b/c I didn’t want to pay rent to a deadbeat. Turned out that the landlord was a nice young fellow with an MBA and a good job.
The landlord didn’t hire a property management company. They used a realtor to find tenants, and I don’t know how much the commission was. There were minor issues with plumbing, etc., but the landlord sent his own handy man to take care of them.
Fast forward three years, Spring of 2011, interest rates are on the floor, house prices appear to have possibly hit bottom, and me, after 6 years as a renter (I had sold my house at a nice profit in the Summer of 2005), decided to buy a house and lock in a low interest rate in 30-year fixed loan.
My landlord listed his house again for rent, at $3200. There were a few looky loos, but the house rented right away, there was no gap in rent! I moved out on April 30, and on May 1 2011 the new family moved in. The new family decorated the house nicely, and appeared to be nice tenants.
But I just learned that those tenants lasted only a year…
