thinking buying eventually; any risk in entering 1 year lease now?

[procrastinator]

I am renting now, but would like to buy a house in RB or Penasquitos in the future. I am doing my analysis of buy vs. rent and now it inevitably comes out in favor of renting, unless of course you assume positive appreciation in the next few years, which would be in contradiction to what is happening now. So I am thinking of renting for at least another year. Is there any risk at all in signing a 1-year lease now? I am not looking to time the bottom of the market precisely, there’s never enough information for that; I just don’t want to miss it by a lot. Based on most discussions on this forum it seems that about the only risk is that the rents might drop during this coming year, and I think I can tolerate that. Anything else I am missing?

[powayseller]

You’re right on track. I signed a 2 year lease in July, since housing cycles take 10-12 years: 5-6 years up and then 5-6 years down. I expect the largest declines in 2008. Hang in there!

[sdcellar]

Keep in mind that you can usually get out of the lease if you really need to (although I seriously doubt you will).

Note that I’m not saying you’ll need to screw your landlord to do this, but that most leases provide for a way for you to get out if you need to. The only thing to keep in mind is that you’re on the hook until they find a new tenant, so it will likely cost you something.

Procrastinating is something you generally don’t want to do. Unless, that is, you’re thinking of buying a house right now. I’m *guessing* you already know that…

[(former)FormerSanDiegan]

I see absolutely no risk in signing a 1-year lease right now.
If rents drop significantly over the next 12 months (unlikely), you won’t want to buy a year from now anyway. If rents go up, and it looks like the time for you to buy is in 6 months (also highly unlikely) then I’m sure the landlord will let you out and fill their rental with a tenant at a higher-rent.

It’s really a win-win right now in either case for you.

[surveyor]

Replacement Tenants

My tenants moved out early and I am charging them rent until I find a new tenant to take over the house. I thought that the house would be vacant for a couple of months, with December usually being the low period for renters.

Advertised, and about 20 people have called me up, interested in the house. I have about five who are interested in moving in NOW.

So unless your landlord is a real prick, I’d say it wouldn’t take too long to find a replacement tenant for them…

(gotta love that craigslist).

[(former)FormerSanDiegan]

surveyor –

I have had a similar experience in the past… twice. Both times the tenant wanted to leave about 3/4 the way through the second year of their lease. Better to let them out on good terms than have someone pissed at you living in your property.
They are legally liable for the rent while the place remains empty (as long as you advertise and don;t increase the rent).
Or if the market is like it is now, there’s the bonus of increasing the rent for the next tenant.

If I were procrastinator I wouldn’t put off signing that lease.

[powayseller]

surveyor, very interesting. Do you know if any of these potential tenants moved here from another area, or why they are renting and not buying?

[surveyor]

Tenant Circumstances

1. One applicant (family of 3) has been transferred from Temecula to El Cajon and wishes to stop commuting from Temecula.

2. Received an inquiry from a person moving here from Georgia.

3. One person seems to be a bubble-sitter – sold his house, wants to rent now.

4. One was military, moving here.

5. Two couples, good friends, wanting to stay in the same house, from New Mexico.

I’m expecting a horde of people coming by this afternoon so I will let you know if I can glean anything from them. The ones I have posted above are the ones most interested.

[(former)FormerSanDiegan]

Interesting … 4 out of the 5 moving in from either outlying areas or out of the area. Seems counter-trend to the population exodus we have witnessed.

[powayseller]

Military people will keep moving here if they are ordered, regardless of the housing prices. I have several in my neighborhood, but both wish to return to other states.

I’m curious about the folks coming from other states, and why they don’t mind renting instead of buying.

I have a family member who was offered a health director job for a So. CA county government, at a higher pay than she currently gets in her Midwest job. She wanted to live in CA, and be close to me and my brother. But after checking housing prices, she declined the offer. This is the type of story I hear over and over, but I guess some people will come here anyway, regardless of housing prices.

Someone told me they think that young people will come here to live, regardless of high housing prices, because they will forego the ability to buy, and rent instead, just so they can live the CA lifestyle. But by the time they are older and ready to settle down, they will leave if they can’t buy a house. Did the guy from Georgia fit that profile?

[CardiffBaseball]

I fit the bill, moved here to rent. Had a comparable job offer in North Canton, OH. This location was an hour from my home with very little traffic. Then the San Diego offer came and the salary offer was $45k more, plus way better bennies.

What helped me decide was to take the other job I’d end up moving anyway, and if I was going to leave my little comfort zone in Youngstown-Warren, why not just go for in CA. Also the Ohio job was with a small niche company, whereas out here I am with a known commodity. Even if I decide to leave here, my career is far better off.

So we rent…

[surveyor]

I didn’t get a whole lot of info from the Georgia person. It sounded like a combined living situation, though. He was moving here with a co-worker and they needed five parking spaces altogether.

If there’s any trend to note, it is the frequency of people “doubling up”. There were quite a few applicants who were renting for that situation.

[powayseller]

So people who are willing to double up as renters, are still willing to move to San Diego? Was the Georgia guy then a young fella, i.e. one of the groups I suggested that will come here, have some fun in So CA, and then leave if he can’t afford a house when he’s ready to settle down? I got this theory from someone at the piggington meeting (was it zk?)

[SD Realtor]

Procrastinator I see no risk in renting. Even signing the 1 year lease is not a heavy risk. Your lease will expire right after (what I hope) will be a very sobering 2007 for homeowners who think 2006 was just an hitch in the market. I am renting just like you are thinking of renting. I also have a few rental properties and when one of my tenants had to break the lease last year I told them as long as I could find a new tenant that there would be no problem. Ran the ad on Craigslist and got it done with no problem.

SD Realtor

[ibjames]

I was one of those that moved here in January this year. (reaching my 1st year anniv. :))

Anyway, my wife and I moved here from WI, we had good jobs back at home, and were thinking of buying but held off because we have always wanted to move to CA.

We knew about the housing prices, and were really discouraged. Yet moved anyway because we knew that where there’s a will there’s a way right? If other people were buying out here then so can we! 2 white collar professionals, I got around a 10k pay increase and my wife got around a 20k pay increase with good bennies, both positions were good career steps. (we lucked out, we applied when we got here)

I don’t know how many people are willing to do what we did though. My wife and I are both outdoors type people, and back in WI you are very limited because of winter. So for us it was worth it. I couldn’t live in AZ or other places due to allergies, or heat (this summer sucked though) plus, I wanted to be a surf bum lol.

It has worked out well, and when we initially got here we saw that it was a “buyers market!” asked people what they did and how they got loans etc. Quickly got approved for a 7yr fixed interest arm (though the realtor and broker thought I was being too conservative.) It was a 80/20 loan (we blew a large portion of our savings on the move) with the 20 being fixed for 5 with the hopes of having the 20 payed off in 5 years so we could refinance (it would have been possible) I look at it now and think, “what the hell was I thinking” I came here with the “midwest” attitude that if you are renting you are wasting money.

Put a couple bids on some condos, so many owners didn’t want to budge on price, we put ourselves on a limb and put a higher bid that we didn’t feel comfortable with, they declined still, we pulled out of the market to save until we can get a regular mortgage. (I posted that I saw that condo on the market many months later for 30k less than what we bid) Our thoughts were if we couldn’t buy in 3-5 years, we probably shouldn’t be living in SoCal.

We still have that feeling. If things don’t get affordable by 2008-2010.. we’ll move somewhere else, and take our nice size savings and buy there instead.

To be honest though, I don’t think we’ll have to move 😉

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