After 22 years in Colorado Springs real estate, I can tell you one of the most frequent conversations we have with the public is about renting a house, despite the fact that I really don’t handle rentals per se. It is quite common for people who are relocating to think that renting a house when they first arrive is the best option, and for some it is. There are others who must rent because they are not able to obtain a mortgage at present, due to credit issues, job issues, etc. I won’t go into all the good reasons that people should rent here, but there are a couple of them. But they quickly discover it isn’t all that easy.
To start with, while there is a computer system of sorts of professionally managed properties, as real estate agents we do not have the same access to homes for rent as we do to homes for sale. A large percentage of the homes for rent are ‘self managed’, and do not show up in the MLS. So a lot of time goes into researching homes that are rented ‘by owner’.
Which leads to a 2nd problem. Some of the homes listed by Craig’s List and other free classified advertising services are scams. Someone figures out that a home for sale is vacant, and decides to run an ad, pretending to be the seller, on line. They will go by the real name of the seller often, and try to convince the victim that they are trying to rent the house themselves, and can’t be around to take care of things, so please wire or mail a deposit and complete a lease agreement. I’ve received calls over the years from many smart consumers, who figure out the house is for sale, and call to confirm the situation with me. I hope no one ever loses a nickel to these people, but I’m sure some do. It sure wastes a lot of time and energy for the people who get caught up in these situations. General rule of thumb: if it looks too good to be true, it probably is.
The next problem is pets. I’ve had people who have been completely unable to find a suitable rental that will accept their pets. Sometimes a landlord won’t accept any, sometimes it’s dogs only, and sometimes it’s small dogs only (under 30 lbs or something), but pets can be a real challenge.
Then comes school districts. We have a lot of them, and if you’ve got kids, it can be a major challenge. Initially it isn’t so bad sometimes. A family finds a rental that seems to work, and the kids start at whatever school. But when their lease is up and they have to move, often they can’t find another one nearby, or can’t afford to buy in the district their kids are in love with, etc, and before you know it, it’s a problem.
Then there is the changing market conditions. Many landlords are not planning on being landlords long term. It is a short term gig until the market improves to the point where they can sell. So the perfect rental home for someone turns into a moving nightmare, where the house goes on the market and the tenant has to move when they really didn’t want to when the lease is up. Sometimes into a house they don’t like nearly as much, for more money.
Recently I was introduced to a new concept (yes, you can teach ‘old dogs’ new tricks!), where the process is completely different. It goes something like this:
- The prospective renter gets pre-approved by an investment group to rent a home a that the renter picks and the investors buy.
- The prospective renter (once approved) shops for homes that are FOR SALE (with a Realtor such as myself) that meet the criteria of the investment group as well as their own. The criteria is fairly general in some ways, and very specific in others. The renter can look for a house they’d really like to stay in, as opposed to settling for one they really don’t like. We have over 4,300 homes for sale right now, and not all of them would qualify, but it creates a lot more choices.
- The investors have the home inspected and negotiate the purchase.
- The investment group purchases the home, and the renter signs a 1 year renewable lease, pays 1st months rent plus a 2 month refundable deposit, plus a refundable pet deposit for up to 3 pets totalling less than 180 lbs.
- The renter is obligated for the 1 year lease, with the option to either purchase the home based on a pre-set formula , or continue to rent it with pre-set increase in rent (up to 5 years), or leave after any lease term is up.
Sound too good to be true, there must be a catch? There are several, but none of them are actually all that big a deal for most people. Not everyone will qualify, so the application process is important. On the other hand, the usual list of ‘big deal problems’ are not actually problems, such as bankruptcy and foreclosure. Not every house will qualify, in that they are only interested in homes served by high schools that are in the 50th percentile or above. While the rents are based on based on market rents, they will not likely be the cheapest rents that can be obtained, because in general the homes will be in above average condition, pre-inspected, etc. And the purchase price for the home will not be the same for the renter as it was for the investor, because they have a formula that guarantees the investor at least a 5% markup of the home over what it costs. But when prices are up approximately 4% over last year anyway, and better days appear to be ahead of us, this looks like a potentially great solution for the right people.
Want to know more? Call or text Rick Van Wieren at 719-331-7675 or email firstname.lastname@example.org, and let’s look at your situation and see what might make sense!