A plugged-in reader reports:
A feel good story (for me, not my new landlord).
From reading a large majority of the posts and comments [on SocketSite] and just from walking around Cow Hollow/Marina it was pretty obvious there was a lot of rental supply. My wife and I had outgrown our place and needed either a 2BR or a 1BR w a dining room – we needed 3 rooms plus a kitchen. We figured there would be a lot out there and we would have our choice of solid places. We saw some good places but the one we liked the most was a bit more than we wanted to spend.
Then LMRiM posted something about how asking rents were just that – “asking.”
The place we liked had been empty for 2 months. They were asking X. I called up and offered X minus 12%. They told me I wasn’t in the ballpark but they would keep me in mind. The place languished, then I saw it on a broker site, so I figured there was room. Then they lowered the rent to X minus 6%. I called em up, put in an app and [we move in soon].
The only thing we’ll add, “asking” isn’t just for rents.
UPDATE: Another plugged-in reader adds:
Also got a great deal on a house – Noe, single family home w/ great yard for ~3600. The ad that we responded to asked $4000 – funny thing is broker also listed the same place for $5000!!…Apparently bought at 950k, tried to sell at [$1.25M] no takers for some reason.
We’ll let you do the math.
Is this legit, or is this an attempt by landlords to limit the discounts to 6%?
By “this”, I mean “this post”
I don’t follow this post. Did he end up paying x-12% or x-6%? If it’s just the latter, the whole bit about calling and making a lowball offer (and really, the whole post) is irrelevant.
I had a similar experience.
After gathering good advice from various socketsite members — thank you, again — in the Spring of 08′, I opted to continue to rent and found an apartment for 15% less than previously paying. Moreover, the new space (also in Noe) is ~300 sq ft larger, and on a quieter street. The previous apt sat on the market for 2.5 to 3 months, and although I have met the renters through neighborhood friends, the oppty to ask about their rent has not arisen. If so, I’ll report back.
Also got a great deal on a house – Noe, single family home w/ great yard for ~3600. The ad that we responded to asked $4000 – funny thing is broker also listed the same place for $5000!!
Silly homeowners.
Apparently bought at 950k, tried to sell at 1.25 no takers for some reason.
2 mo vacancy translate to 17% of a year lease. It’s just irrational for the landlord to hold out 2 mo for extra 6%. On the high end, they go vacant for 6 months instead of taking 85% offer. The memory of now extinct corporate rental for $7000 die hard, I guess. I once had a owner who held out for extra 4% which amounts only to a few weeks of rent. It’s still vacant.
Agreed only in the instance of renting a house, it is silly to sacrifice months of vacancy for a little more rent as you can easily OMI evict someone in a house. However, due to rent control in an apartment situation, it is not accurate to count the lost rent as a percentage of just one years rent as you are locking in that rent control amount for potentially many, many years. So yes, getting $100 more per month adds up to a lot when you count it over 5 or 10 years (or more) and is worth having a place vacant for a couple of months (if you can still swing the mortgage). Also, when you go to sell or refinance your apartment building, $100 a month translates into roughly $15,000 of value at a very low 12 GIM, so landlords would be wise to not give away their apartments in the current market if they can avoid it as it will likely haunt them for a long long time.
Just to add my rent reduction success story:
Saw a slightly better unit in my SOMA building advertised on Craigslist for $1775; had been paying $1800 for about a year after a rent raise from $1750. Wrote the landlord a nice note asking to go back down to $1750 again and he said “no problem.” Hooray, uh, $600/year! Pay attention to craigslist…
Even if there is some speculation as to whether the subject of this thread is a “planted post” from a realtor, I’m very glad for whatever small role my posts have played in encouraging deserving renters to negotiate for discounts.
I’ve always found the best discounts are to be had from long term owners (or kids of owners) of SFRs who are trying to preserve their houses and grandfathered tax basis for future generations. They pay nothing in prop 13 tax, and because average people have so little understanding of opportunity cost, they seem to be happy to rent out their asset at less than 3% annual gross returns (implied cap rates of well under 2% if they had to pay taxes on current valuation). Of course, you are almost certainly not going to find a perfectly renovated new property this way, so if you need that sort of arrangement, then you probably have to pay a bit more. Still better than owning the depreciating asset, that’s for sure.
Good luck out there. Rents and prices imo should continue to go down further over the course of this year as well.
Well, if it means anything, in November of 2001, we signed our lease for 20% less than the former tenants were paying…prime Pac Heights and, a 270 degree view, which includes the Golden Gate Bridge. Funny, rents fell even further, afterward.
I take it back, it was exactly 15% less. And, even more so, this was when all the dot.commers who were loosing their jobs were leaving town…we were walking into all sorts of apartments where it seemed that every single landlord commented, “I was getting x with the old tenants and, I am not sure where to price it now.”
I feel as though there is dot.com bust amnesia on this board. Rents were not doing well. Housing hit a slight slump BUT picked up with the housing bubble…
Jay,
aren’t you worried about being evicted when the owners can’t afford their payments since they are subsidizing your occupancy so much? At a 950K purchase, unless it was a long time ago, they are losing a bunch of money every month at $3600 in rent. This is my primary concern with renting a SFR, that I’ll be kicked out after a year and have to move my family.
A good friend of mine recently called his property manager to request a lower rent; no reason, really. He said he was in sales and it’s been a down year, could they drop his $2,000 rent by 10%. The next day the landlord called him back and told him that wouldn’t be a problem. He’s only lived in the apartment slightly more than a year. Golden.
We’ve managed to get our landlord to pay for ~2 months worth of fix-it projects around our apartment as well: added a temperature-controlled shower head, new kitchen faucet, and fix a number of things with our deck. Granted it’s taken a lot of phone calls on our part, but the property management firm hasn’t given us too much hassle, saying how we’re good tenants.
We’re looking forward to buying our first house in another 12-18 months when the market starts to bottom out…
Renting is a bad idea, financially, in the long run, no matter when and where.
If you always just compare the spot expenses – the current rent vs the current mortgage, yes, renting is good.
But one really needs to compare the spot mortage payments vs rent 20 years down the road.
I am done now. Bring it all on, bears.
ester,
That’s a rather ignorant position and you are confusing ‘bear’ with financially literate.
The comparison should be based on the expected holding period rather than an arbitrary 20 years. I think most people hold for under 7 and I bet 80% hold for under 10.
I love my home but it has not been a good investment. Luckily I’m okay with that.
Ester wrote:
> Renting is a bad idea, financially, in the long
> run, no matter when and where.
This is so wrong I don’t even know where to start…
Most business (including many that have been profitable for generations) rent/lease property.
For most people and for most of the past 50 years renting “has been” a bad idea, but today (even with prices on the way down) when it still costs more than double to buy than rent in nice parts of the Bay Area renting is a better idea.
If I buy a place for a million less than the bubble prices my neighbors paid a few years from now who will be better off financially in the long run?
Yeah, ester’s point has a soupcon of surface validity, but only if you accept the premises that you’re going to stay in the place you buy for 20 years and rents will continue to rise over that 20 year period so much that your current monthly cash flow losses will be made up in the future. But the point is invalid even under those questionable premises when one accounts for the fact that prices are falling (rapidly), so buying now simply bakes in a capital loss. If you accept ester’s premises, wait a few years, then jump in.
So tell me ester, why do you keep going to the grocery store and throwing your money away on food instead of buying a farm?
Why throw money away on dating when you can get married? LOL, this is a fun thread. Can we keep this metaphor going? No cliche please. We already know about milk and cow.
I have to correct the above poster on the “just OMI” someone. It’s not easy and it can be very ugly. On a single family resident, there is no rent control by state law (this includes condos). You are not allowed to evict but you can raise the rent to “market” after the lease expires. Raising the rent above market can be viewed as an eviction.
On the rents dropping further and further, I hope I’m not jinxing myself, but my phone has been ringing off the hook for my vacancies. If you think you want to get a deal you better hurry up. I will agree that the last few months have been very hard and I have had to make concessions, but I am filling my vacancies now at only very slightly discounted rates (2% off top price apartment filled today).
Companies are hiring again? People are moving from Sacto because SF is so cheap now? Your phone is ringing off the hook while Argenta lowered price from $3800 to $2450 and yet only a dozen out of 250 are rented out. Go figure.
My properties are nice (but mid priced ~$2700 for 2br usually) and I’m getting some out of towners (south bay mostly, but some east coast), googlites, and probably 1/2 the people from SF looking for an upgrade. I’m also getting calls from the new stock of doctors coming into town as I do every year. And yes when I went several weeks in January and February were my phone did not ring, 10-15 calls a day does seem to be off the hook.
Between January and March, I would say I probably took a 9% hit on prices from the top… but I am aggressive to get my places filled.
Just my experience.. lol but my phone has not rung today yet.
One factor most buyers (and renters) neglect to include in their rent vs. buy scenarios is loss of principal.
People are very concerned with cash flow, ie, mortgage expense, taxes, tax benefit, upkeep, etc vs rental cost. For 30 years, housing prices only went up, so that appreciation tipped the scales in favor of buying almost every time. Clearly that dynamic has changed, and anyone hoping for appreciation to come roaring back doesn’t understand what a higher home price actually means (ie, inflation) and why the only scenario where the real estate bubble is reinflated is one that we really, really, really don’t want to come to pass.
Renting may be “throwing money down the drain” but at least you’ll have a drain to throw it down if you lose your job, get sick or otherwise come upon hard financial times.
Few in SF truly understand what it means to be underwater and have to sell – a downside risk that is grossly underestimated by most.
If you always just compare the spot expenses – the current rent vs the current mortgage, yes, renting is good.
But one really needs to compare the spot mortage payments vs rent 20 years down the road.
As long as we’re going down this analytical road, let’s not forget the future value of the stream of cash that you are saving every month that your ownership costs would have exceeded you rent payments.
I did a back of the envelope calculation on the rent v. buy difference for me personally since I started renting in SF in mid-2002, and it’s mid-6 figures positive at this point. And that’s assuming that I wouldn’t suffer any capital loss on sale from a mid-2002 purchase, which I don’t think I would have been able to pull off, judging from the prices I’m seeing in my old neighborhood these days (Monterey Heights).
Of course, I probably would have just managed the house like an options position, continually HELOC’ed out, and would now be sitting around asking for a bailout, lol, so maybe I was the sucker after all.
And this poor soul hasn’t even calculated the loss on the home sale that she will be taking…
Even more sobering, Seaman did some math showing that the $60,000 in yearly mortgage payments, insurance and property taxes she’s been shelling out exceeded what she would have spent renting a similar home at $36,000 annually. The tax deductions she got for mortgage interest and property taxes don’t come close to making up the $96,000 difference in cost over the four years, she says. “I feel like the whole housing dream is kind of a joke,” Seaman says. “I paid in for four years and got nothing. I wish I’d never bought.”
Good, if abbreviated, Forbes article EBGuy. It is a common misconception to think that if you pay $1 million for a home then sell it later for $1 million you “lived for free.” Not even close. Mortgage interest payments, property taxes, and maintenance are real costs. Pain is amplified (even more so by the leverage factor) if — as in today’s market — many are selling at a loss.
SF real estate prices, like just about everywhere else, were premised almost entirely on the belief that prices would keep rising forever since the fundamentals have not justified prevailing prices for about 10 years. That premise is now gone, and more and more have now woken up to that fact (and then there’s ester . . .).
For those of you with good taste in home furnishings and the ability to keep a neat house, check out the Rent-a-Family video on the Nightline website. Evidently “housesitting” foreclosures is a business that springs up during each downturn. Deeply discounted “rent” is actually paid not to the bank, but to the person with the business who vets the potential housesitters. The housesitting business offers their service to banks for free.
It is a common misconception to think that if you pay $1 million for a home then sell it later for $1 million you “lived for free.” Not even close. Mortgage interest payments, property taxes, and maintenance are real costs.
I wonder who you suppose the audience is for that particular statement, on this website.
(Of course, your neglect of any tax deductions with a nominal $1M figure, a number central to tax deductions, was also noted.)
If I read the piece correctly, they called and offered 12% less….sight unseen.
If I was the homeowner, I wouldn’t consider this a serious offer.