I moved here from a middle-class suburb of Cleveland, Ohio. I was laid off from my former job at the end of last April. I finally landed a new job last November … here in Austin. I put my old house in the Cleveland area up for sale, at a price far below what I paid for it. No takers. Today, after four months on the market, and several open houses, there still has been no takers, despite significant price reductions; I’m now at the point where I’d be owing several thousand dollars to the bank if it sells near the list price. (The Cleveland area never has a boom in real estate prices, but it suffered a huge bust.)
I’m trying to find a renter, but the only interest seems to be coming from worst-case scenario Section 8s; unemployed single mothers with six kids and the like. Nobody who is not using a government housing subsidy is interested in renting the house.
FWIW, I did the right thing when I bought my old house. 20% down payment (which is gone, thanks to the price reductions), 30 year conventional fixed rate mortgage. I put thousands into renovations and upgrades before I left.
Should I walk away go into foreclosure? What other options are out there that won’t destroy my otherwise good credit, except continuing to pay $1500 a month for a mortgage, utilities and insurance on an empty house?
Can you get a more stable renter by in essence reducing the market rent? If right now you are putting out $1500 a month can you give a better renter a $200 credit. That way you are only on the hook each month for $200. Eventually the market (even in Cleveland) should come up and you can recoup or at least sell out at cost. It doesn’t sound like you can get the mortgage payment covered in the current market–is that true?
If you walk away or go into foreclosure it is a lot longer haul.
I’m asking below the market rent, and no takers. My mortgage payment per month is $1080; insurance is about $70. I’m asking $900 a month for rent (3 BR, 2 baths, high end appliances, main floor and basement completely remodeled, 2200 square feet, 1/2 acre lot). No interest except Section 8; not working families, but the bottom of the barrel (unemployed moms with multiple children). I might have to reduce it again, down to $800. I can stomach a $300/month loss for a few years much better than $1,500/month.
That is what my thoughts were–if you can get the rent down to the point where you can attract someone who would take care of the place who might not be able to afford the rent needed to cover the mortgage. I am biased here in my area as we have a large military presence and thus there are usually good quality renters available for circumstances such as this. In Cleveland–I have no idea. But I think a $300 a month loss is better then $1500 a month loss or foreclosure.
Please don’t slag on Section 8 families…several of us worked very hard to get out of our holes. I didn’t have to raise my two young daughters in some shithole because of Section 8 housing and I’m grateful to the people who were willing to rent to me. I was an awesome tenant and had nothing but good references from my landlords. That is all.
I second this. The Hallkids and I had housing for several years because of the Section 8 program. That being said…
When we moved from Tulsa (where we lived with Section 8) to Harrisburg (still Section 8, which transfered), my landlord cried because we were leaving. No joke. I’m not sure if it was the fact we’d been living there for 2.5 years and took wonderful care of the property (even had the carpets cleaned when we left), because we paid our portion of the rent on time every month, or because the police were never at our property. He owned several houses, all of which were Section 8 and said we were the best tenants he’d ever had. Our neighbor, though, was also Section 8 (different landlord), and they nearly destroyed their house.
It’s not Section 8 tenants that are the problem, if they’re properly screened. Get references, then check them out. Get their employer (or their school, if they’re attending a technical school or college). Have a property manager do surprise visits/inspections of the property. Make repairs in a timely manner. Keep up with the pest control. You should do this with ANY tenants though, not just Section 8.
When I worked at a property management company, we LOVED Section 8 tenants. The rent from the gov. was always paid on time. If the tenant didn’t make their portion of the payment, it was usually so small as to be almost insignificant.
And no more than an average number of them caused damage.
It’s been my experience that good landlords make good tenants. If you invest some time in interviewing potential tenants and make a connection with them, and maintain that connection, you’ll probably be just fine, regardless of how they’re paying. Find out the names of the kids, their birthdays, info about the parent(s). Send birthday cards for the kids. Tell them some stories about the house and your time in it. Make sure they know you’re available to fix any problems they may encounter, and stick to that. For you this is a money-losing situation so there’s the temptation to invest as little as possible to avoid throwing good money after bad. If you give them the impression this is a hassle for you they’ll pick up on that and it’ll turn the relationship sour. They won’t tell you about the toilet backing up or the gutter which is bent and sagging. Your losses will mount significantly if they believe you don’t care about the house and see it as a burden.
How do you intend to manage any issues which come up? Do you have a handyman you’ve worked with that you could contact and have go fix things on short notice? Any friends or family in the area who could drive by every few weeks to see how the house looks? Long-distance landlords need a lot of support to make it work well. You’ll just be a voice over a phone and that’s a concern. If you’ve got friends or family in the area, ask them for recommendations. They may know someone who would like to rent from you.
Sorry you find yourself in this situation, elmwood. I think it could turn out fine, but it’s going to cost you more time and energy than you may prefer if you’re going to be a good landlord.
It’s going to be very difficult to manage a rental from so far away. If you do decide to walk away, buy yourself another house first–because your credit will be screwed if you have a foreclosure.
I have a coworker (married, both employed, two kids) who is looking for a place to rent. She currently lives in Bedford…don’t know if she’d consider your suburb, but I’ll see if she’s still looking for a place. i know my other friends who lived out your way are trying to sell their house…not in foreclosure, just a regular sale, and are having problems getting qualified people, too.
If you are considering allowing the bank to foreclose on a house that you do not intend to live in ever again, you may want to consider if your reluctance to take in Section 8 tenants is just a very expensive prejudice you’re indulging.
I am suggesting Section 8 is a very good way to go, if you have to (or decide to) hang on to the property.
I bought 6 foreclosed on properties in the oil bust of the mid-80s (South Louisiana.) I paid off the mortgages in 5-10 years. I never rented to Section8 consumers because I managed the properties myself. I kept the rents 15% below market value, and the properties in great condition.
Never had vacancies, did all non-major work myself, was almost never stiffed on rent.
Then I got a property management company and moved out of state. It was a nightmare.
The property managers didn’t really manage; for example one renter covered an exterior central air conditioner unit by enclosing it in a home-built shed, another bred doberman dogs in the livingroom (of course there was a ‘no pet clause’…but then again these animals weren’t really pets, rather a money-making investment, I suppose.) It was hell.
Collecting rent ?? The property manager would just collect a good fee for re-leasing; it wasn’t really important to them to keep good renters or evict those who damage.
If you can get good solid Section 8 people they will be grateful to have the place, you won’t be paying huge management fees and you’ll get the rent on time. I think. Best of Luck.
I would take another 10% loss (over the 20% down you’re already willing to lose) to sell the property. On second thought, make that 20%…there are some things, like the smell of ankle-deep puppy urine you and your house will never forget.
It could later cost only around $5000 for the next renters to only vaguely think, “puppies”, when they walk in the door. It’ll cost more to EVER attract a buyer who’ll actually live in the place. You will likely only be able to sell it to an investment buyer, greatly cutting your sale potential.
I would turn it over to a property manager. We bought a condo in Massachusetts when we thought we’d be there for a few years, and then when we moved to Qatar, we hired a property manager. They advertised it, found a tenant, collect the rent (of which they take 10%), take care of maintenance and other issues. We take a large hit on it: after management fees, the net rent we collect is around $400 less than our mortgage, and we eat the condo fees, but the rental market where our condo is is very soft–it took us months (and a price reduction) to find a renter. But if you can avoid foreclosure and reduce your losses until the market improves and you can sell the place, you will be glad you did. And you simply cannot manage the place from another state.
ETA–I see **Breccia **had a different experience re: property managers. Ours is good; they obviously have a financial incentive to maintain the property (although not as strong a one as you do). But we talked to a couple of different candidates before choosing the one we felt most comfortable with.
I work in Property Rental Management. If you do get a Section 8 tenant, make sure you have a lease that spells everything out in detail. They have to pay their portion of the rent, and we don’t care if it is fifty cents. If it’s not paid by the 5th, add a late fee. By the 10th, take them to court.
Spell out who is living in the property, and that they will be evicted if anyone else lives there. Keep Housing aware of any problems. When Section 8 tenants get evicted, they are no longer eligible for Section 8 anywhere ever again. Make them aware of that.
Refuse anyone who offers to pay more under the table. Tell them it’s illegal, and you don’t rent to people who commit illegal acts.
In all my years of dealing with Section 8, I’d say about 5% were decent tenants. The rest had problems. About 15% we had serious problems with.
with regard to my above post—I never (and my property manager never) leased to a Section 8 lessee. So, since I don’t have any direct experience but yammered about it anyway, take my talk with a few grains of salt.
A 4-plex I owned faced an identical building. That owner, who came to be an acquaintance, did lease to Section 8. It made my tenants miserable on a couple of occasions. My most glaring memory, 2 males from one of the apts (which happened to be Section 8 although neither of the males lived there) attacked each other. 1 fled the apt and was stabbed in the parkinglot by the other. The knife was found under one of my tenant’s car, iow the men came onto my property. My tenant gave notice just as the police were contacting me. My feelings, at the time, were if I had Section 8 people I wouldn’t have anyone else. All of what Annie-Xmas says rings a bell.
If you go the Property Manager route you might look at properties various companies manage…some of these guys must be good. If they handle a bunch of ‘slums’ or even properties that aren’t like yours, I would look elsewhere. Someone who’s got a bunch of single family homes will attract clients interested in your place. Ask to see the lease your tenant will be signing. Finally if you know your next door neighbors you might leave them your new phone#. Tell them to give you a call if they’ve got complaints.
Personally if I did not intend on returning to the area or living in the home again I would take a considerable loss to be rid of it. Your sunk costs (and yeah, more although it’s steep) won’t cross your mind much a year from now—if you’re free of the property. If you keep it, it could become unforgettable. Or turn into a, what, 7 year ‘unforgettable’, in the case of default.