Orange County Private Rentals and You - A lesson in caution!

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Masterofdamoney_IHB

Masterofdamoney_IHB

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<p>Hello again all you IHB natives!</p>

<p>It's been a busy time as of late, with the foreclosure numbers growing like a Viagra-induced erection and blasting through the ceiling of my most radical forecasts for OC! </p>

<p>Today I would like to talk about PRIVATE RENTALS in Orange County. You know, those condos/SFRs you see poping up everywhere with the 'For Lease' signs on them. They are becoming quite the rage, as the investment 'flips' sit on the market festering, rotting away equity day by day.</p>

<p>Lately I have had several people ask me about rental rates in apartments vs these private rentals. They tell me that the private rentals seem to give you a lot more for your money as compared to the Irvine Company apartment communities. I have to admit, with the rents falling like a rock all over Irvine, and the private rentals having to follow suit, this can be tempting... but put that deposit check down, MR.! Here's the real truth to what I have been finding as I research these private rentals for people:</p>

<p>1. A FULL 90% + of the SFR and CONDO rentals that are being offered are currently over 100% LTV on their existing financing. They are upside down. Many of these are a FULL $100,000+ upside down right now. This is the VAST majority, not the exception! These are foreclosure timebombs. You don't want to be the one living there when the Sherriff comes knocking!!!</p>

<p>2. When I search value/existing liens on these rentals, I also look at the other N/O/O and PRIMARY residence for the 'owner' to determine their financial state. Almost a full 100% of the time, when they are upside down on their N/O/O, they are ALSO upside down on their primary residence. Scary! Again, a foreclosure timebomb...</p>

<p>3. A large percentage of these rentals are ALREADY in some state of foreclosure/pre-foreclosure. Of course this is never mentioned in the listing, or when you speak to the 'owner'. These properties also tend to have the largest 'secuirty deposit' requirements... hmmm... wonder why? :) </p>

<p>4. REGARDLESS of if they are currently upside down on the rental, their primary, etc... their current loans and terms on the properties, with taxes and insurance included, place their monthly obligations at roughly DOUBLE the rents (for those that are offering going market rates on rent, that is). So your rent check is, on average, only going to cover 1/2 of what they owe per month (on average). Timebomb, etc....</p>

<p>I could go on and on regarding this, but the moral of the story is:</p>

<p>DO NOT RENT A PRIVATE RENTAL IN ORANGE COUNTY RIGHT NOW!!!</p>

<p>Unless you check it out THOROUGHLY, or you are some sort of sadistic SOB who likes throwing money away and being forced to move by the Sherriff every 1/2 a year! :) These are not the exceptions, folks. THIS IS THE RULE. I have looked up literally 100's in the last 7 days for people I am working with, and it's like reading the same dimestore novel over and over again... Let's see... 110% LTV? CHECK. Rent rought 1/2 the monthly obligation on the property? CHECK. Primary Residence for the 'owner' also 100%+ LTV? CHECK... I am actually SURPRISED when I DON'T see that now. I have to go back over the property history 3 times to make sure I'm not missing a HELOC or something! :P</p>

<p>Take my advice (or don't!) and just stay away from private rentals for now... the large complexes are dropping their rents 5-10% on all units right now anyways... they are generally less per month, lower deposits, and you don't have to worry about being thrown out in the street at any given time!</p>
 
I have advised people in the past to get private rentals because you do get more money for your dollar, but given the current state of affairs, I think it is probably safer not to. I am fortunate that I have a good landlord who is not in financial trouble. My wife would like to rent in Woodbury because she would like to live there some day, but I told her it would be impossible to find a rental from someone who was not desperately underwater. By the end of the year, every homeowner in Woodbury, Portola Springs, Quail Hill and Northwood II will be underwater. Most already have values less than they paid, and they soon will owe more than the value as well.
 
It would be great to see a chart of the number of private rentals versus time. On this web site:





http://realty.fatwalletdeals.com/overview.html





Orange county rental and their price histories are listed. It seems that there a lot of people listing rentals at high prices and then dropping the prices after a month or so on the market.





How things have changed......renters asking the landlord for a credit report and financial statement.
 
<p>Pssh you could see that coming from a mile away. I always ask how long the house/condo/place has been rented for. If it is less than 1-2 years then I usually walk away form it.... Either that or I ask how much they'd like to short sell it to me! ha ha ha...</p>

<p>anyways goodluck</p>

<p>-bix</p>
 
Masterofdamoney, good looking out, but i hope this information doesn't scare away renters from ALL private rentals (only the ones with high potential for trouble, which, admittedly, seems to be the vast majority!). i mention this only because i'm considering renting my home, but don't fall into any of your timebomb categories (i have ~75% equity in it, and my monthly payment is ~3K/month, which includes principal and interest on my 15 year fixed mortage, taxes, mello-roos, and HOA, while comps suggest i could rent my home for $3600-4200/month). anyway, it's kind of a moot point for me personally since my house is in san diego and this is an orange county forum =), but i just want to give an example that it is still possible to find a good private rental amidst the distressed ones!
 
I think the main point that I get from this is...because there are so many bad apples out there to rent from, how can I prospective tenant without access to up to date liens/title history/etc. of the home/homeowner make a good decision on the homes for rent out there.





It's not like the homeowners tell you they're in foreclosure or up to their eyeballs in debt?
 
<p>r_h you reminded me of my favorite commercial:</p>

<p> </p>

<embed src="http://www.youtube.com/v/hn5EP9StlVA&hl=en" width="425" height="355" type="application/x-shockwave-flash" wmode="transparent"></embed>
 
recovering_homeowner, perhaps the test is this: if he/she can't prove to your satisfaction that he/she is NOT distressed, you can safely assume that he/she is. =) NanoWest made a good point earlier about tenants asking landlords for credit reports and financial statements. as a non-distressed prospective landlord, i'd be happy to provide those. if i expect a quality tenant, that tenant deserves a quality landlord, right?
 
Nude: yeap, i was thinking about that commercial!


Sd2oc: would landlords provide their credit report and financial statements to tenants? I've never heard of this happening.





I was going to rent a house, and the realtor wanted to run a credit check on both me and my wife, and would charge us 35 bucks x 2. I was fine with running one, me, who would pay the bills, but didn't want to pay 70 bucks. I offered to run my wife's report from the credit monitoring service that we use to save money, but they said no go and I said goodbye.





So now I rent a duplex, and the owner lives next to me, plus he bought the house a dozen years ago and has almost paid it off.
 
<p>How can I check the financial health of my landlord, or better said my floplord?</p>

<p>


By now his town home that I'm renting has comps. at the same price level that when he bought it in early 05, I moved in months later, I know that the property is cash flow negative after mortgage payment, taxes and HOA, he still has equity because a large down payment (he inadvertedly disclosed that to me), but if that came from a HELOC on his primary residence then...Houston we have a problem!





The only monitoring tool that I have is the OC property tax <a href="http://tax.ocgov.com/tcweb/search_page.asp">web page</a> and he's been doing it on time.


</p>
 
You need access to realquest, sitex-data, or some other title info site. These are not always 100% accurate, but they are a very good resource to use.





Anything built after 2004 is most certainly high LTV or underwater.
 
If you know your landlord's last name, and better yet, the first and last name, then you can check the <a href="http://cr.ocgov.com/grantorgrantee/searchPersonsName.asp">county recorders site</a>. This is probably the easiest way to check. Only if they have the loan and title in trust or a LLC with a different name, then you will have issues finding any defaults.





Also, there was someone on the main blog, who was going to rent Slade's place in Coto. Everyone told him not to do it, but he did. I wonder what happened to him, now that the Tan Man owns the home?
 
<p>Ok, Thanks.





How things change, I'm sure that he never imagined what's happening right now, he was 100% sure that after he bought the house, "home prices will keep increasing in single digits only, 2 digits increases are gone" (looking down to me, as if you couldn't buy before, in the future will be impossible), basically repeating what the NAR and OC RE "experts" were saying, that was in 2005.





</p>
 
recovering_homeowner, i haven't heard of it either, but i'm willing to do it, so i imagine other landlords with nothing to hide would as well.
 
Masterofdamoney,



What is you already have put a deposit down and are considering renewing your rental for another year in say Woodbury? Same situation? Last time I check the owners were current on their property taxes on the townhouse then again I never understood why "two doctors relocated to the East Coast" (according to the rental realtor) bought a small nondescript townhouse as a primary residence to begin with.
 
<p>Modm, how much data did you collect? Does it break-out by area? I.e. the areas getting pounded currently are the ones with the majority of floplords.</p>

<p>In my checks of Irvine and similar areas, the potential floplords tend to stick out like a sore thumb with the high rents. </p>
 
MdM, what line of work are you in? I'd pay money to have a potential EffenCasa floplord investigated. I smell a bidniss opportunity for you.
 
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