If you're renting, you probably know that the market is pretty tight right now. Fewer properties are available, and some particularly tough markets have seen a spate of abuses by unscrupulous landlords and brokers. But you can still save on rent and other monthly housing expenses by negotiating with your landlord and implementing some common-sense cost-saving tactics.
In this installment of "Real Estate on the Cheap," we'll focus on saving as a renter, then look at whether the end of the space-shuttle program will affect the housing market in sunny Cocoa Beach, Fla.
Have a good reason for a discount
There are kindhearted landlords out there, but renting is a business, so don't expect a break on rent just because you ask.
"I would advise tenants not to give sob stories and tell us how we can help them," says Ryan Pyle, a Toledo, Ohio, landlord. "They need to offer some sort of value in return for the discount."
Here are four reasons a landlord might consider giving you a discount:
1. The unit is priced higher than comparable ones in the area.
In July's renting-advice column, Karen Aho wrote that a tenant should become familiar with the landlord's competition using sites such as Craigslist, HotPads and Cazoodle. Looking at comparable places will give you an idea whether your unit is priced correctly.
Here's another site you can use: Rentometer.com. Input the apartment rent, address and size, and Rentometer will tell you where it falls in the range of apartment prices in the immediate area. ApartmentRatings.com also has a "What the Neighbors Pay" tool, which will show you the average reported rents for one- and two-bedroom apartments by metropolitan statistical area since 2000.
2. I'm an excellent tenant and will always pay rent on time.
If you have near-perfect credit and a spotless rental history, don't be afraid to brag about it. Landlords have more options than ever when selecting tenants, and a tenant with good credit will stand out from the crowd.
Many landlords depend on rent to pay the monthly mortgage or their own bills, so on-time rent payment is important. If your landlord is set up for it, you can take things a step further and have the rent automatically deducted from your bank account each month. Jim Olenbush, an Austin, Texas, landlord, says he gives a 5% rate reduction for tenants who use automatic monthly transfers to pay their rent.
You can also ask your landlord whether signing a longer lease could get you a discount. It might be worth something for your landlord to know he'll have an occupied unit that much longer.
3. I can pay several months' rent upfront.
Pyle says cash is king when it comes to scoring a deal on a rental. He recently gave a 7% discount to a tenant who paid four months' rent in advance.
"In one instance, a tenant received a large income-tax refund, and he offered to pay a full year's rent in advance," he says.
That tenant saved 11% on the entire year's rent.
"That's a pretty attractive return for him," Pyle says. "I did it because I wanted to buy another property and needed a down payment. So it was a win-win situation."
Olenbush says he offers a free month if a tenant pays for a year in advance.
"We have had several cases of tenants paying for a year's worth of rent upfront for various reasons," Olenbush says. "One was in foreclosure and did not qualify for the lease, so he paid 12 months upfront. Other times, they have paid in advance with no reason given or as a negotiating tactic to secure a lower rental rate."
This can be a great way to save money in the long run. Plus, you won't have to worry about remembering to pay your rent each month. But Pyle does have a few words of warning: "Before handing over several months' rent, tenants should be sure that the landlord is current with his mortgage and not about to be in foreclosure. They might ask to see his most recent mortgage statement."
4. I'll work for my discount.
Remember what Pyle said about offering value in exchange for a discount? One possible value to the landlord is offering to help take care of the property.
Cathy Herard lives in coastal Maine and gets a discount each month for mowing the lawn in the summer and removing snow in the winter.
"When there are small jobs needing to be done, like painting or yard work, we've done some of the work for a discount on our rent," she says. "It's worked out great for both us and our landlord."
For liability reasons, you shouldn't do any major repairs on the unit yourself. Olenbush says one renter who owned a remodeling company offered him free work in exchange for rent concessions, but "too many things could go wrong in that situation."
Look beyond negotiation
Once you've exhausted your negotiation skills, think about other ways you can save each month. Here are a few common-sense possibilities:
Downsize. Can you live with less? Find out if a smaller unit is available in your building, or look around for a place that would meet your needs but costs less.
Add a friend. If you have an extra room in your place, why not take on a roommate? It may not be your first choice, but having someone else pitch in on rent could reduce your burden significantly. Check with your landlord to see what you must do to add someone to the lease.
Conserve. If you pay your own utilities, be conscious of what you're using. Put on a sweater instead of turning up the heat. Turn out lights you don't need and unplug appliances when they're not in use.
Cut other costs. Maybe your rent is set in stone and you've reduced all the housing expenses you can. But what about groceries, transportation, dining out or entertainment? A few small reductions can really add up.
Finding a good deal in Cocoa Beach
If you're dreading the icy sidewalks and frozen noses of winter, you'll enjoy dreaming of the beaches and sunshine in Florida. And if you're thinking of buying, prices are reasonable in Cocoa Beach, where daytime temps hover in the 70s and 80s all winter.
Cocoa Beach is a popular tourist attraction, particularly for Europeans. It's about an hour west to Orlando, Fla., and just a few miles to Port Canaveral for cruise departures. The town's gorgeous oceanfront and location on the Banana River make for some amazing waterfront properties, broker associate Dave Congdon says.
Cocoa Beach is also known for its proximity to Cape Canaveral and the Kennedy Space Center. It's part of a stretch known as Florida's Space Coast.
Although some NASA employees and contractors live in Cocoa Beach, Congdon says he doesn't expect the end of the space-shuttle program to have a drastic effect on its housing market. "We're kind of in this transition stage," he says. "There are big plans and new private companies talking about coming in and hiring people for commercial ventures up at the space center."
He says Brevard County has a lot of high-tech jobs, not all of which hinge on the space program. But some parts of the county have been more reliant on space than others. "My personal opinion is you've seen some big effects in places like Titusville (Fla.)" up north, Congdon says. Space exploration has driven the economy in Titusville for four decades.
But the effect in Cocoa Beach has been primarily on the expectations of buyers. "The bad press (about the shuttle program) creates an atmosphere for the buyers that the market must be depressed," Congdon says. "That affects what kind of offers they make. They all want to try to lowball."
Unfortunately, a huge chunk of the available properties are bank sales, and lowball offers may not work. In fact, a recent bank sale got seven offers in less than a week, and the property sold for $40,000 more than its asking price.
"Banks are doing that on purpose. They lowball the prices and try to create a bidding war, a mini-auction environment," Congdon says. "And if the property is in a good location, they get it. "
Beyond those forced-auction bank properties, most homes on the market are appropriately priced, he says. Frustrated sellers who had overpriced their homes have taken them off the market. The homes that are left are priced to compete with the financially distressed homes, which have made up about half of sales this year. And properly priced homes mean investors are swarming.
"Of 130 homes that sold in the last 120 days, 78 were cash buyers," Congdon says. "That doesn't surprise me."
Many of those cash purchases were condos and town houses. Among single-family homes that sold, the median price for a three-bedroom home was $269,900, Congdon says. But prices vary significantly; homes on the beach cost about $100,000 more than those inland. Cocoa Beach is on a barrier island between the Atlantic Ocean and the Banana River Lagoon.
The area's geography leads to a wide array of homes and prices. "You could have an oceanfront home that at one point sold for $3 million, and less than a mile away is a 1950s house that used to be part of the Air Force base housing," Congdon says. "Then a quarter-mile on the other side are beautiful homes with deepwater canals and huge sailboats and water everywhere you look. It's an interesting place."
Many people retire in Cocoa Beach, and some have second homes there.
"A lot of them rented properties originally and are now in the market because they realize this is about as good as it's going to get from a price standpoint," Congdon says. "As long as people are reasonable on asking prices, they seem to be selling fairly quickly."
By Leah L. Culler of MSN Real Estate