Behind The Scenes of Rentals

By Jennifer Juliano

When people are moving to a new area, or even just starting to branch out from the home they grew up in, many will consider renting temporarily.  It used to be a thought that renting was less expensive than owning, and in some cases, it was.  For those who own properties and use them as an investment, they can either be exhausting or they can be one of the best things for long-term assets.

Let’s look at it from multiple perspectives, starting with the renter’s.  You see an ad for a property for rent and read through the requirements.  You may see that the owner is looking for three months’ deposits:  first, last, and security deposit.  In some cases, you might see that there is a broker fee required too.  What?!  Why all the deposits? Well, you’re being allowed to use someone else’s property they paid for to live in for a set time and expected to not damage it. Each deposit covers the month you’re moving in or out.  Say your time ends in October, but you move out in September. The owner is covered for the time you agreed upon, and they likely have a mortgage to pay, too. The security deposit, which often is equal to one month’s rent maximum although doesn’t have to be, covers damages made during your time there.  That broker fee (hardly) covers the time of their agent doing the showings, sorting through applications, verifying information, and helping the owner with the nuances of renting a property, of which there are many.  Although all carry the same license, not all agents will do rentals either for a tenant or a landlord.

Everything comes with a cost, and homeowners have them, too.   Often, landlords aren’t making the money that renters assume they are each month. Every time something gets voted to change local taxes and they go up?  It’s eventually going to trickle into their expenses, which means rents, too.  Assuming the owner is paying water and sewer charges, those aren’t free either to use for anyone.  Is there a condo fee that the owner is paying monthly?  They go up. Now add in insurance, which may carry a different rate for landlords versus their personal home. We are well-aware that insurance rates have jumped up nationwide.   Does the owner have an adjustable rate on their loan that just went up?  This isn’t even the full list, and all contribute to a monthly rent.

Now for the “behind the scenes” of reviewing applications.  All prospective tenants must be treated according to Fair Housing laws whether there’s an agent used or not.   What basically is being looked at is the ability to pay and on time.  Current and past landlord references are key to be checked.  Are there any past evictions?  These are public record and often show up on a credit report which are commonly checked. Credit can be so important! Does the income, whether it be from a job, assistance, or other sources, support the rent where the tenant can comfortably pay it? At the same time, and this isn’t something a landlord looks at, are there ways the applicant could save money by cutting down extra spending for their own benefit?

Yes, those deposits may seem like part of a down payment on a house, and basically it is: one you’re “borrowing”. I can’t think of a life expense that hasn’t increased, and I cannot dispute that rents are higher too as a result.  Renters are paying a mortgage, it’s just not their own. If having control over living arrangements, budgets, and building long-term assets is important, then consider renting as a short-term option.

Two of my recent clients were young women in their early twenties:  one bought her first condo AS an investment to rent out in Shrewsbury. The other, said no way is she paying rent, and went straight from her family home into a small condo in Northborough. Both of those properties have already appreciated greatly in value and were wise long-term decisions for both. With planning, saving, solid guidance, and long-term vision, it can be done.