Why are the rents so high when wages don't support it? (Portland: renters, mortgage)

[TheQueenofTofu]

The cost of living is high here (the SFGate ranks us as the 12th most expensive city) and we have one of the highest income tax rates in the nation (so you're actually bringing home/keeping less of your hourly wage than you would in most other places). There is also the law of supply vs. demand that everyone else has mentioned. One tip that my friend, who is a leasing agent for one of the larger property management groups in town, clued me in on is the fact that the rates are much higher in the Summer than they are in the Winter. I always made sure that I signed my leases in January or February and that saved me a lot.

[pdxMIKEpdx]

So suppose I own a house.

I went to school, I've got a good job, listened to advice people gave me, worked hard, put away some money, watched my finances, did most things right.

I ended up owning this house as an investment, and I have a 200k mortgage on it.

Now I want to rent it out.

It's not a big house, maybe two bedrooms, it happens to be in a fairly good neighborhood, nothing special, nothing really goes on here.

Nothing out of the ordinary.
Just a normal Portland house, in an average neigbohood, nothing extravagent, just a good solid SE Portland house, say built in 1940.

Just a good solid family house in a good solid family neighborhood.

Just to own this house, the monthly expenses come to about $1400 a month, just for mortgage, taxes, and insurance.
Nothing else included.

If you were me, and wanted to rent it?
How much would you ask monthly?

Tenants are responsible for everything except normal house upkeep and repair.
I won't pay ANY utilities.

What would you ask for rent?

What would you say if somebody said it wasn't fair?

[KJoe11]

Originally Posted by pdxMIKEpdx

So suppose I own a house.

I went to school, I've got a good job, listened to advice people gave me, worked hard, put away some money, watched my finances, did most things right.

I ended up owning this house as an investment, and I have a 200k mortgage on it.

Now I want to rent it out.

It's not a big house, maybe two bedrooms, it happens to be in a fairly good neighborhood, nothing special, nothing really goes on here.

Nothing out of the ordinary.
Just a normal Portland house, in an average neigbohood, nothing extravagent, just a good solid SE Portland house, say built in 1940.

Just a good solid family house in a good solid family neighborhood.

Just to own this house, the monthly expenses come to about $1400 a month, just for mortgage, taxes, and insurance.
Nothing else included.

If you were me, and wanted to rent it?
How much would you ask monthly?

Tenants are responsible for everything except normal house upkeep and repair.
I won't pay ANY utilities.

What would you ask for rent?

What would you say if somebody said it wasn't fair?

Suppose the people that occupy your rental decides they no longer want to pay. It takes several months in order for you to finally remove them from your property. You walk in and they have stripped all plumbing and appliances from the building.

Surprise and welcome to the NEW America.

[urbanlife78]

Originally Posted by TheQueenofTofu

The cost of living is high here (the SFGate ranks us as the 12th most expensive city) and we have one of the highest income tax rates in the nation (so you're actually bringing home/keeping less of your hourly wage than you would in most other places). There is also the law of supply vs. demand that everyone else has mentioned. One tip that my friend, who is a leasing agent for one of the larger property management groups in town, clued me in on is the fact that the rates are much higher in the Summer than they are in the Winter. I always made sure that I signed my leases in January or February and that saved me a lot.

The SFGate article might not be the best thing to go by, it does a poor job breaking down the cost of living and seems to be very vague. Basically it says transit is $96 a month....which if you live where you can bike to work, transit is basically $0 a month.

The COL in Portland is a little above average, but no where near the 12th most expensive city in the US. The 2010 Census gave Portland a ranking of 111.3, basically putting it at upper middle out of the cities in the US.

http://www.census.gov/compendia/stat...es/12s0728.pdf


The plus side and down side to winter leases is the available number of rentals is lower in the winter which is a negative, having to move in the winter is also a negative, but the rents are a little bit lower in the winter which is a positive. Though the rents usually aren't that much lower than they are during the summer months, unless it is a tourist town like where I grew up in and they jack the rents up every summer about three times the winter rates.

[urbanlife78]

Originally Posted by pdxMIKEpdx

So suppose I own a house.

I went to school, I've got a good job, listened to advice people gave me, worked hard, put away some money, watched my finances, did most things right.

I ended up owning this house as an investment, and I have a 200k mortgage on it.

Now I want to rent it out.

It's not a big house, maybe two bedrooms, it happens to be in a fairly good neighborhood, nothing special, nothing really goes on here.

Nothing out of the ordinary.
Just a normal Portland house, in an average neigbohood, nothing extravagent, just a good solid SE Portland house, say built in 1940.

Just a good solid family house in a good solid family neighborhood.

Just to own this house, the monthly expenses come to about $1400 a month, just for mortgage, taxes, and insurance.
Nothing else included.

If you were me, and wanted to rent it?
How much would you ask monthly?

Tenants are responsible for everything except normal house upkeep and repair.
I won't pay ANY utilities.

What would you ask for rent?

What would you say if somebody said it wasn't fair?

I would rent that house for about $1800-2200 depending on the market, though the average is about $1600 for a house like that in Portland. At least that is what the average I have noticed, it isn't based on any actual research beyond looking for rentals in the city over the past year.

[redguard57]

In 3-4 months you can have enough money saved to take certification classes for jobs that make 11 an hour with ample opportunity for overtime. Then you apply for school aid and with your low income you get school at a community college paid for or find a trade school. In some cases advanced certifications in the same area you got your first one exist. Most of those options will get you to a new base in the range of 14 to 20 an hour. At that point you can move to a better place and be a lot less frugal. Repeat this process once more: community college to university placement programs for a degree that gets you a job or a few years hard work in a trade, vocation, or career will boost you into the 20 to 30 range or beyond. Yes this is very doable. I've met people who have done it. I did something similar. I also met people that decided to spend their money unwisely, didn't work hard, called in sick a lot, or didn't try for promotions or advancements. More often than not the people that I have met who are stuck were "victims" of their selves and making bad choices.

I work at a community college, so this kind of trajectory is definitely possible and I've seen a lot of people do it.

In my experience the biggest barriers are not the individuals trying to better themselves. If you're single and healthy, the process described is relatively simple and achieved fairly easily.

The biggest barriers I see are related to family and health. Either the person's health goes south, a family member's health goes south, or they have some kind of family tragedy or drama that mucks their education up. Kids are usually the single biggest problem. They get sick, they get involved with drugs, etc, etc...

ie: one of my better students this past year disappeared for weeks. I later found out that his wife left him overnight for another man and took his two kids with her, not a word of where they went. So he a couple weeks searching for them. With that level of stress it's hard to focus on school, so he had to drop everything. Now he lost all his money for that term and lost all that time.

I suppose this is a choice problem - since a lot of these people are in their 20s/30s with fairly old kids, meaning they had them in their teens or early 20s before they were ready, usually out of wedlock. Still, what I see are typically not losers who choose not to be successful. Those people are probably not in college.

[pdwpdx]

Originally Posted by urbanlife78

I would rent that house for about $1800-2200 depending on the market, though the average is about $1600 for a house like that in Portland. At least that is what the average I have noticed, it isn't based on any actual research beyond looking for rentals in the city over the past year.

Those prices are outrageous and only affordable to yuppies.

[pdwpdx]

You've been in New York too long.

[Deezus]

You can rent a 2-3 bedroom house in Woodstock or nearby for about $1300-$1500 a month so $1800-2200 is pretty high for that area unless it's like a bigger 4-5 bedroom place (I assume that's where Mike's house is near or close to). For about $2300-$2500 a month you can rent a larger and nice older home in the rich area around Reed College, which is a big step up from further east.

You can always charge more than the market rate though, the demand for rentals is high enough that someone might pay it...

[skypros]

Usually if you have a mortgage and have little equity...... You will not make a "profit" on renting out your place.
What is more common is that you will pay a $ in addition to the rent you collected.
IE: if your place costs you $1,400 with taxes, insurance and mortgage...... You will probably get between $1,200 to $1,400 per month and if anything breaks.... and if you have a property management fees then you have to deduct those also.

The real way most make $ on a property per month is if there is a low mortgage or NO mortgage. (IE: you have to have equity)

How you may make $ is by getting a good tenant that takes care of the property, and hope the property appreciates in value.... which usually tends to make the rents go up...... and the longer you own it.... the more principal goes to reducing what you owe.

It also depends on what kind of property it is...... a single family home will go up in value a heck of allot faster than a multi-family property..... But a multi-family property will usually give better returns per month, but when it comes time to sell..... It will usually not have appreciated much. You also have do deal with more tenants.

Anyways, This is my thoughts on renting out places.