How Much Should a Landlord Pay a Tenant to Move Out of an Apartment?
priceonomics.com
priceonomics.com
In most places, rental units have more basic fixtures an amenities and tend not to be upgraded. It can easily cost of $100K to upgrade a kitchen or bathroom with high quality cabinetry and appliances. And this happens all the time with $1M+ units.
I have a house for sale in Mexico and I'm intentionally not renting it out. Why? Because renter occupied units are perceived by buyers as having more wear and tear and low-end than a place that's owner occupied.
The stock kitchen for a middle-class house in suburban USA and a kitchen with $100k of work done to it are functionally identical for 98% of people who buy them, but the one with $100k spent on it looks like $100k was spent on it (if you're in the know).
Less sardonically: "professional-grade" appliances, granite countertops, redone cabinets which were custom-built by artisans out of exotic-but-sustainable wood as opposed to something which came out of a factory in China, etc, will all let you spend arbitrary amounts of money in a kitchen.
If a kitchen is cheap enough, granted, it could be a reasonable strategy to just treat it as disposable and replace the surfaces every few years, if you don't mind it always looking beat-up. I grew up in a home with all linoleum and we did exactly that right before we sold it: put in all-new countertop and floor when we were about to sell and then avoided using it to avoid marring it, so it'd look quite misleadingly nice for the realtor showings. But it wouldn't be my first choice in surface, if I had any spare cash.
... to explain, kinda painfully, that you can't use a sharp knife on a stone counter or you'll dull the knife. You need a cutting board. Or a wood countertop.
I understand the concern about heat but I've cooked with linoleum counters for my entire life, mostly as a baker, and I don't remember damaging one. It's just a question of not getting into the habit of setting hot objects on arbitrary surfaces. I and every cook in my family has a nice little collection of trivets, which cost a few dollars each and often come with college logos or bad jokes on them. Of course, this probably makes us look lower-class. See above under "status symbol".
We also have the confidence that, should we make a mistake, we can always buy a second or even a third linoleum countertop and still be saving money over granite or engineered stone.
That said, there's a good chance I'll end up owning a stone counter someday anyway just because, in the Massachusetts market, status symbols matter, and signals of recent renovations matter even more. We have a lot of lead paint, buried asbestos, hidden knob-and-tube wiring, and sixty-year-old hack-job plumbing around here, and anything you can do to suggest that your kitchen's walls have recently been opened and pronounced up-to-code is worth doing.
I don't cut on countertops, and agree that's bad for knives (I use cutting boards, as is traditional even in countries like Italy and Greece where stone countertops are the norm). But I do often have sharp things in the kitchen. The last time I dinged a counter it wasn't even due to a knife, but because I accidentally dropped a corkscrew. Would've been no problem with stone or tile, but since I don't have those, it caused a permanent mark where the tip hit! With wood countertops I've found myself paranoid about even setting a coffee cup or wine glass down without a coaster, lest it leave stains that are hard to remove. And with linoleum I'm always paranoid that even a bowl taken from reheating in the microwave will leave a ring-shaped heat-mark.
In addition to tile as a stone alternative, I am somewhat curious about the newer generation of synthetic countertops. I have heard that modern Corian countertops (or generic brands making Corian®-style countertops) are quite durable, and somewhere in price between linoleum and stone.
You'd need to be way, way overpaying to end up spending mid-5-figures on countertops.
We were back-and-forth on custom cabinets versus IKEA cabinets. We weren't looking to make a vanity cabinet purchase. We just couldn't get the storage --- particularly the pullouts --- that we wanted from IKEA.
Kitchens are really expensive.
If you want a kitchen that looks like it would be at home in Sunset Magazine its going to cost you quite a bit of money. That said, Sear's appliances, linoleum floor and countertops and Home Depot cabinets? You can do the whole thing for probably $20K tops :-).
"dual dish drawer dish washing machines $5,000"
Like what?
My "high end" Bosch dishwasher retailed at $1,500 for ultra-silent, low water consumption operation (but was purchased for just over $950) - http://dishwashers.reviewed.com/features/2013-best-of-year-d...
Even double drawers as far as I could see had an RRP of <$2,000.
Just curious, not argumentative!
How do you like your Bosch dishwasher? I was pretty disappointed using some of their laundry products I didn't even seriously consider their dishwasher when we remodeled.
To me, the sole downside (and it's subjective, because I actually like it) is that the design of the the cutlery try is not particularly flexible - it has an opinion on how it should be loaded.
But everything is great. Low water consumption. Excellent cleaning. Good looks.
You don't have to do any of this silly stuff to rack up huge bills for a kitchen. Like I said: just gut it, and get custom cabinets. Or buy a Lexus. Similar price.
1. We demolished the entire HVAC stack, including knocking out an old chimney, and replaced a furnace and hot water heater. The new appliances were nice bonuses, but were a rounding error compared to the labor. That work got us a range hood sufficient for our new stove.
2. We tore the kitchen down to the studs and replaced the windows and backdoor, and created a pass to our dining room.
3. Cabinets. Holy fuck are cabinets expensive.
[ huge dropoff in expense happens right about here ]
4. We had an architect plan all the details of the renovation, which sounds silly except (a) the kitchen is better as a result, (b) it prevented us from fighting over feasibility of things we wanted in the kitchen, and (c) it made it easy to get permits.
5. New appliances. For normal people, you'd have to work pretty hard to find reasonable appliances that would significantly impact the cost of a new kitchen. It's not the "professional" appliances that make kitchens cost $100k.
6. Countertops (we wanted something cheap that ended up not working out, so this turned out more expensive than we planned).
7. Tile.
We live in a not-particularly-expensive part of town (there's a significant amount of section 8 on our block, which is directly adjacent to the West Side of Chicago). Our house isn't expensive relative to houses in Chicago. But renovation --- real renovation, not just replacing a fixture and putting in new backsplashes --- gets nosebleed expensive fast.
My impression is that people used to be able to do stuff like this regularly by taking out home equity loans, on the premise that improving the house increased its value and so was a little like investing on margin.
Incidentally: to anyone considering improving a kitchen: get a foot pedal sink. The plumbing for them is cheap (like, a couple hundred bucks installed). It makes a huge difference.
"This post is focused on how much a real estate investor should be willing to pay to get out of the shitty deal he or she signed."
Realize that the deal wasn't shitty when signed. After many years, along came supply and demand, drove prices up astronomically.
Whose obligation is it to free someone from their commitment?
This is just an ETF for a landlord.
Of course you're going to think that - it's in your best interest. But it's not fair to a tenant. Without regulations on evicting people asshole landlords could make families homeless for no reason. I don't think you should have to pay to evict someone but if you rent your property out there should be regulations in place to protect the tenant. If there weren't I think you find the market for rental properties start to diminish. People who could afford to buy (and that's true of a lot of renters) would to avoid the risk of their lives being turned upside down overnight.
You should re-read what he wrote. That's not his hypothesis.
If tenants want stable prices over a longer period of time, then they should negotiate a multi-year contract with the landlord. All of the protections you're discussing are already built into the concept of a lease.
If either the tenant or landlord is not willing to agree to a longer contract, then that should be their right. (Why should anyone be forced to lock in the rental price of their property for years, even while the circumstances of the city are changing -- e.g., receiving investment or decaying; people moving into the area or out of it.) If one party wants a longer contract and the other does not, then the party who desires the longer contract should offer something in exchange for lowering the other party's flexibility. It all plays into the price of the contract.
I personally prefer to rent month-to-month because I value my ability to pick up and leave any time more than I worry about the uncertainty of being randomly evicted. Someone who wants a five year lease should negotiate differently and get a different price than I do (whether higher or lower depends on the circumstances).
If you offered the landlord double the lease price in exchange for a 2 year contract, will they take it? Almost certainly. Few contracts of that type are truly take it or leave it. My point is not that 2x would be fair, just that you have the ability to negotiate, which means the question of whether you can get a contract with the terms you want depends on your ability to negotiate a price for those terms.
Many landlords value stability and will be happy with a longer term lease at the same price, or even a lower price. And that's where the negotiation comes in. If the landlord believes prices in the area will rise steadily, then he may or may not want to offer a fixed price over a 3 year lease. Perhaps he will offer a longer lease, but with a stipulation of 3% price increase per year. You don't believe prices will rise that much, so you counter with 1% YoY. It's like buying a housing future. You're locking in the price of housing now as insurance against it changing in the future. That should properly have a different price than a lease with no such provision.
If a person believed in rent control, why not go further? Fix the price of property itself so that it may not rise more than 1% per year. If you buy a house from someone, the sale price may not be greater than the last sale price increased by 1% YoY. Would this be desirable? A law like this will have all sorts of negative consequences on the economy. For example, imagine a house owner who no longer wishes to live in the city. If prices were allowed to rise, then he's incentivized to sell his house, cash out on the increased price, and move somewhere else, enabling a person who wants to live in the city can do so. But if prices are not allowed to rise, then he's stuck selling is house for the same price he bought it; he has no incentive to move. Someone is willing to pay him much more for that house, but they can't. This is what it means for resources to be allocated efficiently, and it depends on the ability of prices to change over time.
Fixing prices also affects investment. For example, if I believed that prices were likely to rise in some area, then I'm incentivized to buy property there, build housing or fix it up, and sell or rent it to capitalize on that price increase. The rising prices bring investment: I might build an apartment building to take advantage of rising rents. By comparison, if I know that my property will be rent controlled, then that limits my financial upside from investment, and removes my incentive to invest, which is also bad for the economy if it would otherwise happen naturally.
Also, as a counterpoint, Seattle has no rent control, and the fastest growing population of any large American city yet is able to provide good housing options to people of all incomes. This of course may be due to more liberal zoning laws allowing new housing to be built.
And I'm pretty sure you don't want a rent a Honda Civic from a company that might decide to jack up the price half-way through your rental period, or lock you out of it regardless of where you happen to be at the time.
It would be interesting to see how quickly your attitude would change if you weren't wealthy and were living under a landlord such as yourself.
Any day, for any reason or no reason, your entire life can be turned upside down. You can be effectively made homeless and given a very limited amount of time to find a similar alternative place to live that may or may not exist and may or may no be close to your work (which matters when you're poor and cannot afford public transport).
The power imbalance in this type of situation is just horrifying. Even if the tenant pays their rent on-time the landlord could still easily utilise the eviction threat in order to control the tenant (e.g. "your apartment is untidy, clean it or I'll evict you." "You went to a protest last week that I disagree with, goodbye!" "Give me your postal vote or I'll evict you.").
It might be your "property" but it is someone elses HOME. Their basic rights trump your property rights.
That's why regulation has to exist to stop people like you, so people (particularly poor people with fewer choices), get basic rights and the power imbalance is corrected.
I'm not referring to rent control: I am talking about privacy of the tenant (inspection notification periods, etc), notice for evictions (e.g. 30 days), written understanding of both the tenant and landlord's responsibilities (or default ones under the law if they lack), and so on.
It is your property, but when you rented it to someone to be their HOME part of that transaction is taking money but in exchange knowingly enabling someone else's basic rights. Those basic rights don't start and end at a rental cheque.
You seem to be postulating a landlord that owns all the property. If you don't want to rent to me I can always find someone else.
Incidentally, your concern about poor people being unable to commute to work is a bit silly. Most poor people don't have a job but do have a car.
I am not postulating anything, it is a hard cold fact: If a landlord evicts a tenant with no notice they're at that point homeless (as in "with no home").
They might be able to find another property, maybe, but they also might not. It doesn't take a single landlord to own all properties in order to make it difficult for a tenant to find no place to live on literally 0 days notice (particularly when a lot of tenants living in rental accommodation are very cost constrained).
> Most poor people don't have a job but do have a car.
People in general don't have cars in the city, poor or rich.
If someone is living on near minimum wage, and their home is moved from 10 minutes away to 20+ minutes away that is a big financial blow. That's more money, which they likely don't have, going to transport.
It will be harder to find the "right" apartment if you have 0 days notice within which to do so. If you had a month or more to look for a new apartment you might be able to find something more suitable to your needs and budget.
> Incidentally, your concern about poor people being unable to commute to work is a bit silly.
There are people who can barely afford to put food on the table, my concerns about public transport costs are quite valid I assure you.
Most lease contracts are 12 months. That gives you 1 year of warning.
If someone is living on near minimum wage...
Most poor people aren't.
http://www.people.vcu.edu/~lrazzolini/GR2010.pdf
There are people who can barely afford to put food on the table
Poor people are typically fat.
The typical poor person has no job, if he does have a job it isn't minimum wage, and he has a car. He would also be healthier if he put less food on the table.
Why do you keep discussing these completely atypical poor people, and extremely uncommon rental contracts?
That link doesn't claim what you claim it claims. It talks about impact, and excludes a large chunk of the population for different reasons that it doesn't go into great lengths to justify (see page 597 (6 on the PDF)).
Also the definition that they use for povery is extremely literal, see here for more info on that:
https://en.wikipedia.org/wiki/Poverty_in_the_United_States#M...
Even with their massive amount of exclusions it still impacts almost 10%.
>> There are people who can barely afford to put food on the table > Poor people are typically fat.
That's an incredibly ignorant thing to say. It is like responding to global warming by saying "it is snowing outside!"
Obesity is a side-effect of poverty. One person being obese doesn't exclude another from starving.
> The typical poor person has no job, if he does have a job it isn't minimum wage, and he has a car. He would also be healthier if he put less food on the table.
That's just raw bigotry now. You have given up the pretence even, you just hate poor people.
> Why do you keep discussing these completely atypical poor people, and extremely uncommon rental contracts?
They aren't atypical, they're extremely typical. Even according to your own link they make up around 10%. According to less exclusionary sources they make up more.
The focus of the paper is on impact, and along the way it counts people (including poor people) with wages between the current minimum wage and a proposed increased minimum wage. I have no idea what you mean by "massive amount of exclusions".
That's just raw bigotry now.
If so it's bigotry on the part of the BLS and Census. I guess you assert they are lying? If all the statistics (or at least the ones that disagree with you) are lies, there is no point continuing the discussion, since we can't get anywhere.
So, you pay off all the utility bills at the old property. You maybe get some of the deposit back. You maybe get some rent back if you were paying in advance; or you have a debt if you were paying late.
You then need to pay a month's rent in advance, and a deposit on the new property. Some utilities (at least, in England) want advance payments.
There's a disturbing number of people who would not be able to pay all that. Including people with full time reasonably (for the not IT sector) paying jobs.
It's funny because I do live under a landlord such as myself, in a different city. I'm both a landlord and a tenant.
>Any day, for any reason or no reason, your entire life can be turned upside down. You can be effectively made homeless and given a very limited amount of time to find a similar alternative place to live that may or may not exist and may or may no be close to your work (which matters when you're poor and cannot afford public transport).
Sure, that would be inconvenient, but I'd get a reasonable amount of notice (60 days in any case where I haven't done anything wrong) which would be sufficient for me to line something else up.
>I'm not referring to rent control: I am talking about privacy of the tenant (inspection notification periods, etc), notice for evictions (e.g. 30 days)
Oh, so we're actually in agreement. I agree, there certainly needs to be notice if you feel like kicking your tenant out. That's just a matter of practicality.
Tangential trivia: in some states, even "progressive" states like Washington, this number can be as low as 20 days.
That can be a burden: "Quick, find a new house, move, come up with at least first month's rent and a security deposit that is usually equal to a month's rent, in less than three weeks".
If California were serious about fixing it's housing problems, it would:
1) Repeal prop 13. Yes, some grannies would be forced to sell their homes because their property taxes would go up beyond their ability to pay from their fixed income, but the overall effect would be positive. A side benefit of this would be that we could fund our schools again.
2) Cities could repeal rent control laws. If owners are forced to pay property taxes that reflect the true value, there's less likely to be an imbalance between the value they get from renting and from selling the property.
3) Cities should allow the building of more housing regardless of complaints of existing residents. Repealing prop 13 will also help with this, since there will no longer be a direct financial benefit to existing homeowners to block new construction at all costs. But the underlying problem that's evicting poor people from ares like San Francisco is that there's a severe imbalance between housing supply and demand. No amount of government meddling will fix that problem...the only thing that will is correcting that imbalance by increasing the supply of housing.
As a non-American I think that property taxes are an abomination anyway.
Tax people on their income if you must, but not on their wealth, especially not on non-liquid wealth. Otherwise you have retired people being forced out of homes they've owned for decades just because prices in the area have gone up.
I've seen excellent arguments for taxing only those specific types of wealth because it maximizes the amount of productivity that each member of society is contributing to the group whereas taxing income has the effect of deterring productivity...granted, at the levels that we currently tax income, the deterrence factor is very small, but it's still there.
Regulations exist because of attitudes like yours, and frankly they ought to be stronger everywhere. Eviction ought to be difficult, and not merely based on the owners' whims.
Because my landlord does (polite!) extra inspections on top of the legal minimum I feel fine telling them when water's coming in or plaster is falling off.
(It's an old building. And the derelict building next door causes some problems. And the demolition of an old cinema is a bit disruptive too.)
(doesn't New York still have rent control?)
http://www.cheltenham.gov.uk/info/200008/benefits/565/local_...
A landlord can charge what they like, but if they want people on benefit to be able to afford the property they should price it near the LHA rates.
There are some restrictions on sudden increases once you've got a tennant, but the landlord could just evict the tennant.
England has the balance mostly right (I'd prefer some slighty stronger protections for good tennants and fiercer penalties for terrible tennants).
Virtually all people in the US recognize that it's not. Some people think that's a positive; others think it's a negative. Many of the most significant issues in US politics are about whether we should enact new regulations, retract old ones, or revise them in place.
Major issue with the article:
Condos do not have rent control- They are treated as single family homes- The new owner can simply raise the rent to market pricing at the end of the lease cycle. There are some rare outliers that can bypass this (such as if a tenant was present in the apartment when it originally converted to be a condo) but you should find that the vast majority of condos do not have this situation.
A much better analysis would have been on the sale of 2-4 unit buildings.
...Why? I don't see how that conclusion follows from the data. The data only compared occupied vs unoccupied rent-controlled home sale prices. Nothing took into account how under-market said rents were. Unless I missed something...
The market may not have done the cash flow valuation correctly, but the owner is selling in that market, not the ideal market, so it doesn't matter. The market prices also account for the "hassle factor" so it may even be more accurate than a spreadsheet calculation.