A LANDLORDS PERSPECTIVE ON RENTAL RATE COMPLAINT LETTERS
For the last several weeks the Source has had letters from Bend renters lambasting local landlords and rental managers, complaining about unfairly high residential rents. I have some responses for them to help them better understand basic housing economics.
First, let's do some fact checking. According to this fall's edition of Shaping Our Future, published by the Bend Bulletin, the real estate analysis firm RealtyTrac found that Central Oregon had one of the very lowest annual gross yields for rental investors of any place in the U.S.!
It follows that, if real estate investors cannot get a fair and reasonable return on their investment dollars in Bend, they will not buy homes here and there will be even fewer rentals available. Investors will put their money elsewhere, demand for new homes here will decrease, fewer new units will be constructed and sold and rents of remaining units will rise.
So let's look at the cost of purchasing a typical newer three bed, two bath home in Bend as a rental investment. A purchase price of $265,000 (if you can even find one at that price today) with a twenty percent down payment leaves $212,000 to finance. At current investment mortgage rates, the PITI (principal, interest, taxes and insurance) payments would be $1,280 a month.
An investor then has to pay a professional property manager about ten percent of the rents collected to cover management costs. If that home is then rented out at $1,500 a month to you, the owner is getting only $70 a month back as a return on their $53,000 down payment investment. That's only about a 1.6 percent return!
If the investor is a cash buyer buying a three bed, two bath home for the same price, the rental return on that huge cash outlay is better, but still only about 5.1 percent. In both cases this is the return without vacant months and before incurring extra repairs and maintenance expenses, which are inevitable since things break down and also because tenants generally don't treat rental homes as well as owners would.
Compare these low returns to what an investor would get who simply puts the same funds into the stock market instead, where they have no liability or management headaches, no bounced rent checks, and no trashed properties to deal with, and where they could earn a return of eight to twelve percent annually.
Basically, people complaining about high rents here, in some cases, really are asking that their lifestyle be subsidized out of the income of other property owners, some of whom aren't even making as much money as their renters are.
Lastly, with regards to the letter complaining about how hard it is to find rentals here that allow pets, I'll share my latest tale with you as to why we're now reluctant to rent to dog owners any more.
We put in new carpet and padding a couple years ago in a home, at a cost of over $5,000. We next rented the place for two years to a couple who had two large dogs—ones that supposedly did not shed and that allegedly were kept kennel caged when inside the home. When these folks moved out (because the gentleman lost his job), we discovered that the whole house absolutely stunk of a wet dog smell. After two professional cleanings, (at $300 a pop) the carpet still reeked.
So now the house needed not only new expensive carpet and padding...again but also needed the wooden subfloors painted over with an odor blocking primer. And who is going to pay for all those extra damages, with an unemployed tenant already headed out of state? We, the owners are, yet once again.
And as a result, we'll have to raise the rent for the next folks who move in (who will expect clean, fresh smelling floors) and limit the rental from now on to people who don't have pets.
—A Landlord in Bend
In reply "Location, congestion, greed, and bad location" (10/21)
Well DeeDee, I think you about covered it all. Bend has become what most people moved here to get away from. Anyone that has been here at least 5-6 years can see what has been happening and how quickly things are changing, and not in a good way. Bend has become more about squeezing every dime out of the so called "experience or lifestyle" this great place has to offer, and less about building a strong comunnity where people that actually live and work here can live at a reasonable cost. The new norm of rental cost and property values is way beyond reasonable, it's just plain greed. But if nothing is done about it and the people that migrate here continue to pay this out of control pricing, then it will never stop and only get worse. No one seems to have any common sense anymore when it comes to the long term outcome of Bend, all they see are dollar signs and the next opportunnity to capitalize on the Bend experience. I hate to say it, but Bend is a lost cause unless some drastic changes happen soon.
IN REPLY TO "DIPPING INTO THE POT" (10/29)
At this point, giving Ms. Larsen immunity from prosecution in exchange for truthful confession of exactly what she corrupted as far as evidence, this would stop the waste of millions of dollars that is surely going to take place in checking each and every case she may, or may not have touched.
Her crime is severe, but doesn't warrant the State (our money) in spending this massive amount. In fact, it's exactly opposite of what we want now, and that's expediency in getting to the cases she corrupted. In not getting this done quickly will lead to other criminals being released because the State has no way of defending its position.
IN REPLY TO "WITCH, PLEASE! PROBLEMS PLAGUE THE LAST WITCH HUNTER" (10/29)
I went to an advance screening of The Last Witch Hunter on 10/20/15. The audience was full of people who really enjoyed and liked the movie. So hopefully, the word of mouth of people like them will give TLWH good box office. After all, it's just a bit of fun, and should not be taken so seriously.