Renters should consider owning

United Feature Syndicate Inc.

WASHINGTON -- Partly by design and partly by accident, the rental sector is starting to stir after several years in the doldrums.

By design because the government is slowly pulling back from its once unequivocal support of homeownership; by accident because the millions of owners who have lost their homes to foreclosure and have become renters by default are flooding the market.

Throw in the millions of new households that will be formed over the next few years with people who are likely to be renters, and you have the makings of a downright boom. Indeed, University of Utah professor Arthur Nelson says half of all the new housing units built between now and 2030 should be rentals just to meet the expected demand.

That's great news for apartment builders. Though it's "too early" to tell if the newfound appreciation of renting is a short-term response to a struggling economy and battered housing market, Kim Duty of the National Multi-Housing Council suspects "a landmark shift" is under way.

"There are reasons to believe that the new normal favors long-term renters and more renters by choice," Duty says.

And speaking of choice, renters have plenty, including a slew of single-family houses that have been lost to foreclosure by their former owners. Many of those homes have been put back into service as rentals, either by lenders who are waiting for the market to improve before trying to sell them or by investors who have picked them up for a song from banks that dumped their real estate rather than wait out the downturn.

Houses have several advantages over apartments. For one thing, owners of houses are often more flexible than apartment managers. If your credit is strong and you have solid references, you may be able to bargain down the rent. Or perhaps you can barter whatever special services you can offer in exchange for a free month or two.

But houses also have shortcomings. Unless the house is located in a large-scale development that has plenty of amenities, for example, you probably won't have a pool, clubhouse or many of the other features that have become synonymous with apartment living.

At the same time, however, renters are likely to get more for their money with a house. In Orlando, Fla., according to a local multiple-listing service, a three-bedroom, two-bath house on Soapberry Boulevard is listed for rent at $1,350 a month, just $45 more than a three-bedroom, two-bath apartment at Knightsbridge at Stoneybrook. But the house is 550 square feet larger and comes with a two-car garage and a big yard for the kids to play in.

Comparable deals can be found elsewhere, too. In Chicago, Ill., a three-bedroom, two-bath apartment without laundry facilities in the Irving Park neighborhood rents for $1,495 monthly. But a nearby four-bedroom, two-bath house is listed at $1,500 a month, and it has a fenced yard, deck and full basement.

Rents are somewhat higher in Southern California. At the Santa Rosa in Irvine, a three-bedroom, 2½ bath unit goes for $2,730 a month. But on Edge Street, you can rent a four-bedroom place for $2,500.

But more value for your dollar --‚ more living space, more bedrooms and baths, more storage and more privacy -- is only one advantage houses have over apartments. You also won't have to deal with elevators or shared parking arrangements, which are synonymous with multifamily structures, and you could be closer to schools, possibly even better schools.

These benefits aside, renting a single-family house is somewhat different from renting an apartment. Here are some of the key distinctions:

• Management. In an apartment, you usually deal with a full-service management company that not only employs an on-site property manager but also service workers who can fix balky appliances or leaking pipes. But that's not always the case with a house so would-be tenants need to vet their landlords as rigidly as landlords screen them.

There's nothing wrong with small-time landlords or mom-and-pop operations, per se. But chances are if your guy owns just one or two houses, he is a relative amateur who has no staff at all. He is your go-to guy when a problem arises, but he has to go to someone else to get it taken care of.

Worse, perhaps, is a landlord who is an investor and resides in a far-off location. Even if he hires a local real estate agent to act as his liaison, the agent usually still has to obtain the owner's OK before responding to a tenant's needs.

And even worse yet is an undercapitalized landlord who is in the deal on a shoestring and can't afford to change a light bulb, let alone replace a broken furnace.

On the other hand, there are outfits like Carrington Property Services, an Irvine, Calif.-based company that manages a national portfolio of single-family rentals, including a bunch for Fannie Mae, and Beazer Homes, the Atlanta, Ga.-based homebuilder that is buying up distressed properties and putting them back on the market as rentals.

"Renting a home that is professionally managed makes a tremendous difference," says Carrington's Chris Orlando. "It means centralized service and maintenance capabilities so repairs are completed by licensed professionals, and it offers such conveniences as the ability to pay your rent online."

Beazer, meanwhile, says it is buying only houses built since 2004 and by particular builders. And all houses will receive whatever repairs and upgrades are necessary to bring them up to strict company standards.

Before signing any kind of lease, however, you should check out your prospective landlord with previous tenants, the local better business bureau, your local consumer-affairs office and perhaps even the county landlord-and-tenant court.

If possible, also try to get a handle on the landlord's financials with his bank and other creditors, especially his mortgage company to make sure that he is paying on time. Many tenants have been forced to leave their homes early because their landlords failed to pay their mortgages and lost their properties to foreclosure.

• Exclusions. In a typical multifamily property, tenants pay for their own electricity, cable, Internet and phone. But with a home rental, the list of "tenant pays" can be far more inclusive. Often, you also pay for water, trash collection, lawn care and, in some cases, even association dues.

On the other hand, apartments usually charge extra for additional storage, additional parking or upgrades like covered parking. With houses, these benefits are gratis, or at least included in the rent.

• Flexibility. If your credit record isn't good or you are a previous owner who has gone through a foreclosure, most professional managers won't rent to you. But according to a survey by the National Association of Independent Landlords, four out of five of its members would be willing to take a chance on someone who has lost a home to foreclosure -- as long as he has paid his other bills on time.

Independents also may be willing to waive a month's rent or two if you agree to paint the house, sign a two-year lease as opposed to the standard one-year contract, or pay a year's worth of rent in advance. If they won't budge on the rent, maybe they'll agree to replace an outdated refrigerator or range.

• Resale. Once a housing recovery takes hold, many rental-house owners can be expected to put their places on the market, and that can work to the tenant's advantage or disadvantage, depending on personal situations.

If you are not ready to join -- or rejoin -- the ownership ranks, you'll have to vacate. But if you are ready to become an owner, you are an excellent candidate to buy the house you're in. You know the property and the neighborhood, you don't have to move, and your landlord may give you a price break because he won't have to advertise the place for sale or pay a sales commission.

Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance-industry publications.