Need a home break? Try renting

Often a smart, affordable option, renting might be right for you

By Barbara Ballinger
CTW Features

With home sales continuing to decline, many sellers are reluctant to jump back into the real-estate market. They prefer to wait for the market to hit rock bottom, which still may be a year or two off. And in that interim, they discover – or rediscover – how carefree and inexpensive renting can be versus the American dream of homeownership.

But to make it go smoothly, it’s best to take your time, just as you do with the purchase of a home.

Last year, after five years of owning a five-bedroom house with pool in Encino, Calif., Paxton Quigley, 52, sold her house at what she perceived to be the top of the market. “I put it on for $1.325 million and when I didn’t get offers right away, I dropped the price $50,000. I ended up with $1.265 million. I feel I did very well,” she says.

But before heading into smaller rented quarters, Quigley donated furniture and clothing to charity. She felt unburdened. She was equally delighted to get rid of her home’s maintenance expenses and hassles. “I love not worrying whether the gardener will do what he’s supposed to or if the pool isn’t up to par. I also like the idea of having cash!” she says. Quigley plans to buy another home but envisions waiting until next year when prices drop further.

In the meantime, she’s renting not one but two spaces: a two-bedroom in a high-rise building in Los Angeles’ Century City and a furnished rental in New York where she spends two weeks a month for business. “I could afford to do that with the money I made from the sale of the house,” she says.

And though some think renters throw away money when not building equity, Quigley disagrees. “If I had bought another place after I sold, I would now be upset since the value still would be going down. Everyone says I’m lucky – that I got out in time,” she says.

In 2006, Dave Pounder also got lucky and sold his Irvine, Calif., condo five years after buying it when he recognized the market’s decline and while he still could make a good profit. He says he’ll buy again in his new Boca Raton, Fla., location when he sees all major market indicators – new mortgage applications, existing home sales, new-home permits and inventory levels – point to rock-bottom prices. “I’m (probably) renting until the end of 2009 when I think the market will be low enough to justify buying back in,” he says.

Besides making smart financial decisions, there are other good reasons to rent. For Quigley, it’s also been a way to test-drive a neighborhood. She loves her Midtown Manhattan location yet is considering the Upper West and East sides. “So much depends on what kind of apartment I find. A good view and light are very important to me,” she says.

For others, renting also allows the ease of shutting the door and heading away on vacation or business without worrying about security, water flooding into the basement or the roof leaking.

The burgeoning number of amenities that new and remodeled apartment buildings offer is still another incentive to those willing to pay a bit more than they would for a bare-bones rental. Many apartment buildings now offer everything from well-outfitted gyms with trainers to conference centers, libraries, coffee bars, guest suites and dry-cleaning, beauty salons and gift wrapping stations.

Another appealing by-product of the housing slowdown is that more condo owners who can’t sell are putting their units out for lease as long as their building rules permit. “You can step into a $500,000 condo for $1,500 a month in some markets and get all the amenities of a first-class building, such as a top-rated health club,” says Richard Swerdlow, CEO of Miami-based www.condo.com, which lists 600,000 condos worldwide.

But before you sign on the dotted line, be sure you’ve done as much due diligence to rent as you would to buy a home. Here are 10 key questions to ask:

Is the monthly rent comparable to other units of a similar size and with similar amenities in neighborhood buildings? Check out prices at www.rentometer.com, which cover the country’s major metropolitan areas, says Allison Atsiknoudas, CEO of Investment Instruments Corp. in Newton, Mass.

Ask yourself these questions:

• Is the term of the lease satisfactorily? A one-year lease is typical but sometimes six months is available. Also ask how much notice you must give before you leave the building.

• Are you sure you’re taking enough space if you’re downsizing? If you go smaller, can you rent a storage unit on site or nearby, and how much extra expense will that add?

• What is the building’s rule about homeowner’s insurance? Some buildings require it.

• What is the building’s rule about having a pet and even allowing visitors for long periods?

• What are building rules about making any changes in carpeting or paint color? • Do you have to turn the premises back to the way you found them?

• Are you entitled to all building services, particularly if you rent in a condo building or might you have to pay extra? Can you use the pool, for example?

• What other extra charges will be applied? Will you have to pay for utilities and which? Is parking extra and can you get an assigned spot? If you’re in a condo and there’s an assessment, might you be responsible?

• Does the building offer good security?

• Is there a building engineer on hand to correct problems 24/7, such as a broken dishwasher or air conditioner? Good, for-free maintenance and is one of the biggest bonuses of being in a quality rental.

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