Rent-to-own may sound inviting, but you could lose your shirt
If youre thinking about renting a place to live anytime soon, you should know that the game has changed a lot. Recently, the Federal Trade Commission (FTC) sat down with renters, renters advocates, and researchers in Atlanta to hear about issues affecting renters. And they got an earful.
At the top of the change list is whos in charge. In the past, many rental units were owned by a single person, a small company, or a company that developed apartments on a regional basis. Today, its institutional investors who are large and in charge.
Many of them have gotten into the rental game because they sensed an opportunity brought on by rising home costs and interest rates and, basically, all they care about is making money. And with that, the focus group the FTC met with told the agency that the rise of institutional investors and corporate landlords has contributed to rising rents, hidden junk fees, issues with online portals, and predatory lease-to-own schemes.
Heres all the agency heard:
Rising rent
Institutional investors in single-family rental (SFR) houses have been found to increase rents significantly. Upon acquiring a property, these investors raise rents by 60% more than the average increase, then continue to tack on annual increases averaging around 7%. If you dont believe it, just take a look at ConsumerAffairs recent guide to how much renters are paying across the country.
Junk fees
In this modern day money grab, corporate landlords have found that junk fees such as the January fee can bring in an additional stream of revenue on top of the monthly rent. The focus group told the FTC that some landlords have gone as far as charging fees on paying rent through their mandatory payment portals. The FTC has a proposed rule to stop junk fees, but things move slowly on Capitol Hill, so renters will just have to be patient.
Get as much clarity as possible about what the process to apply to the rental will be, including relevant fees and what is permissible in the specific market, Nikki Beauchamp, associate broker at Sotheby's International Realty suggests. She advises tenants to ask about every single kind of fee imaginable:
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Application fees
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Security deposits
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Credit check fees
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Pet deposits
Also, ask questions about next steps if an application is approved: drafting of leases, payments due at lease signing, how payments are to be made, what the process and responsibility is for repairs any related late fees or penalties, and clarification around return of security deposit.
Another smart move is to get your leasing documents reviewed by an attorney, as well, she said.
Rent-to-own schemes
Rent-to-own and equity skimming schemes are targeting renters, too. On the surface, those schemes look like a good deal. They allow tenants to build equity while renting and provide a little time to improve credit scores or save for a down payment. But, the downsides are that the monthly rent is often higher and renters run the risk of losing the option fee if they decide not to purchase the property.
Deceptive rent-to-own schemes say you can buy in installments, but dont make clear the conditions that mean its nearly impossible for you to actually rent to own, Anna Burns, regional director, Southeast Region, FTC, said.
Online portals
If a renter has a problem, these days, theres not a building superintendant you can call up and get something taken care of. Now, everything is online and rental managers are using portals for maintenance and utility billing fees are on the rise.
More and more landlords are making renters use online portals for maintenance requests. Renters are often left with disrepaired units even as help appears to be on its way. Renters also reported on landlord shell companies that charge a utility fee on top of renters monthly bills.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-07-10 16:47:50
