Rental accommodation once retired

How to avoid signing your life over to a mortgage
thrifty++
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Rental accommodation once retired

Post by thrifty++ » Fri Mar 08, 2019 3:00 pm

One thing I often think of is that it may be all well and good if you retire because you have a few hundred thousand dollars in assets, but what about needing somewhere to live.

I have the fear that it might be difficult to obtain rental accommodation if you are not doing regular paid work. Even if you have a decent amount of assets.

What are peoples experience with this? Is this fear founded or unfounded? And how to strategise yourself out of this risk?

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unemployable
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Re: Rental accommodation once retired

Post by unemployable » Fri Mar 08, 2019 8:35 pm

If you have good credit and at least one good reference you should be fine. You may not even need the reference. Some people may still not rent to you but it's unlikely no one will wherever you're looking.

EDIT: I mean a rental reference, a former landlord.
Last edited by unemployable on Sun Mar 10, 2019 6:03 pm, edited 1 time in total.

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C40
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Re: Rental accommodation once retired

Post by C40 » Fri Mar 08, 2019 9:59 pm

Landlords get a special gleam in their eye if you tell them you will just pay the first 6 months all up front (for a slightly lower rent price).

If you're talking more about paying for it. Yeah, I've found that to be my number one perceived long-term financial challenge. It's like a goldilocks situation, particularly if buying. Can't be too big/valuable or property taxes will add up (among other costs, unless you're getting rental income). Can't be too expensive or it will require all your capital. Can't be a crappy house that will need a lot of $ to fix. And so on. There is, of course, the possibility to "hack" housing - like buying a property with two separate living areas and renting one out. Or other ways. But they will probably all take work, time, and flexibility/effort/serendipity in setting up.

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unemployable
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Re: Rental accommodation once retired

Post by unemployable » Fri Mar 08, 2019 10:57 pm

C40 wrote:
Fri Mar 08, 2019 9:59 pm
Landlords get a special gleam in their eye if you tell them you will just pay the first 6 months all up front (for a slightly lower rent price).

Have you actually done this? If you flash a bunch of cash in front of a LL some may suspect it is off the books/illegal. I wouldn't want to pay more than a couple months in advance anyway as this would give the LL zero incentive to make repairs.

I think more than a few people have friends act as "employment references".

RealPerson
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Re: Rental accommodation once retired

Post by RealPerson » Fri Mar 08, 2019 11:07 pm

We were concerned about that also. But a nearly maximum credit score has a way of calming the nerves of a landlord. That should do just fine. We have not had a problem.

I thought about paying upfront like C40 suggested, but I would be too worried about the landlord not repairing things or responding to problems. We pay the rent a week early every month and that makes the landlord very happy. They are apparently used to late payments, bounced checks and other goodies related to irresponsable financial behavior. Maybe tell the landlord you want to pay 2 weeks early every month. That way you sweeten the deal but don't lose your leverage.

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Sclass
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Re: Rental accommodation once retired

Post by Sclass » Fri Mar 08, 2019 11:09 pm

I had a thread about my experience a few years ago.

I’m glad you think it will be easy. I did too. Makes it easier to take the plunge.

It was very difficult in reality. Most of the landlords I spoke to were uneasy renting to an unemployed person with a pile of financial assets. They wanted to see a job. Or pension, bond or annuity income totaling 3x their rent.

The idea that I could actually make 4% on my stock portfolio regularly was foreign to them. Heck they’re property investors, what did I expect? If they knew what I know they’d be renting homes from somebody else. Actually the one who gave me the most pushback was in disbelief that I was the wealthier of us. She seemed to have a predefined role in mind for lord and tenant.

Most of the people I interviewed with were my age. Working. Struggling. Trying to get wealthy by buying and renting out properties. Most were underwater as indicated by Zillow and background searches I did on them. They weren’t real investors, they were degenerates trying to service multiple mortgages.

When one asked “how can you be so wealthy?” I wanted to say “by not buying multiple overpriced homes and trying to rent them out for profit.” The more I explained the more irate some became.

I finally met a sensible one. He owned the home free and clear. He still made me promise to tell him where I eventually would get hired. I’ve never spoken to him about it again after three years. I think he’s drunk on my steady rent checks. And I am still ahem...unemployed.

Good luck. If you’re really worried, why don’t you go out and try to rent a place. Say you’re unemployed or young retired or whatever. Don’t be surprised when you’re met with an ounce of skepticism or even jealousy. It was a big wake up call for me.

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Sclass
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Re: Rental accommodation once retired

Post by Sclass » Fri Mar 08, 2019 11:27 pm

Oh yeah and I forgot to mention my thoughts about offering 6 months rent. Right, this was also suggested in my old thread. I think the Red Hot Chili Peppers did this according to one post.

My problem with that is the landlord’s responsibility. Some of these homes were underwater. What happened if this landlord’s rental empire fell apart in the next three months?

Some of these guys wanted really big deposits. Like two months rent in addition to first and last months rent. The fact they didn’t make repairs before showing the home and saying they’d fix the problems after I paid my deposits made me realize they were cash poor. Commingling my deposit with their upkeep budget. Not a good sign.

And my credit score is stellar btw. It made some uneasy that I didn’t owe anyone a dime.

The Old Man
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Re: Rental accommodation once retired

Post by The Old Man » Fri Mar 08, 2019 11:43 pm

Early retired people frequently run into this problem. Typically it is resolved by showing them a printout of your bank balance/investments; thus, showing them you have the ability to pay. However, if you are very young, then the manager may think it was acquired through illegal means. You basically need to have a good story. You may need to show them your tax returns.

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C40
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Re: Rental accommodation once retired

Post by C40 » Sat Mar 09, 2019 12:14 am

I could definitely see potential landlords being confused by early retirees, being skeptical of investment income, and so on. Especially larger properties run by corporations or management companies that have guidelines and procedures. I feel like with small/individual landlords, when you're renting a small/cheap place (and thus they are used to potential tenants that have little money, are maybe unintelligent or not good socially, etc.) just showing up and carrying yourself well, communicating clearly and intelligently, and having money go a long way to show that you're a good potential tenant.

I've rented only one place since retiring - the one I live in now. It went very well. The landlord owns three houses next to eachother (though mine is barely a house - it's a 250 sqft one-room casita.). He and his wife live in one of the homes. Later on I learned that the guy runs or works at some local fair housing non-profit. I can't recall if we even spoke about my employment or income. I feel like maybe he did ask conversationally, and that I told him I don't work, and don't plan to, and I have investment income. He did run my credit report, which I know is clean. Last I checked, in 2013, my credit score was basically at the max.

Basically, after I told him I like the place, I mentioned that the rent is a bit high for the size, and also that if it's useful for him, I can pay 6 months of rent all up front, and then go month to month, and asked for a rent amount a bit less than he was asking. I think he was asking $625 per month and we settled on $575. He was plenty happy with that and was surprised to find a tenant that had money to pay up front (even though it was only like $3,000).

He's been a good landlord. Was very responsive when I had a problem, and asked me to report any issues immediately so he could fix them right away, and he specifically said he doesn't want me to have to live with any problems of the house. He's put up a mailbox for me (my house doesn't actually have an address so it didn't have one), and added some plants.

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Re: Rental accommodation once retired

Post by Seppia » Sat Mar 09, 2019 12:59 am

Here in Italy we have a system where one can sell its home in a way that has him/her keep the right to live in it till death.
People buying usually get a nice discount VS market value, but since most people can’t do math, it can be a great deal for a smart, aging person.

So you could buy a place, and then in your older years sell it in this particular way to fund your last years.

Not sure this is available in the USA as well.
We don’t plan on selling our small place, but it can be an extra safety net this in case things go worse than expected with our other assets.

IlliniDave
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Re: Rental accommodation once retired

Post by IlliniDave » Sat Mar 09, 2019 7:48 am

I've thought some about this topic. I also wonder some about how credit score might be impacted over time. I have no need to borrow money but like the convenience (and small discount) from using a CC to funnel all my day-to-day purchases through. Credit score factors into getting rental agreements and increasingly it seems, employment. But I'm wandering off topic. In terms of rentals, at this point my plan is to buy a downsized place with cash in part to avoid potential hassles with convincing people I'm lease-worthy while not employed, and to avoid the instability renting can bring. I get that both of those are surmountable, but Plan A is to avoid them. As I get on in years getting into a condo or apartment could start to make sense. But renting might be easier down the road because as each year goes by it will be increasingly common for people my age to be retired, and barring some awful financial disaster I'll have a couple small/moderate income sources that will make me appear normal (insofar as I'll ever be normal).

Seppia, there are legal mechanisms to do what you describe in at least one state I know of. What I don't know is whether there is a steady pool of buyers who are willing to go that route. What appears to be the customary use of the mechanism is in estate planning. A person might "sell" their house to their children for something like $1 via a Transfer on Death Instrument. It's similar to naming a beneficiary on a financial account in that, for that particular state at least, the property passes directly to the transferee upon the death of the transferor without having to go through the probate process. For raising cash from home equity, the technique that is heavily marketed here in the US is the so-called reverse mortgage. They have a dubious reputation; however, I've never looked into them in detail and don't know exactly how they work. I expect like most things some are better than others. The attraction is that people get to keep their homes while getting a monthly check. The knock on them is that some argue that the overall terms don't favor the homeowner and approach exploitation. Definitely a caveat emptor endeavor.

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Sclass
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Re: Rental accommodation once retired

Post by Sclass » Sat Mar 09, 2019 11:39 am

Ok. My case was a little different. I’m not renting an inexpensive place. There is a lot on the line for the landlord. Had I gone downmarket I probably would have had an easier time given my income. Because I’m frugal yet choose to live in a Macmansion it looks like I’m reaching too high.

I showed credit reports, bank and brokerage statements and tax returns. My feeling was some of the less sensible landlords wanted to see a job just because. It made them comfortable. It was what they were used to.

I got the idea it was hard work to try to understand me. Since the market will eventually give them a tenant without analysis/risk why not just wait till you get a middle manager working at ACME products up the street. Easier to understand than me. Just pass on me. Crazy guy who lives on 1.5x rent. Sounds ridiculous.

Luckily I got a landlord with some sense. In my particular situation the owner used a realtor to find a tenant. The realtor had a successful rental portfolio herself. I think she took the time to dissect my statements and tax return and realized I’d have no problems paying rent. (Seriously I could buy the home cash so it doesn’t take a rocket scientist to figure out I can make the monthly rent). So, I think the problems I had boiled down to individual landlords’ fears of the unknown. Still it was a problem and it caused a ton of stress as I lived at a friend’s vacation home for two months.

I assumed a lot before doing this. I thought it was going to be easy. I moved out of my prior rental and didn’t look back. I found myself living In a temporary situation with all my goods stored at PODs.

Next time you’re bored and see a sign “For Rent” walk up and ask them if you could rent it even though you are currently unemployed. See what they ask for.

@Idave

Yeah I noticed my credit rating fell the last few years as I carried a bigger and bigger average balance on one credit card that had juicy rewards. I was running my mother’s household using Amazon Prime and paying a lot of monthly bills on the card but paying it off each month to avoid financing charges. However according to Experian my “average balance” was in the thousands and that dinged my credit rating from the 800s into the 700s.
Last edited by Sclass on Sat Mar 09, 2019 11:49 am, edited 1 time in total.

Mister Imperceptible
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Re: Rental accommodation once retired

Post by Mister Imperceptible » Sat Mar 09, 2019 11:41 am

I found a suitable AirBnB in a depressed neighborhood and after one week negotiated a week-to-week arrangement using cash with the landlord. He is thrilled.

There’s no paperwork and therefore an associated risk, like anything else in life.

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7Wannabe5
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Re: Rental accommodation once retired

Post by 7Wannabe5 » Sat Mar 09, 2019 12:27 pm

Another option if you have a micro business would be to cut yourself a series of paychecks at whatever income you wish to declare. No reason your potential landlord needs to know that you and Acme Consulting are one and the same. Another little trick I picked up from reading the WSPs.

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Jin+Guice
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Re: Rental accommodation once retired

Post by Jin+Guice » Sat Mar 09, 2019 8:31 pm

Like so many other things, if you live your life like a complete scumbag, this is somehow never a problem.

IlliniDave
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Re: Rental accommodation once retired

Post by IlliniDave » Sun Mar 10, 2019 7:23 am

Sclass wrote:
Sat Mar 09, 2019 11:39 am
Yeah I noticed my credit rating fell the last few years as I carried a bigger and bigger average balance on one credit card that had juicy rewards. I was running my mother’s household using Amazon Prime and paying a lot of monthly bills on the card but paying it off each month to avoid financing charges. However according to Experian my “average balance” was in the thousands and that dinged my credit rating from the 800s into the 700s.
Somehow I've lucked out and the services seem to sample my CC balances each month a couple days after I pay the balance off, so those numbers are usually in the $50-$100 range. One month recently I made a large purchase early in the month so they sampled a balance of more like $1,700. That was enough to knock me down about 15 pts on credit score because of its fraction of my limit on the card. What I wonder is whether my limits will be lowered once my income plummets making that more of a persistent issue. Over the last 7 years I've ranged from about 790-810ish so I'm a long way from having a problem at this point. The suggestion I get to get myself above 810 is to open up 9 or more new credit accounts. Many of the old ones I closed when I got my $hit in order post-divorce have been rolling off my report and every time one does I get gigged a little. I'm down to 2 active accounts and that puts me "in the red".

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Re: Rental accommodation once retired

Post by chicago81 » Sun Mar 10, 2019 9:50 am

One thing to be aware of, in certain rental markets:

There are sometimes laws in particular locales that stipulate that landlords have to use the same pre-defined criteria by which to evaluate all potential tenants. In nearly all cases, one piece of that criteria would certainly be based on employment (length of employment, provable W-2 income, etc.) I think the "intent" of these laws are to prevent discrimination.

While this may not be strictly adhered to by small-time landlords, it would certainly make a difference if you are trying to rent from a large company that manages a lot of properties (or entire apartment complexes.)

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Re: Rental accommodation once retired

Post by Josephine » Sun Mar 10, 2019 4:43 pm

I was concerned about renting without proof-of-employment too. Here is how I have had good luck with renting mid-market and up-market apartments in Las Vegas, Denver, Boise, and Portland. I tell the lease representative, "I usually use a proof-of-assets bank statement to rent, like a retiree does, since my writing income is irregular, is this okay?" There is usually an awkward pause while they check with someone about this. Then, a few minutes or hours later they get back to me instructing me to give them the last three months of my bank statements. I have a 30k-sized account at Capital One set aside for this purpose. I black out the account number. I prefer not to disclose excess personal or assets info to them. It probably helps that I have a good credit score. So far there haven't been any extra deposits needed or other issues.

@IlliniDave said "That was enough to knock me down about 15 pts on credit score because of its fraction of my limit on the card. What I wonder is whether my limits will be lowered once my income plummets making that more of a persistent issue."

My income was cut in half three years ago. I kept using my cards the same way. My credit card limits stayed the same and score stayed stable enough. Hope this helps.

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Re: Rental accommodation once retired

Post by unemployable » Sun Mar 10, 2019 5:58 pm

IlliniDave wrote:
Sun Mar 10, 2019 7:23 am
What I wonder is whether my limits will be lowered once my income plummets making that more of a persistent issue.
If you don't go over the limit or otherwise bust the T&Cs banks virtually never lower credit limits on an individual basis. Some banks did it across the board after the 2008 crisis -- bofA did it to me -- but this was done to everyone. They have no idea what your income even is if you don't tell them.

Over the last 7 years I've ranged from about 790-810ish so I'm a long way from having a problem at this point. The suggestion I get to get myself above 810 is to open up 9 or more new credit accounts. Many of the old ones I closed when I got my $hit in order post-divorce have been rolling off my report and every time one does I get gigged a little. I'm down to 2 active accounts and that puts me "in the red".
You're probably at at the point where average age of accounts (AAoA) starts to matter, so I wouldn't open up any new cards you don't need or don't have perks you'd heavily use. I've had exactly two credit cards for some 16 years now (the same ones, with change of issuers due to corporate acquisitions, so a continuous credit history) and my credit score hovers in the 815-830 range. Funny how the FICO score thingy says the reason it's not higher is because I have too few types of accounts. No thanks, if I need a car or house I'll pay cash.

IlliniDave
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Re: Rental accommodation once retired

Post by IlliniDave » Sun Mar 10, 2019 6:13 pm

unemployable, yes I agree and don't intend to add a bunch of accounts or otherwise follow the suggestions to improve the score--just mentioned it because I thought it was a little strange that 11-20 open credit accounts is considered optimal. I do get gigged for a relatively short history as all of the longer-term accounts I used to have (e.g., mortgage) are rolling off the reports. I intend to keep my simple cash back card indefinitely, so eventually my credit history will appear long again.

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