Homeowners rent houses waiting for market turnaround

Despite signs that Corridor home prices have stabilized in recent months, sales are down and a growing number of homeowners are renting their homes as they wait for a market rebound.

“It got to the point in October where I almost decided that I wasn't going to take anymore single-family homes,” said Tim Conklin, owner of Preferred Property Management in Cedar Rapids. “If we can't get them rented, as property managers we have to take care of them all winter. We're a percentage-based property management firm and we don't make anything unless a home is rented.”

The average price of a home sold in the Corridor rose in November, according to the Cedar Rapids Area Association of Realtors and the Iowa City Area Association of Realtors. But home sales were down 37.7 percent in Cedar Rapids and 28.9 percent in the Iowa City area when compared with November 2009.

Conklin said location and price range have little to do with homeowners going the rental route.

“They're all over the area,” he said. “We've been getting a lot of calls from people who want to know how much we would charge to manage the rental of their home.”

Conklin said anyone thinking about a market rebound in the spring should understand the challenge of attracting a short-term tenant.

“Most people who want to rent a single-family home want a year's lease because it's such a hassle to pack up and move to another home in six months,” he said.

Sue Dunlap, housing assistant in the Iowa City Housing & Inspection office, said there has been a noticeable jump in the number of homes being registered as rental properties,

“It's generally people who have had their home on the market for several months and have not seen any action,” Dunlap said. “They need some income to pay the mortgage and utilities. They're getting a rental permit, which is good for two years and gives them a little time for the market to turn around.”

Matthew Widner of the Cedar Rapids Housing Inspection office said the city's recently-implemented landlord license and registration program makes it impossible to know whether more single-family homes are being rented than last year at this time.

“We have lots of people and rental properties that we didn't know existed,” Widner said. “We had an outdated database. Now, we feel we have a pretty good picture of how many landlords we have and what properties they own.”

High-end homes in the Corridor have become a casualty of the slow real estate market. Dunlap said there are several homes for rent in the Windsor Ridge area of Iowa City that sold for between $350,000 and $400,000 when they were built within the last 15 years.

J.D. Schlotterback, regional manager for Iowa Realty in Cedar Rapids, said renting a house that would normally sell in that price range could be challenging.

“With the low interest rates that we have right now, someone can probably buy the house and pay less per month than they would to rent it,” Schlotterback said. “How do you think you can find a renter for a home in that price range if you can't find a buyer?”

Schlotterback believes a homeowner is better off accepting a lower selling price, rather than trying to find a tenant who will take care of their home.

“Sometimes it's better to bite the bullet and move on with your life than to sit with something and let it be your ball and chain,” he said.

Some Corridor subdivisions and condominium associations have restrictive covenants that prohibit a homeowner from turning their home into a rental property. Conklin said such covenants could unintentionally lead to a home in foreclosure when a homeowner no longer can afford the mortgage.

“We advise anyone thinking about renting their home to check for covenants,” he said. “We also recommend that they list their home with a licensed real estate firm. We do a national records and sex offender search when we're considering a potential tenant. Choosing the wrong tenant can easily cost you $20,000 to repair damage to your property.”