Glut of rental homes leads to lower rates

Many apartment communities, including Mallard Cove (above), are offering move-in specials to entice potential renters. Page Dowdy/Chesterfield Observer It’s no secret that the real-estate market has been struggling over the past couple of years. The local rental market isn’t doing much better, according to several property managers who oversee rental homes and apartments in Chesterfield County.

“The market’s been tough,” says Irvin “Jack” Horner Jr., co-owner of Horner and Newell real estate and property management firm, which handles about 200 single-family rental homes in the county. “We’ve had a family business since the 1940s. Typically when the sales market is bad, the rental market is good. That’s always been the case. It’s not so right now.”

The rental market has been flooded with properties over the last two years, driving inventory up and prices down – a direct result of the sluggish sales market.

There are plenty of rental properties on the market now, from apartments to large single-family homes, like this one off Woolridge Road. Page Dowdy/Chesterfield Observer “We’re picking up a lot of our properties from the glut of homes that aren’t selling,” says Carole Terhune, rental manager for Charles A. Rose Co. real estate company, which manages single-family homes throughout Greater Richmond, including Chesterfield. “The owners have tried to sell their home for the last year, and it isn’t moving, and they’ve got to do something to cover their mortgage. So, they turn to property managers so they can at least get something back.”

Terhune says current rental rates may not even cover the mortgage of some homes under her management, a situation Horner has seen result in unfortunate outcomes for homeowners and renters alike.

“I [recently] showed a house to a couple that is currently renting from an owner, and they’ve been paying their rent every month, but the owner has fallen behind on his mortgage payment,” says Horner. “The home is going into foreclosure, so they as tenants have to move because the owner is losing the property. That’s happened twice this week. We’re seeing more and more of that.”

With so many more options available, prospective tenants are able to be choosy, leading owners to offer competitive pricing. Mike Mulligan, owner of Property Managers of Virginia, says single-family home rental rates have decreased 5 percent to 8 percent from a year ago. Jan Sisson, a property manager with EXIT Realty Parade of Homes, says they’ve dropped by as much as 20 percent.

“The reality is [homes are] renting for less than the original list price – in some cases by $100 and in some cases by $300 [per month], which is significant,” says Sisson, who manages 14 single-family homes in the county. “But if the price is right, certainly it rents quickly.”

Apartment rentals have also become more challenging, according to Rebecca Steel, the regional manager for Landmark Property Services, which manages three tax-credit apartment communities in Chesterfield. She says vacancies have increased to the point that Landmark has dropped rental rates by $100 a month.

“That’s a huge giveaway,” she says. “As for concessions, we’ve done everything from $500 gift cards, $1,000 gift cards, waiving application fees, waiving deposits, drawings for TVs, vacation packages. We’ve done pretty much everything you can think of to pull that market in.”

The prospective renter has changed, too. Property managers for apartments and homes alike are seeing an increase in families looking for rental residences, many of whom lost their homes to foreclosure.

“The tenants that I saw two years ago were typical – people who hadn’t bought a home yet or maybe they’ve divorced or had some life change that caused them to seek out a rental,” says Sisson. “I still have those people, but I’m seeing a lot more folks who were foreclosed on and need a place to live.”

“It’s more family-oriented, and it’s bigger families,” adds Steel. “It used to be you’d have three to four people to a home. Now you’re seeing at least a family of six moving in. It’s a huge difference from what we used to see.”

In the past many managers would immediately disqualify a tenant who’d gone through foreclosure. Now they take a more careful look at a renter’s history and current situation in order to determine their actual creditworthiness.

“We used to insist on really good credit and that they be at their job at least six months,” said Terhune. “Nowadays that’s just not the case. We look at each case individually rather than having a blanket cutoff for a credit score. It’s easy to tell the difference between someone who’s kicked back and never bothered to pay their bills or a family that got in trouble.”

There are some bright spots in the market. Mulligan’s rentals in Chester have done well, in part due to business from Fort Lee personnel, and he and Horner report activity from out-of-towners relocating to Richmond. And business is definitely booming for the property management companies that are benefiting from the influx of rental residences. But for homeowners and apartment complexes with properties on the market, the outlook is dark.

“It’s kind of like the sales market,” says Terhune. “Too many homes, and nobody’s getting quite what they want for them.”