Smart Moves by Ellen James Martin

FORMER RENTALS CAN BE HUGE DEALS

With spring up ahead, many people living in cramped apartments are yearning for a house with a yard.

"For many renters at this time of year, home ownership sounds like nirvana," says Tom Early, a consumer advocate who was twice president of the National Association of Exclusive Buyer Agents (www.naeba.org).

For many wannabe buyers, the catch, of course, is financial. How can first-timers get an excellent price on a solid property? Steve Israel, the president of a real estate firm that caters to homebuyers, says one strategy is to consider properties were once rental units but are now up for sale.

He says some of the most willing-to-negotiate sellers include those who had to move due to a job change. These are people who moved before their property had sold and decided to rent their place out on a temporary basis.

"They never intended to become landlords and dislike the headaches," Israel says.

The owners of a rental property who live far away are often so eager to sell that they'll give you a very good price, says Sid Davis, a broker and author of "A Survival Guide for Buying a Home."

Here are few pointers for buyers pondering the purchase of a rental:

-- Visit the property when the renters are absent.

With a few rare exceptions, those living in a rental home are usually displeased upon learning that their landlord plans to sell and force them to move.

"Some tenants will openly seek to sabotage their landlord's efforts to sell," by leaving messes or exaggerating minor problems, Davis says.

Davis urges buyers trying to evaluate a rental property to schedule their visits at times when the tenants are away.

"That way, you'll avoid the annoyance of having the tenants follow you around in the house. You'll also feel a lot more comfortable scrutinizing the property. For example, you won't be embarrassed to open the closet doors or kitchen cabinets," he says.

-- Realize that a detailed home inspection is a must.

A fair number of rental properties are overseen by professional management firms. Still, they rarely receive the same level of attention as owner-occupied homes. That's why it's important to make any bid conditional on a satisfactory home inspection.

Without a good inspection, Israel says it's hard to know, for instance, if the heating and cooling systems have been serviced regularly or whether plumbing problems were fixed.

Davis says one way to find a qualified home inspector who serves your area is to go to the website of the American Society of Home Inspectors (www.ashi.org). Another is to ask your real estate agent for recommendations.

"Ideally, you'll gather the names of at least 10 candidates and then narrow your list to three who you can interview by phone," he says.

Davis recommends you refuse to hire any inspector who's also in the home improvement business.

"Watch out for any guy who tries to contract with you for home improvement or repair work," Davis says.

-- Obtain cost estimates for potential repairs.

As a real estate investor, Davis once owned seven rental properties, all of which he's since sold. His experience as a landlord taught him that tenants often fail to tell their landlord about problems unless they become serious.

"Suppose the dishwasher has malfunctioned for a year, yet the landlord has never heard about the problem until a home inspector determines that the dishwasher leaks and must be replaced, along with the subflooring beneath," he says.

Davis says the prospective buyer of a rental, or any property, for that matter, should determine in advance how much needed repairs will cost. Before finalizing your bid, he recommends you get estimates for all the work on your inspector's list. Then make sure these costs are factored into the price you negotiate.

-- Distinguish between houses with superficial vs. serious issues.

In those neighborhoods where available homes are still in short supply and buyers continue to outnumber sellers, bargain properties are now tough to find. Even so, Davis says those who keep an open mind about purchasing a rental unit could still get a good house for an under-market price.

"Lots of folks attach a stigma to buying a rental. So if you're the people who can look beyond that stigma ... you could score a very good deal," he says.

The key to finding a genuine bargain in a rental unit is to carefully consider each property on its own upsides and downsides.

"The reality is that some rental properties -- especially those that have been occupied by tenants for five years or longer -- are a terrible deal that would drain your savings and make your life miserable. But a house that's been rented out only briefly could present you with a wonderful buying opportunity," Davis says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)