In North Port, the problem is chronic oversupply
Life is sweet for North Port renters
A massive supply of vacant homes in the city pushes rents downward and prompts owners to offer incentives
By MICHAEL BRAGA
michael.braga@heraldtribune.com
NORTH PORT -- A large banner hanging outside the Toledo Club Apartments on one of the main arteries in this city attests to distorted condition of the local rental market.
The words on the banner read: "Free Rent."
Whenever a business is willing to offer something for nothing, you had better believe that something is wrong. :shock:
In North Port, the problem is chronic oversupply. :shock:
"There is an abundance of rentals out there," said Donata Noone, a rental specialist with ERA Sun Coast Real Estate. "Buyers bought homes and condos when the market was good. They then tried to flip them, but realized they couldn't and decided to rent them instead."
But with hundreds of houses, condos and apartments for rent in North Port, not every owner has been able to find a tenant. So rents are plummeting, and so are rental standards.
"We're talking to people we would not have considered two years ago," said Linda Haese, who is trying to rent two new 1,800-square-foot houses. "These are people who don't have deposit money, but are willing to put $25 aside every month. As long as they don't have a criminal record, we're willing to say OK."
Dennis Black, a Port Charlotte appraiser who recently completed a study of North Port's housing market, said apartment building owners are suffering the most. :shock:
"Why should tenants renew their leases when they can rent a house for about the same price?" Black asked. "I am told that apartment occupancy is down to 80 percent."
Black explained that 80 percent to 85 percent is the break-even point for apartment owners. He said owners do not start kicking off serious profits until occupancy passes 90 percent.
"They're having trouble right now," Black said.
The Herald-Tribune called six apartment complexes in North Port, including Toledo Club, but five of the managers failed to return the calls. :shock:
The only manager willing to talk was Summer McLenon, who runs the Villas of North Port on Biscayne Drive.
McLenon said her complex is unique because rents are subsidized and occupancy is restricted to senior citizens, 62 and older.
"We are almost full," McLenon said. "We've one person moving out in August, and we've not seen a decrease in renters."
McLenon explained that subsidies are provided by the federal government to tenants who are paying more than 30 percent of their income in rent. The result is rents at the Villas of North Port range from $485 to $611 for a one-bedroom apartment.
"People keep coming in from other places where rent is increasing," McLenon said. :shock:
For owners of non-subsidized apartment complexes and investment homes, however, the market is far more chaotic.
Everyone contacted by the Herald-Tribune acknowledged that rents are plunging.
"Rents are coming way down because of supply," said Karen St. Pierre, a rental specialist with ERA Advantage Realty. "A 1,800-square-foot house without a pool that rented for $1,400 a year and a half ago is now renting from $900 to $1,000 a month."
That represents a 36 percent drop and has created a wave of resentment among investors, who have seen their taxes and insurance bills move rapidly in the opposite direction.
"Some owners are going crazy," said Noone of Sun Coast Real Estate. "They say they need the higher rent or they'll go bankrupt."
Noone says agents try to explain that it is better to lower rents and keep tenants than to let the house go empty.
"I try to tell them that if their mortgage and payments are $1,500 a month, they should accept a renter willing to pay $1,000 a month, because that means they are covering all but $500 of their cost," Noone said.
Haese, who is trying to rent two houses in North Port, said she attends investor club meetings where she hears horror stories about owners who have been unable to rent houses for as long as five months.
"They're just not dropping their prices fast enough," said Haese, who is offering her houses for just under $1,100 per month.
Haese said she is not making money at that level, and she would like to sell, but the market is glutted with houses for sale.
"I think it will be five or six years before I can get out," she said.
But for people looking to rent houses in North Port, the situation could not be better.
They are being offered new houses with swimming pools at ridiculously low prices.
"It makes much more sense to rent than to buy right now," said Black the Port Charlotte appraiser. "A renter will pay 60 percent of what it costs to own."
Black added that anyone considering buying a house in the city should consider renting for a year first.
"In all likelihood sales prices will go down," he said.
In the meantime, owners and managers are offering renters all kinds of incentives.
"We offered the first month free on our newer homes," said Jeffrey Cristello, who owns five rental properties in North Port. "We're asking for $500 security."
St. Pierre of ERA Advantage said several of her clients are offering similar deals.
"They're offering half a month free and waiving application fees," she said.
