Bay Area homeowners renting out rooms – small business ideas
Homeowners rent out rooms to stave off foreclosure
Reeling from the recession’s one-two-three-punch of job woes, climbing mortgage payments, and evaporating equity, desperate Silicon Valley homeowners are dipping into a nearby income stream to avoid foreclosure:
That bedroom just down the hall.
While renting out a room has been around for years, especially in the South Bay’s Latino neighborhoods, sharing a home in order to save it has become an increasingly popular way to hang on to the front-door keys to the American dream.
"I’m up against a wall and I had no other place to turn for income," said Rafael Porras, a 50-year-old waiter who began renting out a room in his downtown San Jose condo this month after he was squeezed by pay cuts at work and a mortgage payment about to rise. "But I had to do it because I don’t want to walk away from this place. My credit’s excellent, and without good credit, you’re nobody."
Whether they’ve rented out rooms in the past to make ends meet, or a job loss has prompted them to tap into their inner landlord for the first time, many people say their rental income is the only thing keeping them from losing their homes. And for many homeowners — even those whose property is worth less than their loan amount — losing their home is not an acceptable option.
"I can’t imagine life anywhere else," said 71-year-old Margaret Licon, who bought her San Jose house 40 years ago and raised six kids in it before losing her husband 25 years ago.
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"Renting out bedrooms is a growing trend," says Sunnyvale housing counselor Maritza Wong, who works for the nonprofit Project Sentinel. "And it’s not just lower-income people doing it, but even people who were making good money before losing their jobs.’
At Project Sentinel, where staffers report as many as 20 percent of their clients becoming landlords under their own roof, counselors are recommending the practice as a way for homeowners to tweak their debt-to-income ratio in order to qualify for a modification. But a word of caution: becoming a landlord, especially for someone with little or no experience, can bring headaches, from tenants who fail to pay rent to those who are just a pain in the neck to live with.
Did you see that? “I can’t imagine life anywhere else”. That’s just how amazing Silicon Valley is – people would rather rent out their homes than leave!
Really, this is a reflection of two aspects of Silicon Valley’s nature:
1: Generosity. Just like how companies love to share stock options (equity) instead of paying something dinky like cash (like they do on Wall St), homeowners love to share their houses so they can offer others the opportunity to move to Silicon Valley!
2: Entrepreneurship. Silicon Valley folks are incredibly resourceful in finding new ways to raise revenue. Besides, how much of a 1100 sqft house do you really need?
Congrats Bay Area! Congrats! The rest of this nation could really learn from us!
February 28th, 2010 at 11:02 am
I’m starting to imagine life somewhere else now.
If California starts taxing renters, I won’t be just imagining it anymore.
February 28th, 2010 at 11:43 am
The real quote was: “I can’t imagine life anywhere else , without proposition 13“.
nomadic, your comments?
Anyway, before they tax renters, they should start making sure property owners declare the rents they collect as income.
February 28th, 2010 at 12:04 pm
That’s not income, herve. Like a HELOC, that’s just a benefit of bagholdership.
February 28th, 2010 at 1:08 pm
Bagholdership! Bravo!
I don’t have to imagine life outside California, I’ve been there and it sux hairy ones.
We just have a Depression and possible revolution to get through, hopefully both are fairly peaceful, and at least I live in the best place.
But then, I find living much cheaper here too. Arizona is incredibly expensive, I’d not even want to imagine Idaho or New Mexico or Nevada.
February 28th, 2010 at 1:08 pm
Poor bastards. I’d rather rent by myself than be a bagholder owner who is forced to bring renters into their homes.
LOL Tiiiiiiiiimmmbeeeeeeeeeeerrrrrrrrrrrrrrrrrrrrrrrr!!
February 28th, 2010 at 1:19 pm
But then, I find living much cheaper here too. Arizona is incredibly expensive, I’d not even want to imagine Idaho or New Mexico or Nevada.
SmilingCat, you need to broaden your horizon. New Mexico was uber cheap for me. A few years ago, I lived in a nice 1-BR apartment in Albuquerque for $500 per month. If you have a roommate, you can rent a 2-BR for $625. If you’re willing to live in a less desirable part of town, you can get a 1-BR for $375. My utilities was $60/month, maybe 80 in the summer. Climate comprises of 4 distinct seasons, with summer in the 90s (dry heat and cools in the afternoon) and winters in the 20s at night and 40s during the day.
I suppose if you really tighten your belt, you can live that cheaply in the bay area too. But I guarantee you, it’s a lot less comfortable lifestyle in the Bay area for the same money.
February 28th, 2010 at 1:40 pm
“I can’t imagine life anywhere else,” said 71-year-old Margaret Licon, who bought her San Jose house 40 years ago and raised six kids in it before losing her husband 25 years ago.
Let’s think about this…
- House bought 40 years ago for spare change
- House in all likelihood paid off
- Prop 13 tax rate
- Spouse gone, and property fully inherited only 6 years past retirement
Of course she can’t imagine life anywhere else!
February 28th, 2010 at 1:42 pm
Correction: She inherited the house at age 56, not 6 years after retirement.
How many of you can beat that?
February 28th, 2010 at 1:45 pm
> Correction: She inherited the house at age 56, not 6 years after retirement.
You may want to correct again…
February 28th, 2010 at 1:49 pm
>>You may want to correct again…
Holy sh**, at age 46. Imagine this happening to a guy.
February 28th, 2010 at 2:55 pm
So WTF is wrong with this picture?! If she bought the house so long ago for spare change, why is she resorting to renting out her home to make ends meet? Why does she have to deal with rising mortgage payments?
So she’s been using her home as an ATM and is now underwater? LOL
February 28th, 2010 at 3:11 pm
The real quote was: “I can’t imagine life anywhere else , without proposition 13“.
nomadic, your comments?
Bah humbug! That old biddy probably pays less than $1k/year in property taxes and has a $400,000 loan on the place? Where the hell did all of that money go? Did she send a couple of her kids to medical school? I doubt it. And with no income, and at her age, how did she get that kind of loan? How did people get so dumb during the bubble?
How’s that? Enough vitriol?
February 28th, 2010 at 3:33 pm
Let’s think about this…
- House bought 40 years ago for spare change
- House in all likelihood paid off
- Prop 13 tax rate
- Spouse gone, and property fully inherited only 6 years past retirement
—–
Faux Estater is his “exerceptor” mode again. This is his typical used car salesman style – “Buy this Mercedes. Transmission not working? So what? Think other way – it’s a nice looking luxury car and you can just park it on your driveway and your neighbors will envy you. You don’t need transmission to park on your driveway, right?”
Let’s re-read what the article said.
Mr. Exerceptor, she is about lose her home and only way she can keep her home by renting out a bedroom. So your interpretation “house in all likelihood paid off” is incorrect.
Why she can’t move to other places? There could be various reasons. Some of them she herself mentioned – she had her whole adult life here (at least last 40 years), she raised her six kids here, most likely she spent her whole marriage life in this house. So obviously she has lots of lots of lots of emotional attachment to her home. So would like to keep it, even if that means renting out one bedroom.
Now let’s re-read what Mr. Exerceptor said.
1. House bought 40 years ago for spare change. (Wow! She bought the house so cheap. She got to be very wealthy now, sitting on million dollar equity.)
2. House in all likelihood paid off. (Again, she got to be wealthy, sitting on million dollar equity.)
3. Prop 13 tax rate. (She is sitting on million dollar equity and on the top of that she is paying less tax. Super wealthy!).
4. Spouse gone, and property fully inherited only 6 years past retirement. (Wow!The whole equity is on her name. Not half. Whole equity. Super duper wealthy.)
Now, does it sound like the very same widow described in the article who is trying to keep her home by renting out one bedroom?
That’s our Mr. Exerceptor and his unique way of “exercepting”.
February 28th, 2010 at 3:45 pm
The reading comprehension of you bozos is pathetic. You must have attended public schools in the non-real-Bay-Area.
Here’s what the article said:
With no job, dwindling savings, and rising loan payments, Licon now relies on a house-full of renters to stay afloat — a couple with three kids, an ex-Marine with health problems, and two grandsons shoe-horned into the garage.
She’s renting out most of her house, not just one bedroom. At the very minimum, “a couple with three kids” occupies 1 bedroom. An ex-Marine occupies another room. And her two grandsons are crammed into the garage.
February 28th, 2010 at 3:56 pm
…and the last bit about what is owed on the home:
“Without my tenants, I couldn’t make it,” said Licon, who’s hoping her lender will modify her $400,000 loan. “But I’ve been here so long, this house is a part of me. I’d even move into my garage and rent out my own bedroom if it meant keeping my home.”
February 28th, 2010 at 3:58 pm
Good, you guys are reading, but not thinking.
40 years ago, you could’ve bought the Winchester Mystery House for $400K. There’s no freaking way this lady needs a $400K mortgage. As nomadic noticed, there’s no freaking way anybody would lend her $400K without a job.
Things just don’t add up in this example. Even if it were a true story, it’s extremely unusual.
February 28th, 2010 at 4:34 pm
Faux Estater’s change of mask would have been successful only if he did not write following line in #7.
Unlike, #16, Faux Estater did not question the authenticity of story in #7. Rather he tried to bolster the statement “I can’t imagine life anywhere else”.
February 28th, 2010 at 4:38 pm
As nomadic noticed, there’s no freaking way anybody would lend her $400K without a job.
—–
No, he did not say that. He just wondered how people got dumb in bubble period.
February 28th, 2010 at 4:55 pm
RE, you have the reading skills of a 3rd grader. You missed or just skimmed past all of the salient points. Give up while you’re ahead.
February 28th, 2010 at 4:57 pm
Pralay,
Let me provide an analogy. Licon is like a guest on the Jerry Springer show, and you’re like one of the audience members. To describe the situation: Dumb, and Dumber.
February 28th, 2010 at 5:58 pm
Photo of the week: It’s a great time to buy a house
February 28th, 2010 at 6:20 pm
Just visited two SJ downtown condo developments (88 and Plant 51) for kicks, and I must say that the cheaper the place, the snottier the “agents”. When you reach $400k-$500k, you barely get a glance let alone worthy answers, as opposed to multi-m$ properties where agents are typically decent and knowledgeable. I’m trying to figure out if the Wal-Mart treatment is due to too much demand at that price range, crass incompetence, the full moon or the fact that such agents aren’t “real” real estate agents but simply mis-incentivized employees.
February 28th, 2010 at 6:55 pm
> I must say that the cheaper the place, the snottier the “agents”.
3% of $400K is less than 3% of $2M
February 28th, 2010 at 7:01 pm
The units aren’t opened for “bids”, they’re on fixed price. So I don’t know that the folks touring the models are on 3%.
February 28th, 2010 at 7:09 pm
As nomadic noticed, there’s no freaking way anybody would lend her $400K without a job.
Things just don’t add up in this example. Even if it were a true story, it’s extremely unusual.
Faux Estater, I really don’t like bashing you. I don’t. But your IQ is smaller than the size of my pen!s.
If you think back just a few years, everybody and their mother got loans without having adequate income or credit. Hell, it was easier to buy a house or refinance than to rent. At least with renting, the landlords typically check credit and rental histories.
February 28th, 2010 at 9:03 pm
DreamT,
Are you planning to invest in a condo now? Am I hearing you’re in need of a professional realtor?
February 28th, 2010 at 9:23 pm
Stupid estater is stupid.
February 28th, 2010 at 9:27 pm
Holy cow, the Plant 51 bedroom loft can fit 5 beds! Great investment property for Real Estater!
February 28th, 2010 at 9:35 pm
Just think what you could do with bunk beds, Herve Estater!
February 28th, 2010 at 9:40 pm
Let me provide an analogy. Licon is like a guest on the Jerry Springer show, and you’re like one of the audience members. To describe the situation: Dumb, and Dumber.
——
Let me provide an analogy. Licon is like an actor on a reality show. And you are trying to sell her as “celebrity” in #7.
February 28th, 2010 at 10:25 pm
#26 – No and No. I was accompanying someone who might, and I have a real estate agent I trust (should I need one). Also at $500+ monthly HOA, I’d probably pass, even though I thought 88′s unit G was reasonably priced.
Apparently the bulk of the buyers go for the FHA 3.5% down loans at 5% rate or so, and the smaller units have all sold out. Which I find somewhat strange, because they represent the worst value in terms of $/sqf, and the sqf range isn’t that broad. Wouldn’t it mean that the typical buyer doesn’t have an eye for value?
Finally, (for 88) having a small-sized Safeway “market” downstairs and Philz Coffee one block away is really attractive. And the Fairmont’s lounge is also one block away once you tire of Philz’ snobbery.