Grad School Cautionary Tale asks:
Husband and I are trying to save for a house. He is a prof and was on leave this year. For various reasons, we were unable to buy a house this year as we had planned. For the next academic year, we need a place while we look for a house to buy.
A colleague in his dept. is on sabbatical next year. We thought we could rent that place, agreed on rent and we would pay utilities. Turns out there is oil heat and utilities are an extra 500. In trying to negotiate with the colleague, I’m trying to figure out their mortgage payment without asking to try and find a reasonable amount to pay. I have, from public records, sale price, year bought and term of loan. Is this something that I can figure out/estimate w/o knowing interest rate/down payment?
We are sort of stuck b/c at first colleague said ze didnt know what ze would do with the house while abroad. It is not a true rental in we would only be moving in our bed, have no storage space, and make no changes. We don’t want to be paying their phone and cable package though, and it seemed like we were doing each other a favor, (we house sit, pay some rent, live constrained for a year so we could save money, ze has someone they trust with their house/stuff, doesn’t have to move much). Now that i type it up, it sounds kinda crazy, but I think my original question of figuring out mortgage payment still stands.
Can you help with that?
Well, I think the best you could probably do would be to plug assumptions into online mortgage calculators and get a range. Keep in mind that their mortgage payment is also likely to include property taxes and insurance. I’d start by assuming that they put 20% down on whatever term mortgage you found and vary the interest rates. You’ll end up with a range.
We have been on both sides of this furnished housing rental deal. We paid fair rent for a furnished place for a year (we got a discount for asking and being a good risk, but paid extra for our cats, so it balanced out), and another family rented out our furnished house for that year and paid less than the going rate but still more than our mortgage. (There was a glut of short-term professor rentals that year because of an overseas program– usually the short term rentals in our market go for a premium.) I don’t think in either case we thought of it as doing a favor or having someone do us a favor. There are still risks to having a family living in your house, just as there are risks to leaving it alone.
You can also see price ranges on sabbaticalhomes and academichomes. Craigslist and whatever rental sites are used locally will tell you what unfurnished rentals go for in the area. You can also contact a local realtor who specializes in rentals.
If you’re in the northeast, it isn’t unusual for a house to be oil heat. Since the price did come as a shock, personally I’d just try asking for a discount off the rent because of it. They may be willing to work with you. People are often willing to come down in price for low-risk renters, regardless of ideas of fairness, especially for a short-term deal. I’d suggest not even naming a number, but saying the cost of oil heat is a problem for you and letting them name a number– they may be willing to lower the rent by quite a bit. (And if you don’t like their number, you can suggest a lower one.) If you haven’t written up a contract yet, then feel free to walk away if you find something you like better. (And do make sure you write up a contract eventually wherever you end up.)
Any wisdom to add, Grumpy Nation?