THE LUXURY LEASE MARKET We chatted with a couple of the big players in San Diego luxury leasing to find out what is happening in this niche market.
While San Diego has always been able to draw big bucks for peak summer and track season rentals, the long term rental of some of our finest estates has been a growing market over the last few years. We chatted with a couple of the big players in San Diego luxury leasing to find out what is happening in this niche market.
“To me the definition of high-end in the lease market are homes renting for $15K +/ month long term, 1 year or more. We have rented more high-end homes this past year than ever before” ~ Maxine Gellens, Prudential California Realty
As home prices dropped after the market peak leasing became a more viable option for those in the higher end for a couple of reasons. For homeowners who wanted to, but didn’t need to sell, leasing their home allowed them to tread water for a bit in an uncertain market. Jason Barry of Barry Estates told us he has had many clients who have chosen this alternative to selling. “This is based on an optimistic view that prices will increase to a degree in which it is a better investment for homeowners to lease, and have the home pay for itself, and then try and achieve at least a 10% increase in sales price in 2 years,” he says, “I recommend this for clients who are trying to sell a second home but are not willing to sell at today’s prices or are willing to downsize by leasing a smaller home to offset the cost of their main residence.”
“For those on the other side of the transaction, signing the leases for these homes, it has allowed them the ability to test the market while also waiting out restrictive financing,” according to Brett Combs of P.S Platinum Properties. As financing on the high end loosens up and the market shows signs of stabilizing Combs already sees a portion of these lessee’s starting to draft offers and move back into home ownership.
There are some potential pitfalls for homeowners including the possibility of damage caused by renters. Catherine Barry of Barry Estates says that it is a fine line for homeowners who risk potential property damage but also enjoy the benefits of having someone live in their larger homes maintaining the properties systems while the homeowner waits for the market to improve.
One segment of the leasing market that has grown comes from those former homeowners who either lost their previous residence to foreclosure or sold in a short sale. Many of these tenants have high monthly incomes but not the hefty down payment needed to buy. Linda Sansone from Willis Allen Real Estate points out, “We are also seeing more Lease-Option agreements. Some people may have the cash to afford a luxury rental, however they are not qualified to purchase a home because of the stricter lending laws.” The lease option allows some to start making the move back toward homeownership sooner than later.
Some may question why a real estate agent is needed when simply leasing a home and the answer is that it’s more complex than you expect. For the lessor, a real estate agent handles negotiating the rental terms and specifics just as they would a sale, which at the higher end is a much more complicated process. Real estate agents also market the property in the same places they market their luxury listings (like right here in PREMIER) because they are courting the same type of high level clientele. Contractual obligations, legal issues, tenant screenings, and someone looking out for your best interests as a homeowner are all the reasons you need an qualified agent to help you lease your property as well as sell it.
“Agents are protecting rights of both tenant and owner and are able to provide unbiased assessment of each party’s needs. ” ~ Andrew E. Nelson, CEO Willis Allen Real Estate
For tenants, because there are a limited number of luxury properties available for lease, the network and relationships of an agent help you to find and get the property that is right for you at a fair price. Maxine Gellens points out, “Gorgeous high-end rentals are few and far between. So if you see something you like—grab it!” Do be sure that the property you are renting is not in a distressed situation though, Linda Sansone reminds us. This can lead to headaches down the road.
Many agents are both leasing a property and listing it for sale at the same time, a boon for the homeowner. Brett Comb’s P.S. Platinum offers full concierge services for his luxury tenants, providing cleaning companies and even connecting tenants with private chefs or party planners, whatever they need. This way the homes are happily occupied while being shown for potential sale.
While luxury leasing is a growth market, and will remain so in places as desirable as San Diego, it remains a changing market just like all things these days. As one group is moving out of home ownership and into leasing, another is heading right back into the buyer’s market with prices that seem to have reached their bottom and interest rates and financing extremely attractive moving into 2012.
To find out more from the real estate professionals quoted in this article:
Jason & Catherine Barry, Barry Estates www.catherineandjasonbarry.com
Brett Combs, P.S. Platinum Properties www.psplatinum.com
Maxine Gellens, Prudential California Real Estate, www.gellens.com
Linda Sansone, Willis Allen Real Estate, www.lindasansone.com