With the credit crunch in the mortgage market pricing out many would-be homebuyers, the next best thing to owning a home may be renting one.

The rental market in North Texas currently is swollen with homes, in part because of the high rate of foreclosures.Through the first eight months of this year, the number of North Texas rental homes in the MLS listings soared 18 percent, compared with the same period last year, according to the MetroTexAssociation of Realtors.

And consumers are snapping up homes to rent.

The average time a rental home remained on the market last month was 41 days, down 18 percent, compared with August of last year.

“Rentals are definitely hot right now,” said Bill Head, spokesman for the Realtors association.

That may make it a renter’s market, but it’s still important that you take precautions in selecting a house to rent, negotiating a lease and buying insurance.

John Ellig of Flower Mound owns three rental homes and is negotiating to buy two more. He sees the demand for rental housing going up.

“The homes in my neighborhood – when there’s a ‘For Rent’ sign going up – it does not stay in the yard very long,” said Mr. Ellig, who buys homes that are within walking distance of schools in the Lewisville Independent School District.

The main reason some consumers rent a home is because they don’t have the credit or the money to own one, said Kent Newsome, a partner and real estate attorney at Greenberg Traurig in Houston.

But that’s not the only reason.

You may expect to not live in an area that long, making a home purchase not worth it financially.

“If you plan on staying there a year or two, it might be worthwhile to rent a home than to buy outright, or if you think housing is in a bubble and is about to go the other direction,” Mr. Newsome said.

Either way, there are specific steps you should take to ensure that you make the best decision in choosing a rental home.

First, figure out where you want to live, which may be highly influenced by the quality of the area’s school district.

You can get an idea of how a school district performs by checking the Web site of the Texas Education Agency, which rates school districts on up to 36 measures to determine whether they are exemplary, recognized, academically acceptable or academically unacceptable.

The 2007 rankings can be found at www.tea.state.tx.us/perfreport/account.

Second, check out the neighborhood you’re thinking of living in. Drive through it and talk with residents.

“I would also visit the neighborhood at various times of the day and week when considering a place to lease,” Mr. Newsome said. “The street that appears peaceful with an empty park on one side of the street might be loud and chaotic on weekends when there are Little League baseball games from dawn to dusk.”

Once you’ve settled on a home, make sure you can afford the rent and evaluate what you’ll be getting for your money. Is the home in good condition?

“The tenant should have a thorough inspection of the house performed, to be sure there are no significant repairs that need to be made,” Mr. Newsome said. “Some important repairs – for example, old or faulty wiring that may pose a safety risk – are not obvious to the untrained eye.”

In today’s beleaguered mortgage market, you also want to check out the financial condition of the landlord.

“If the landlord bought the property with a subprime loan that may soon be in default, the tenant could be evicted from the house if the lender forecloses and sells the house to someone who wants to live there, so the tenant should require information about the type, amount and status of any loan secured by the property,” Mr. Newsome said.

He suggested one way to approach a homeowner-landlord:

“Tell them, ‘In this day and age, I need comfort that you are financially solid enough that you can pay your debt service and that I’m not going to be subject to being evicted because your lender forecloses on you,’ ” Mr. Newsome said.

Although the relationship between landlord and tenant is governed by several laws and various court rulings, the most important item that dictates your dealings with your landlord is your lease. Read it carefully before you sign it.

If you want to change part of the lease, discuss it with the landlord. If the landlord agrees, write the change into the rental agreement.

When looking at a proposed lease, it’s very important to determine where the responsibility for repairs and maintenance lies.

“Generally, the tenant has a budgeted number for monthly rental in mind,” Mr. Newsome said. “If the house is in need of a lot of repairs and the lease allocates some or all of that cost to the tenant, that monthly number could easily be exceeded on a regular basis.”

Some landlords, such as Mr. Ellig, want full control of repairs.

“I don’t want them to touch anything,” he said. “I will send somebody out to take care of it. I want it done right.”

A key piece of advice he has for renters is to not trash a rental home.

“It’s critical that you treat your property as if it’s yours, not as if it’s somebody else’s and you’re going to abuse it,” Mr. Ellig said. “If you’re good to your landlord, they’re going to be good back to you.”

What’s more, there’s a legal reason you should care for your rental home.

Under Texas law, you have a right to demand that the landlord repair any condition that “materially affects your health and safety.” The law says that by renting you the property, the landlord guarantees that the home will be a fit place to live.

However, the landlord doesn’t have a duty to pay for or make repairs if you or your guests cause an “unsafe or unhealthy condition through negligence, carelessness, abuse or accident –unless the condition resulted from ‘normal wear and tear,’ according to the Texas attorney general’s office.

If you do repairs yourself, don’t assume you can automatically subtract those expenses from your rent.

“The law does not allow a tenant to deduct repair costs from the rent unless the tenant gives two written notices of repairs,” said Mary Spector, associate professor at Southern Methodist University’s Dedman School of Law. “The landlord is allowed a reasonable time to respond.”

A judge determines what’s reasonable, she said, though the law presumes seven days.

“Get it in writing if the landlord says, ‘Go ahead and deduct it from rent,’ ” Ms. Spector said. “Always get it in writing, and pay on time.”

Not being late on rent is crucial because “the tenant’s ability to do things like deducting for repairs all depends on the tenant being current on her rent,” she said.

Mr. Ellig said that unless there are extraordinary circumstances, he expects his tenants to pay their rent on time.

“I let them know up front I don’t mess around,” he said. “They have until the 5th to pay rent, and after that, I charge $25 a day. But I have never had to enforce that.”

Make sure you purchase renters’ insurance to protect your belongings.

Your landlord’s homeowners’ policy covers only the physical dwelling you live in, not your personal property inside.

Finally, if your lease gives you an option for renewal, make sure the agreement states what the rent will be during the extension term.

“Many landlord-drafted leases provide for an extension option, but state that rent during the extension term will be ‘market rent’ or ‘determined by agreement of the parties,’ said Mr. Newsome. “That sort of extension term is virtually worthless to the tenant because the tenant has no recourse if the parties can’t agree on the rent.”

Source:

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