Tenants evicted as apartment owner faces foreclosure

HARLINGEN — Apartment dwellers on Sonesta Drive were shocked Thursday to find eviction notices on their doors telling them to move out by July 5.

Such occurrences have been common lately, said their landlord, John Sanchez of "For RENT Inc.; The Property Management Company."

Only four tenants out of eight apartments in two buildings were affected this time, Sanchez said.

But it's a national trend that is affecting Harlingen and the rest of the Rio Grande Valley, as well as many other parts of the United States, he said.

The main reason for apartment foreclosures is that many people purchased rental apartment buildings with adjustable rate mortgages that now have high interest rates, Sanchez said.

Apartments such as those on Sonesta Drive and Sonesta Court rent for $400 to $500 a month, but owners with adjustable rate mortgages, or ARMs, would have to raise rents to $600 a month to make their increased payments at today's interest rates, he said. Tenants won't or can't pay the higher rents, so banks and mortgage companies foreclose on owners.

When the properties are resold, they go for lower prices than what their present owners paid, with lower interest rate mortgages, so new owners are able to rent them at about $450, which is what most current tenants are paying, Sanchez said.

But he feels bad about having to evict tenants, who must suddenly look for a new home, pay moving expenses and endure the hassle of having their utilities disconnected and reconnected, he said.

"It's part of the economy," Sanchez said. "It's boom and bust. We're just told what to do. It's happening everywhere. ... There are foreclosures everywhere."

But there could be a variety of reasons for the foreclosures, he said.

"It could be an ARM, taxes, or it could be a traumatic event, like the owner lost his job or there's a death in the family," Sanchez said.

If an apartment building owner has a high number of vacancies, he or she might not be able to make mortgage payments, he said. Then the bank or mortgage company will foreclose.

Sanchez refused to name the owners of the Sonesta Drive and Sonesta Circle apartments.

Tyler Dale, one of Sanchez's tenants being evicted, said he was leaving to go to his job as a television videographer when he found the eviction notice taped to his door, telling him he had to get out in less than a month.

He has lived in his apartment nearly a year, Dale said. He had to move out of his previous apartment last summer because of water damage from Hurricane Dolly.

Although it will be difficult for him to search for a new apartment and suddenly come up with a deposit, rent and utility deposits, things could be worse, Dale said.

"I don't have an extra $500 just sitting around," he said. "Also, I'm going on vacation this month."

Friends have offered to let him stay at their home for a few days if he has a problem, Dale said.

"They (management company) said I'll get my full deposit back," he said. "I signed a six-month lease when I moved in last summer and that's expired, so I'm month-to-month anyway. They could make me move out anytime anyway."

He likes the apartment where he lives now and really doesn't want to move.

"This is a nice place. It has vaulted ceilings, ceiling fans," he said. "It's a pretty good management company. My air conditioning went out the other day and they had somebody over here to fix it the next day."

Besides ARM-related evictions, gasoline prices have also contributed to the high number of apartment vacancies in the past couple of years, Sanchez said. Young people, in particular, have been hurt by the cost crunch.

"They can't afford the prices, so they give up their apartment and move back in with mom and dad," he said.

There is nothing a management company like his can do except try to help tenants find similar apartments at similar prices, Sanchez said. And that is what he is trying to do.

He is now placing tenants who were evicted into newer apartments with the same rent, but with utilities included, he said. "And they are getting the first month free, too."

Mari Rivera, of Mason & Co., a Harlingen real estate company, said although lots of foreclosures are happening now, she has only experienced one foreclosure on a property she managed.

"With as many properties as we manage," she said, "I've only had one that happened, about seven years ago."

But she knows of lots of foreclosure situations.

"It's basically because properties have been purchased by out-of-state investors," she said. "If you buy something very high and you cannot produce the income, then guess what - you're going to lose.

"That's what the bottom line is. If you buy something overpriced, that's the end result."

Often, out-of-state investors overestimate the amount of rental income they can earn by owning properties in the Valley, Rivera said. They expect to charge the same rents they would get in California.

Out-of-state investors don't understand that when the economy goes sour, many Valley tenants move back in with family members, Rivera said. In January, when people start getting income tax refunds, those erstwhile renters may get another apartment.

"It's sad," Rivera said, "but that's the way it is."

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Allen Essex is a reporter for the Valley Morning Star.