WSBA Interview – Rental Revival: Census Shows Shift Away From Home Ownership

For Rent Sign in Front of Home

I did an interview with Gary Sutton with WSBA in York, PA on June 1st.

It was a follow-up piece to an article published in USA Today titled, “More Than 500 Cities See More Homes Become Rentals.” The authors wrote, “In the aftermath of the nation’s housing-market collapse and recession, more than 500 midsize and large cities have seen a rise in the share of homes that are rented rather than owned”

Most of the cities with the higher changes towards renters were same cities hit hard by the mortgage meltdown and subsequent foreclosures. I saw another news story showing that home ownership peaked at 69 percent and had dropped to 66 percent .

Clearly this should not be a big surprise. Not only did we have a housing bubble, but a home ownership bubble as well. Further, the people who lost their homes to foreclosure still need a place to live and will likely be tenants for a number of years.

The good news is that investors are buying homes in these areas and rather than flipping them as they did in years past, they are converting them into income-producing rental properties1.  It’s a great time to purchase income-producing properties as prices have dropped, interest rates are low, and the demand for rental homes is up.

Contact us for more information on investing in income-producing real estate.

Tom Branch, Broker, CDPE, SFR

1. See “Flipping Versus Income Producing Real Estate Investing

Flipping Versus Income Producing Real Estate Investing

Modern Home for Rent

I did an interview with Bonnie Petrie on KRLD Radio last week. It was an interesting conversation. She wanted to talk about the shift away from flipping homes to buying homes to use as income producing investments. We’ve been talking about this shift for the past several years yet the emphasis has remained on flipping houses.

Why the shift? The primary reason is the lack of “easy” money that once fueled the flipping engine. Investors were able to purchase properties, rehab them, and then get them back on the market. Buyers were able to take advantage of the “easy” money, securing a mortgage and becoming homeowners.

The lending market softened with mortgage meltdown. Underwriting guidelines tightened on both borrowers and the properties. This left fewer buyers able to purchase and lenders began asking lots of questions about why a property that sold for $100k two months ago is now worth $150k.

The conditions that have made flipping properties much harder are what make investing in income-producing properties the thing to do now.

Investors can purchase properties at a discount, rehab them, and then lease them to produce a steady stream of income. I find investors with cash have a much easier time of it but money is available. Investors need to be prepared to put 20 to 30 percent down and carry the costs of rehabbing the property.

Investors need to carefully select properties. Not only is initial price important, but the cost of rehabbing the property has a huge impact on the long-term capitalization rate. This is where working with a seasoned real estate professional and having a solid pool of trusted contractors is critical.

Property management has lots of pitfalls, so investors need to outsource the management of their properties or become very familiar with state and local laws.

Looking to invest in real estate in the Dallas area? Contact us!

Lease and Rental Homes in the DFW Metroplex

Tom Branch, Broker, CDPE, SFR