Here is an interesting, although somewhat slanted, article from NYT on the increasing level of evictions in various parts of the country. What this article demonstrates is that it is getting harder out there as rents and price of everything else keep increasing. What the article fails to mention however is that evictions are hard on the landlords as well. I know I try to avoid filing them and I suspect many other landlords do as well. An eviction is an absolute last resort for me as I will try to work with struggling tenants first.
Real Estate News
The World’s Most Expensive Apartment
Check out the world’s most expensive apartment.
Take the tour or inquire about availability here.
Must be nice!
How Much Has The Rent Gone Up?
This is an interesting graphic from foreclosurereport.com showing how much rents have increased across the country by state between 2000 and 2011.
What did I miss in Nebraska?
Click for a larger image.
Not Everyone Likes Section 8
If you missed it, the last Smarter Landlording Podcast featured longtime real estate investor Arnold Dormer discussing the Section 8 program. Arnold has been participating as a landlord in the Section 8 program for the past two decades and has done very well. “The rent is direct deposited in your account at the beginning of every month” said Arnold.
But Section 8 can be a controversial and unwanted program. Some homeowner associations in fact, like these around Boca Raton, Florida, are banning Section 8 recipients. Are these bans a result of discrimination or of communities simply trying to maintain their property values?
It could likely be argued either way, but these bans are likely to generate a storm of criticism to say the least.
The things to glean about the Section 8 program from the info posted above is that the program, while potentially profitable, is definitely complicated and may be controversial depending on the location.
Smarter Landlords should be fully aware of the pros and cons of the Section 8 program and proceed accordingly.
Stay tuned for the next episode of the Smarter Landlording Podcast, coming at you soon after a bit of a summer break.
Is There A Rent Bubble?
I saw this article the other day and I thought it asked a very good question considering the rise in rental rates we have witnessed over the past few years. Are we witnessing a “Rental boom, or rental bubble?”
I tend to think we may be entering bubble territory. Rising rents have been driving up the prices of rental properties. I read about it across the country and am seeing it here in Memphis, TN. Rising rents have also spurred a number of new apartment projects across the United States. Here in Memphis, I can think of several new and planned apartment projects that will be hitting the market in the near future.
All of this makes me wonder; how many more renters are out there to fill up these new projects and how much more can they afford? Honestly, I don’t know and I do not think anyone else does either. One thing I do know, the old adage is true, what goes up must come down. When? That is anyone’s guess.
What is a smarter landlord to do in potential bubble territory? I can think of three things.
- Be conservative with your rent estimates when buying new properties. Remember that cash flow is king. If there is a bubble and it does burst it will drive down rents. You do not want to be in a negative cash flow situation. This strategy may make deals harder to find but it is better to have no deal than a bad deal.
- Sell! Since the value of an investment property is based upon the income it generates then now may be the time to sell. Several properties in my market have sold for what I thought were exceptional values. Perhaps now is time to sell.
- Sit on the sidelines and wait. I did this back in 2006/07. Values had gone crazy high and out-of-state investors were willing to reap a 1% cap rate! I cannot and will not compete with that so I just waited. Waited for the bubble to pop. I knew that when it did those out-of-state folks would be in bad shape. When the bubble burst, they went belly up and I was ready to buy. So you might want to wait, wait until there is blood in the streets. That is when the best deals are made.
So what do you think? Are you seeing the beginnings of a bubble in your market? What is your strategy? Let me know with your comments.
Some Rents Are Actually Down
Rents have been steadily increasing in most parts of the country for the past several years. There are however a few places where rents have been on the decline as HuffPo reports here, but for the most part, increasing rents still rule the day.
Many have a hard time connecting the dots to explain these rent increases and decreases. Rent is nothing more than a price, subject to economic laws just like any other price. Rents go up when demand is high and supply is short. Rents decline when the opposite occurs. Demand increases because more people are chasing the same number of rental units thus pushing rents up. This can happen due to a foreclosure crisis which pushes people into the rental market or because of some strong attraction such as job growth. Restrict the construction of new rental units to feed this demand and rents will rise even more. Pump trillions of newly printed dollars into the economy and rents will rise even more.
The Squeeze Continues
The bottom 20% in this country continue to get squeezed more and more. I recently wrote about the increasing cost of everything and how some were cutting back in other areas to be able to afford the rent.
No we see, as demonstrated by the attached chart, that rent and food make up over 50% of the bottom 20%’s expenditures.
Expect this trend to continue and be on the lookout for calls for “rent reform.”
h/t: www.economicpolicyjournal.com/
Simple Supply and Demand
The market is following the demand!
With the ever increasing numbers of renters and booming rents the following headline had to be expected.
Housing Starts, Permits Smash Expectations On Surge In Rental Construction
“…almost the entire surge was led by an almost 40% spike in multi-family units as the ‘rental nation’ grows ever stronger.”
Check out the full article here.
Will they overbuild this time? If they do, will rents stop soaring, level off or perhaps drop? Time will tell.
Rents Soar To Record High
As Homeownership Rate Plunges To 19 Year Low
“Long live the New Normal American Dream: Renting.”
What Will $1 Million Buy You Around The World?
Time to dream a bit!
I thought this was an interesting article comparing how much space you can buy for $1 million bucks in different cities around the world.
Would you spend $1 million to live in 161 square feet? Apparently somebody will. It all depends on the three most important rules of real estate. Location! Location! Location!
