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Real Estate News

Investors Are Being Watched

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We should all be aware by now that serious Wall Street money has gotten into the landlording business.  Hedge funds have been buying up thousands of foreclosed homes all over the United States and placing them on the rental market.  I have been watching this process take place here in Memphis, TN and have wondered how it is all going to shake out in 5 or 10 years.  Looks like others are starting to watch and wonder as well.

This article from the Memphis Daily News takes a look at the impact investors have made on the Memphis real estate market over the past few years.  The article notes that according to Jim Reedy, who owns Reedy & Company here in Memphis:

“Memphis is a 50 percent rental town now and I expect that to go to 60 percent, possibly 65 percent.”

What will the impact on the city be upon loosing so many homeowners?  The article goes on to say:

“The role of investors is growing and the impact on different kinds of neighborhoods is largely unstudied and unknown.”

People are watching this process develop however.  Some, like the Center for Community Building and Neighborhood Action (CBANA) at the University of Memphis are watching rather closely.

In a rather detailed 2010 study of lending patterns in Memphis which examined the roles of some of this City’s largest investors and turnkey providers, CBANA concluded that:

            The significance of the investor-driven market, however, has been anything but clear.

While CBANA can’t say that all of this investor activity is bad for neighborhoods, one can tell from the tone of their reports that they do not think it will turn out very well.

So while none of us may know what the future holds, here is the moral to this story.  With folks like CBANA and others watching us investors, we investors need to be sure we are keeping an eye what CBANA and others like them report.  Why?  Because at the first sign of trouble it will be folks like CBANA calling for new regulations, restrictions and registrations. 

And it will not only happen here in Memphis as there are similar situations in cities all over the country such as Atlanta, Dallas, Indianapolis.   Landlords and real estate investors of all types need to keep tuned into what is said and make sure their voices are heard as well.  Their business may depend on it.

 

The Building Boom Is On!

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In apartments that is.

I have been noting that rents have been going up all over the country.  Vacancy rates are also historically low.   

These are conditions that make it nice to be a landlord.  But these conditions are also good for apartment builders.  Builders are responding to the increased demand for rental units and the incentive of increased profits through increased rents by building new apartment complexes all over the country.  Here are just a few examples in San Jose, Philadelphia, Charlotte, Nashville, New York City, and Dallas from the past week alone.

If you are in the apartment building business or thinking about getting into it, now is the time.

I wonder if an apartment building boom is in the works?  Will it bust someday?  Time will tell.  

Rent Too Damn High?

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Looking for a cheap place to rent?  Then this article from Apartmentguide.com may be able to help you.  In it they outline the top ten cheapest metro areas in the US when it comes to rent.  There is some other interesting info in there as well.  Check it out.

Now the Hard Part Begins

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I have posted before about Wall Street getting into the local rental market business.  I tried to tell them again that getting into this market was not going to be as easy as it seems.  I am sure everything looks great on paper back at the office.  But the reality of this business is very different.  Tenants skip out in the middle of the night, leave water running, all kinds of crazy things.

Now, Blackstone’s buying binge has ended according to this article on Bloomberg.  After spending nearly $8 billion to buy over 43,000 homes across the country, the company has reduced its spending on new property acquisitions by 70%.

So, after spending all of that money, driving prices up and beating out local investors and actual owner/occupant buyers, what now?

“We’re not selling the homes. We’re building a long-term business,” said Jonathan Gray, global head of real estate for the New York-based firm.

I wonder.  It is easy to buy them, hard to manage them.   Let’s check back in a couple years and see what they say.

More Rentals and Shrinking Home Inventory Ahead

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There are some interesting stats in this recent survey done by Redfin.  From the article:

“There’s a new trend among 2014 homebuyers: the decision NOT to sell their current homes when they move. For the latest Redfin Real-Time Buyer Survey, we polled 1,909 homebuyers across 22 major metro areas in the U.S. Among homebuyers who already owned a home, 39 percent said they planned to buy a home and rent out their existing home instead of selling it, thus further limiting the number of homes available for sale.”

The Biggest Cash For Keys Deal

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This is a pretty amazing read. 

“A hotel hermit living in a filthy rent-controlled room was paid $17 million to leave – the highest price ever to relocate a single tenant in the city of New York, while the son of legendary General MacArthur only got $650,000 in the same deal.”

Thankfully, I have never had to pay that much in a cash for keys transaction.

Can Home Prices Be Far Behind?

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Mortgage applications have fallen to their lowest point since 1995!  Will we see a corresponding fall in home prices or will investors continue to gobble up the inventory?  Either way it should make for some interesting times over the next few years in the housing market.

 

Source: ZeroHedge

Empty Pockets Ahead?

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Realty Trac just released a report showing that the average estimated monthly house payment increased 21% form one year ago.  Seems there has definitely been some appreciation in the housing market.

To many real estate investors, increasing payments may sound like a good thing.  We think that with rents going up we will make more money.  We think that with home prices going up we can flip them for more profit.

But rents and home prices are not the only things increasing.  Almost everything is increasing in price these days.  Have you checked out your grocery bill lately?  Ground beef for example rose about 5% in price in 2013 and it is predicted to jump another 5% to 7% this year.  Coffee is up over 20%.  Gas is also at a 5 year high.

One has to wonder if everyone can afford all of these higher prices.  Will we see increased stress from our renters with more late payments? Will they be moving to more affordable locations or adding roommates?  I have a feeling we will.  Time will tell. 

What do you think?  Are your rents going up?  Are you still able to command higher rents?  Are you seeing any payment stress from your tenants?  Let me know with your comments.

Being A Landlord Is Not As Easy As They Thought

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I tried to tell them back in October, managing rental properties is not as easy as you think.  Now it looks like Wall Street is finding that out the hard way.  Will we see all of this hedge fund money that has been fueling the rental housing market boom dry up soon?  Time will tell.

Here is the highlight from the Bloomberg article.

“Rents collected on the collateral for the first U.S. rental-home securities declined by 7.6 percent from October to January, according to Morningstar Inc.

Payments declined as expiring leases and early tenant departures left residences backing the bonds of Blackstone (BX) Group LP’s Invitation Homes vacant, Becky Cao and Brian Alan, analysts at Morningstar’s credit-ratings unit, said in a report.”