[quote=CA renter] . . . For as long as interest rates are suppressed at these levels, there will likely be fairly strong investor involvement in the housing market. What should be concerning to those who want to see higher housing prices in the future is the 5-7 year disposition plans that these large funds have (and many banks who’ve been holding off on foreclosures). This will also coincide with more Baby Boomers entering a stage where they realize their pensions/retirement accounts won’t be able to sustain them over the years, and they, too, will be looking at liquidating their houses in order to provide cash for living expenses.[/quote]
I agree with this and also agree that there could be a LOT of inventory on the market at the same time equity sellers will be trying to unload. Most of these REITs DO have a ~5-7 year “buy-and-hold” window. HOWEVER, I have no doubt that the bigger ones will be in positions to change their minds and hold out their properties for lease/rent (at least the many that are near job centers) and/or stagger their listings so as to not flood the market (just like the REO lenders did) and thus obtain a higher price for each one.
[quote=CA renter]If interest rates rise, the investors making 5-10% the hard way (and I think they are underestimating what it will cost them to maintain these rentals) will want out of these funds. Will the funds be forced to liquidate their inventory if this happens? All at the same time? With higher interest rates, new owner-occupant buyers will also be willing to pay less for the same properties at the very same time that these investors are looking to exit. Sure, the investors can hold and accept lower than expected/desired returns, but there are weaknesses in these plans that many people aren’t acknowledging, IMHO.[/quote]
Rental properties CAN very well be “labor intensive.” The REITs are no doubt using local property mgmt companies in each area they have a concentration of rental properties. Higher mortgage interest rates are a two-edged sword. Be we must remember that with each mortgage rate hike, another subset of potential buyers remains renting, thus fueling rental-unit demand. In mtg-rate-hike periods of decades past, homebuyers would simply buy a smaller property or a property in a lesser area than they could previously qualify for … or both. Today’s renters who are used to living in a particular area that they are happy with will generally NOT step down in size/location just to become a “homeowner.” Their “lifestyle” is far more important to them than owning a home.
[quote=CA renter]Something for these new landlords to think about are the statistics about the percentage of income renters are already paying for rent. It’s unlikely they’ll see rising rents over the years (assuming foreclosure numbers continue to dwindle to more normal levels) unless the renters start adding more people per unit…which will increase turnover, late payments/no payments, maintenance costs, etc. . . .[/quote]
I don’t know about other states, but in CA coastal counties, three or more salaries per rental household is not uncommon. This could either be one or more of the renters with two paying jobs or three or more adults or young adults (typical children of renters) contributing to household bills. This is the way it’s always been.
If YOU, as a LL, have a rental which rents for $2600 or more per month and are concerned that it will take up too much of a “nuclear” family’s income, then it might behoove you to entertain only the rental applications you receive which use three or more incomes by the tenant group (whether a related family … or not) for rental qualification and thus living expenses. This also cushions against job loss by any of the tenants or loss of ONE job by a tenant who has two jobs.
