About ten years ago, Wall Street hedge fund money started pouring into the rental house business. They purchased thousands of homes all over America with special emphasis on the southern states. These Wall Street backed companies evict renters for non-payment of rent at a rate 26% higher and much sooner than us non-institutional landlords. Maybe the rest of us landlords should be stricter too.
Rental home subdivisions:
The business model of a company building whole subdivision consisting of just rent houses is alive and well. With a 250 house rental only subdivision planned for the west side of San Antonio. Because the demand for rental houses is high and this demand is not likely to ease up anytime soon and with rents rates increasing at 3% plus a year, plus homes increasing in value 8% to 10% a year, it’s worth looking into buying more rental properties.
Flipping houses declines nationwide:
Because of the higher price of distressed homes, as well as increasing material and labor cost. Flippers are finding it harder to make profitable deals. Holding periods to get the completed homes sold are getting stretched out, resulting in more carrying cost, and higher risk. When you factor in the cost of hard money loans to do these deals profit margins are getting thin. The result nationwide is that fewer deals are getting done. Fewer new flippers who enter the business are staying, resulting in a decline in participation at investors meetings. Deals are still happening just less of them.
You might need a new Strategy:
If what you are doing isn’t working don’t give up, change your investing strategy. Buy rentals, buy cheap houses and sell them on notes, look at mobile homes on land. Partner with someone who has money to reduce carrying cost. Flip higher priced homes that might take longer to sell but can stand the higher labor and material cost. If you do not know all the different investing strategies, it might be time for some additional training.
Marketing for Deals:
The biggest problem with investors who are not doing deals is they are not marketing to find them. When I talk with investors and ask how their business is doing I get that not so good look. When I probe, I find that the vast majority of investors have no consistent marketing plan to find deals. If you are not looking you won’t find deals.
The other hurdle is a lack of money to deals of any kind. If you are not asking people to lend you money than you can’t do deals. There is plenty of IRA funds and savings out there earning little interest. Ask people to lend you money, sooner or later if you ask enough people someone will say yes than go buy rent houses, or do flips, or even do seller financing.
The Rental Market is Hot:
There are so many people wanting to rent houses that they rent in days not weeks. If you have a W-2 type job and can scrape up the down payments, buy as many 3-2 homes with 2-car garages in good school districts that you can get financed at 5% or less. This type home will increase at a rate of about 8% to 10% a year for several more years. There is plenty of loan money available with down payments in the 20% to 30% range. Just make certain you have a $200 minimum positive cash flow from the rent on the house and go for it, you will get slowly richer. Call your favorite mortgage broker and see what you qualify for, you will be glad you did.