January 10, 2011 · 10:08 am

Rental Rates According to HotPads

Many of you know I’m a proponent of HotPads.com.   And if you are a member or have used HotPads you too may have received this email.  It’s very helpful.

Hi Chris,


I wanted to let you know HotPads.com just released its 2010 National Rental Housing Report and I thought you might find it interesting. You can find the analysis and interactive graphs here: http://hotpads.com/pages/housing-report-2011-01.htm

Here is what we saw in 2010 and expect to see in 2011:

– In 2010 Rental Prices increased by 11% and Home Prices dropped 9.8%.
– Rent-Buy Ratio dropped from 15.66 to 12.64, meaning conditions are improving in favor of buying.
– We expect to see foreclosed and long standing for sale properties re-enter the market as rentals in 2011,  should drive up supply and help ease rent prices.

We also have state level data, in case you are interested.

I hope you find this useful and please let me know if you have any questions!

Best wishes in the new year,

Paul

Paul
Director of Communications

Hotpads on Facebook & Twitter



Washington, DC. – January 6, 2011 – Rental prices across the US increased 11.6% in 2010, growing from a national average of $1181 in January 2010 to $1319 by December. The steady increase in rental prices was inversely matched by falling prices of homes for sale, which saw a 9.8% drop over the same period. 

The rental price increase is a factor of uncertainty in the US economic climate, which has forced a transition from a home buying mentality to one more in favor of renting. The growing number of homes lost to foreclosure in 2010 expanded the number of people seeking to rent, creating a renter surplus.

Further, with the US unemployment rate over 9% throughout 2010 (up from 4% in 2006), low risk housing options became more desirable, a trend which may continue in the coming months.

At the same time, HotPads expects to see foreclosed and long standing for sale properties re-enter the market as rentals, which should expand the rental supply, thereby helping ease rent prices. This represents an interesting contrast to the peak of the housing market in 2006, when rental units were being converted into for-sale condos.

The 2010 national rental market data is calculated from a sample of one million concurrently active rental prices on HotPads. These are averages of each state’s monthly median rental price weighted by the number of listings in that state.

About HotPads.com

With over 500,000 active rental listings and 4 million homes for sale, HotPads.com is one of the largest national housing resources in the market today. HotPads.com is the premier map-based real estate search engine, delivering the most interactive and personal housing search experience online.

 

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Filed under Property Management, Real Estate Investing

January 5, 2011 · 10:33 am

Searching for Quality Investment Property

Searching for quality investment property is cumbersome.  Oh, there are lots and lots of properties for sale in the Kansas City area right now.  And some seemingly great bargains…until you examine the neighborhood, the repairs necessary, the financing appropriate financing, etc.

And you really have to keep appraisals in mind.  It’s been quite a while since I’ve had a problem with a primary home appraisal.  But refinancing an investment property seems to be a rather interesting way to spend your time for the real estate investor.  It’s like a hobby that may or may not pay for itself.  🙂

Right now, more than ever, you have to keep your criteria in mind when deciding on a quality investment property.  My criteria?

  • Neighborhood
  • Vacancy rates
  • Rent to price ratios
  • Tenant pool

Just to name a few.  The property I seek for my clients must have money to be made on the buy side ( a little or a lot depends on your patience ) and pay for itself during the holding period of the next 5-10 years.  To pay for itself the rental property needs to be clean and attractive to an available tenant pool that is in need of housing (less than 10% vacancies) and can afford the rental rates being sought.

Sounds simplistic.  But the more you can define YOUR criteria the harder it will be to find YOUR investment property.  But when you find it, it’s an easy decision.

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Filed under Investment Property

December 8, 2010 · 11:14 am

A Thaw As The Weather Turns Colder

I feel a thaw.  No. You wouldn’t know it from the temperature outside and the breaking grass under my feet.  But I’ve made three offers in the last week.  (Although I am still waiting to get one together.)  And great news!  One of the bank foreclosures that has been frozen has rumblings of closing on or about December 15.

Now, I won’t believe it till I am there watching the buyers sign.  But it is movement, never-the-less.

*** *** *** ***

Just a note about this real estate market.  Everyone has it rough.  I feel fortunate.  While my income from real estate sales and investments has dropped about 20% from 3 years ago I have made up that income with another business my wife and I own.  Portraits Today Studios in Olathe, Kansas had a record month in November and is on pace for our best December, as well.

But I look around and I’m a little saddened.  It’s renewal time for real estate agents across the country.   I’m expecting a blood bath.  $450 to $550 for dues and fees in December is pretty tough on a lot of under-performing agents.  Yes, it’s a purge that needed to take place.  But it doesn’t make it any easier when you look across the landscape and see how hard it’s hit people you know and have built relationships with.

 

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Filed under Uncategorized

November 29, 2010 · 7:51 pm

Real Life Bank Foreclosure Freeze Tale

Okay, so I know many of you are probably tired of hearing me talk about the foreclosure mess that is ongoing.  But it’s real.  It effects buyers.  It effects realtors trying to make a living.  It effects neighborhoods with deteriorating housing.  It effects housing values.  It effects tax payers.  It effects bank profitability.   Title companies.  Contractors. Etc.  The only people that I can think of that really benefit are the lawyers.  Need I say more?

So back on September 23 some clients of mine reached terms to purchase a bank foreclosure in Olathe.  The closing was to be on or before November 5 but everyone agreed, as is usually the case, to close much sooner.  Then everything ground to a halt and the buyers were told they would close by 11.5 but not before.

On November 4 I start getting calls from the listing agent and the title company.  Everyone was insistent that we sign an extension immediately to keep the house under contract.  So we eventually signed one extending the closing until November 30.  They kicked it back saying they wouldn’t extend past November 26.  Okay, you should grab a calendar.  They were being pissy about the day after Thanksgiving, a Saturday and a Sunday and then two business days, Monday and Tuesday.  Apparently my buyers and I were the only ones that had a calendar or could read it.

So we signed their extension through to only the 26th.  So on Wednesday afternoon I get an urgent email and a phone call saying we need to get an extension signed because it hasn’t closed.  No crap.  Of course, I was the one that had to call them ask what the hell was going on.  But that’s another story.

Now they want another extension signed through December 27.   I would again refer you to a calendar.  That’s the Monday after Christmas. So we all know that there won’t be any work done at the title companies or the asset manager’s place on the 24th, Christmas Eve.  Christmas is on Saturday.  Sunday, no way.  But let’s back up, I’m also sure we’re not going to see too much work done on the 23rd, either.

And again with the same terms.  You know, bank has all the rights and the buyer just has to bend over on the bank’s whim.

I’m not trying to be rude here.  But does any of this sound normal to you?  How is the buyer supposed to move forward?  And he doesn’t have a plethora of other options.   Why?  Because of the foreclosure freeze there aren’t any new foreclosures, or very few actually, coming on the market at this time.

This is a fine mess we’ve gotten ourselves in to.  🙂

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Filed under Social Issues

November 10, 2010 · 1:27 pm

Why Real Estate Investing Makes More Sense Than Ever

Real estate investing still makes sense. In fact, even in today’s troubled waters investing in income property still kicks the hiney of most other investment vehicles.  And it should.  After all, it’s more labor intensive (even with a professional property manager) and it’s not very liquid.  It could take months or years to sell, depending where you are, and to avoid locking in losses you may have to hold longer than you originally expected.

The Kansas City real estate investing market is still margins above other areas of the country.  We do not have the huge depression.  Our unemployment is still lower than most of the country.  And our real estate values haven’t declined anywhere near other markets.  We’re not perfect.  Go to the areas of town I’ve never recommended and you’ll find plenty of examples of bad stories.  But let’s take a look at a real live rental property currently for sale.

Rental Duplex Example
There is a duplex here in suburban Kansas City that is for sale.  What they are asking and what they will get is of course, negotiable.  But I figure this duplex will sell for about $111,000 and with closing costs and very minor repairs thrown in you’re probably all in at $115,000.

Nice rental neighborhood.  Safe and desirable school district.  Two beds, one bath each side.  Rents on one side are $525 (long term tenant) and vacant on the other.   Three bedrooms in the same neighborhood rent for between $825 and $950.  So the real rents here should be about $625 to $650.

Let’s subtract our vacancy (6.0%) and other expenses adding up to about 32.7% of annual rents (includes property management, taxes, misc., utilities, etc.)  and you’re left with about $9,200 of Net Operating Income.  Subtract your debt service (20% down at 6 1/8%) and you have an annual cash flow before taxes of $2,720.

Throw in Principal Reduction (always my fav) and add back in tax consequences after reducing your NOI with interest and depreciation and you have a net first year benefit of about $3,571.

What is $3,571?

That’s a 13.6% return  on your cash invested.

That’s an 8.0 Cap Rate.

That’s Cash on Cash at about 10.4%

Where else are you earning 10.4% on your money after expenses?

4 Comments

Filed under 4 Benefits of Real Estate Investing, Kansas City Real Estate

November 8, 2010 · 1:27 pm

Spam Investor Emails

So I get these emails all week every week.  If you are going to send me this crap can you please spell everything correctly, including my name, and not use “$” signs as a “s” please.  🙂

Hi Cris Im a nebbie wholesale Investor I work with a Team of Investors Nationwide that looking to pay me, a fee, Locating Properties, below value market. My investors pay Ca$h and Close Quick costing your Company not 1 cent. My goal is to find deals, make an offer, If offer gets accepted, put it under contract, along with estimate money desposit of $100*$100.00 using my Team of Investors Assigning my contract over to my Investor Buyer I have my Estabished Title Company who will do all the closing title seaches,check for liens etc who legally cuts me a check Putting your company in a Win Win situation. That would truly skyrocket your commision and give me the opportunity to build a realationship with you and your company. I look forward to meeting you in person. If you dont mind. I need to see a few homes on expired listing that did not sell that you desperately needs to sell. Please call me so I can see how I may help you sell your Properties Fast for Ca$h and Close Quick I can be reached at <phone number removed>.

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October 26, 2010 · 10:51 am

Great Column

Some people are so much more eloquent when they rant than I am.  From today’s Washington Post…

 

The real foreclosure mess:  Lack of accountability for banks

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Filed under Worth Reading