Rents Up

The Houston Chronicle today said that homeowners are now renters. The average rents in Houston in October 2006 was $657/month. The average rents in Houston October 2007 is now $681/month. That is up 4% in one year.

Ain’t happening in the Northeast.

There is so much inventory out here that you can rent homes and apartments for dirt.

We had boat loads of developers up here who thought this gravy train would never end. They bought up a lot of old mill buildings with the intention of converting them to high priced condo’s. Well guess how that worked out?

They all came on market at the same time in late 2006 - 2007. None of them sold, so now they builders are leasing them. Like Florida, we now have an oversupply of rental units in our area and rents are actually falling. Think about it, these builders are screwed. They spent big money putting granite counter tops and whirlpool tubs in these units. There is no way your competing with that with your 2nd floor, 3 bed, 1 bath, 80 year old 3 family. And THAT is exactly why rents are falling. Investors are dropping their rents because there is so much of that product on the market. The developers are renting these units for $1000/month and everything in them is top of the line and brand new.
Sprinkle in the thousands of single family homes that can’t or won’t sell and are now being added to the rent inventory and rents ain’t going up, THEY’RE FALLING!

I don’t by into the “this is great for the rental business” theory.

This down turn is just starting to pick up speed. It is going to be just as historic in it’s ferocity, as the rise that led to it was spectacular.

All the pieces are falling into place folks, wait, just wait, in 2008 $900 BILLION worth of ARM mortgages adjust for the first time. THAT’S A FACT. NOT theory, a fact. Those homes WILL NOT appraise for any where near what these people owe on them.

Put your self in that postion while this information sinks in…

You purchased a home (like MILLIONS) in 2005 or 2006 (at the market PEAK) the payment on your home is let’s say $1500/month. Now the market is falling, and getting worse by the month (last month had the worst national month to month comparison since records have been kept) You owe money on a home that is ALREADY worth less than you paid for it, Now to cap everything off, your bank is going to double or triple the mortgage payment on a home that isn’t worth what you owe for it!! Can you say “leave the key under the welcome mat?”

THIS IS GOING TO GET MUCH WORSE. I personally believe this is going to get far worse than even I had originally predicted. I talk to other business people. It’s my way of REALLY getting a handle on what’s going on out there. Let me tell you…what I am hearing is VERY scary.
Contractors I’ve done business with for over 20 years are losing their homes, they have laid off more than half their work force. Last week I had a flooring contractor THANK ME for giving them the job. 2 years ago these guy’s wouldn’t return phone calls. Now they act like you gave them a winning lottery ticket when you pay their bill in 10 days!!

Get ready folks, it’s coming. It’s not going to be pretty, and a whole lot of us are going to feel this one.

Real Estate is a very local business. Bluemoon knows his market, and knows how to make money there. I don’t dispute a word of his post. I only lay this out there to advise people to make SURE they understand where THEIR market is RIGHT NOW in this cycle.

fdjake, your scaring the hell out of me! lol. I live in the northeast, and since im going to be JUST STARTING to invest, this is NOT what im wanting to hear! :flush

Would you rather hear it AFTER you buy your first property??

Realtors are EXCELLENT at telling people how BAD the market is right AFTER they get a listing agreement signed.

I deal in FACTS. I’ve been investing in Real Estate for over 20 years.
I invested through the gut wrenching late 80’s up here. Banks closed, businesses left, it was ugly. This is different. In some ways the potential is even greater for much more downside.

Here’s my advice…

Don’t screw up.

You better be absolutely sure you have one hell of a bargain on your hands before you sign a mortgage for HUNDREDS OF THOUSANDS OF DOLLARS. It’s no joke. This is the REAL WORLD. You screw up, your DONE. This is where the men get separated from the boys.

THINK about what your doing. I am a VERY optimistic person, I always try to see the upside of any situation. especially a business opportuntiy. So here it is…

You are about to see an incredible buying opportunity come your way. It will be clouded by indecision, fear, and REAL PAIN. Be careful, this is the EXACT point at which new guy’s get their @sses handed to them.
BUT…by knowing this, you should be able to avoid that and get some truely spectacular buys.

If it ain’t half price and nice, it isn’t worth buying!!!

I hope I scared you. Fear is good, it’s natures way of keeping you ALIVE! Fear in financial markets can be good and bad. The key is to have a plan and STICK to it. In military training you are taught that even a retreat can be a tactical advance. You live to fight another day.
My advice to ALL new guy’s in the North East is make sure it’s half price.
Also make sure it not half price because it needs to be rebuilt from the foundation to the ridge line. Have it inspected if your new. Make sure there is nothing that can surprise you. Then if it looks good BUY IT.
Then fix it, and sell it for less than anything in that area comparable is going for.

That and ONLY that sells homes in the North East during this type of market. what you guy’s have to realize is people are WAITING. They see the same news we see every night. Every month the prices on homes here is DROPPING. If it’s not a bargain NOW, it will be next year.
That is EXACTLy what I’m hearing from people who buy my homes. I UNDERPRICE EVERYTHING!! It sells but only because it’s cheap compared to other similar homes.

There’s only ONE way to do that…

BY VERY LOW. and don’t buy crap that you have to completely rebuild!

I agree with everything mentioned! I also believe that the need for rental properties will be up, regardless of how many newer built multis are in the market now. I believe that this demand for rentals will cause competition and create rising rental prices in certain areas. Also, while most people will be effected by this perfect storm that we have sailed into, I believe that if you can make it through this and still buy while the market is horrendously slumped that you will be ten times better off than the next guy when the market rebounds. I love a challenge, and this presents a playoff berth in my eyes!