wont rents decrease soon 9 posts by 7 users

Posted: 10/11/2008 at 10:02AM

isn't it safe to assume while putting deals together for buy and hold that rents will decrease from current highs. In my area rents are 1250 for 3bd/2bth, which was acceptable when homes were 350K, but with homes now at 100k those rents will be 1.25 % of market value and with homes expected to drop (and in some cases already have) to 80K current rents would be 1.5 %.

In my recent readings, rents should be about .8 % of market value. When figuring rent comps today, shouldn't we be figuring the adjustments going on right now?

My other thought was; people have been paying this for years and can still afford it, wages aren't going down (although unemployment is rising), so perhaps they are stable.

Then again, new investors will be buying cheaper and undercutting current rent prices (or will they) driving down the rent. I can't figure this one out and need some expert advice from those that have been doing this a long time.

Posted: 10/11/2008 at 02:36PM

I am no expert, far from it. So I try and go see experts - not gurus - talk whenever I can.

A long time respected Southern California real estate market expert I saw talk a couple weeks ago said rents will drop, especially in apts and condos, as we're about to be flooded with the biggest supply of single family homes for rent over the next few years that we've ever seen.

Posted: 10/11/2008 at 03:00PM

In our area, vacancies have gone down. I can't tell if rents have gone up yet, but falling vacancies bodes well. That's in an area that's already been hard hit with foreclosures.

Posted: 10/13/2008 at 12:27PM

I am getting a lot of inquiries on my rentals from people who used to own and lost it to the bank. Due to more people losing their homes and credit being tight, they will not qualify for a loan, therefore they have to live somewhere and that's were rentals come in. These people are use to having a home and a garage and do not want to live in an apartment. They are willing to pay a little more for a home with a yard and garage.

Many investors can buy up those vacant homes, but only the experinced will be successful in my market. All the others will fail within the first year, which will allow me to come along and buy them cheap.

Posted: 10/13/2008 at 06:35PM

well, more evidence over the weekend suggests rents are stable and homes are being bought. I ran into many buyers on Saturday and the homes are all becoming bidding wars. I think the August numbers suggested an 18% increase in home sales.

Perhaps the point is moot and things are turning around.

The next question would then be, what will the pace of short sales and foreclosures be in the months ahead?

Connie, I meant that homes that were sold for 350k (and are now going for 120k) are renting for 1250-1400 (to be more accurate). However, when homes were 350K they were renting for only 100 dollars more. I'm basing this on only two rentals I knew of, but I think its true of my area.