Why don't they buy?

Question

I am in the crazy CA real estate market; and have been looking into buying out of state.

Either 30-50k cash deals or 110-150k deals financed that cash flow.

My question is: on the 110k-150k deals, why are there not more owner occupant buyers?  The payment on those prices would be 800-900 per month; and FHA goes down 580 fico w/ only 3.5% down.  So why are there renters at 1500/mo. on these properties and no owner occupant buyers?

Frank Jiang · Answer

- Because the average American is lucky if they are able to do long division... forget about something as complicated as interest and mortgage payoffs.

- Because the average American cares more about the Kardashians than the inflow and outflow of their money.

Franklin Romine · Answer

Renters don't buy property for the same reason investors don't buy property...... FEAR.

Frank

Larry Turowski · Answer

@Dan D. Does is matter why?  I could say the many people can't keep $20 in their pocket let alone save up a 3.5% down payment plus closing costs.  Some people aren't intending to stay long term.  Some of those with really low credit scores would be paying really high interest, likely putting them right up to $1,500/mo.

There are people out there that need and want decent housing from a good landlord, who will pay $1,500/mo.  That landlord could be you.

Elizabeth Colegrove · Answer

That is a great question and the key is to know the market you are looking in. Personally that is the first question I always ask myself. I buy in markets that instantly cash flow but tends to be very transient and one of the areas when down by almost 50% in the crash and still isn't back up. Since it is not an area that people want to stay and its transient most people won't buy initially. I have had a pretty high rate of break leases because people will decide once they are here they want to buy. That being said, neighborhoods and schools are really important since that is what this groups is looking into. I also don't have people staying for 5+ years. Most of my people stay 1-3 years so alot more transient.

Joshua D. · Answer

@Dan D.

I think the short answer is that it is an Emotional reason rather than a mathematical one. But this is true in all of our lives... for example... why would you ever buy a new car. Mathematics and statistics point to a 3-5 year old car as the best investment... and yet there will be loads of successful people on here that have a new car. Because of some emotional reason.

Same with renters.

I personally do not get it at all... by brother pays $700 a month in rent while houses nearby can sell for $50k or less. Run the numbers and his mortgage would be about half of rent. and you get all the other benefits of owning in a growing area.

I don't get it...

Michael Boyer · Answer

lots of accurate examples. Along with transience and ability to move, I find the financial side (saving even a small downpayment) and personal management skills are an issue.

There is an interesting study on renters in the U.S. (Google FINRA financially fragile renters) showing most can't come up with a couple of grand in thirty days(or some metric like that)..

On the personal manager side, for example, have you noted how renters may have trouble with simple tasks a homeowner completes regularly, be it pulling out a trash or recycling bin in the morning, sweeping a porch, or doing something as simple as buying and changing a light bulb (had some of those)..what are the odds they can save monthly for the downpayment, study the homebuying process, and take care of the place.

That said, I have had several happy endings of young couples I counseled to buy a home and, good news, they did It! Until then, I guess they keep us in business and vacancy free.

John Thedford · Answer

1. They lost during the crash and are fearful of entering the market again

2. They don't want the responsibility of ownership

3. They are afraid of doing something new

4. No down payment

5. Not able to qualify for a mortgage

The list goes on and on. Recent articles on renters state that many will pay nearly half their income in rent. With that drain on their income, they probably won't be able to save enough to buy even if they want to.

Larry Fried · Answer

All good answers, but sometimes it is just they haven't managed or established their credit scores yet, or got hit by an unexpected expense like medical bills, that destroyed their credit.  Many circumstances, many reasons.

Steve Haight · Answer

Oh cool thread,

You are the lucky one that knows better and a good reason why you are on the forum. Let me know what you find out there as far as investments under 50k, are you looking for turn key or fix and flip and in what areas do you invest in? Like this forum get to learn lots of what my fellow B/P members are doing and where.

Have fun

Why don't they buy?

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