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Updated over 8 years ago on . Most recent reply

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Charles Oglesby
  • Orange County, CA
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Top of the rental market?

Charles Oglesby
  • Orange County, CA
Posted

Multi family real estate is booming right now because many people who were owners at one point in time are now being forced into renting.  As the market adjusts do you see this causing rents to decrease and if so what is the strategy for investors when this happens? 

I live in CA and rents are sky high in areas like Orange County and Los Angeles.  This can only last for so long and soon people will move from renting to buying.  If your property is cashflowing now with inflated rents how are you going to cope when you have a property operating at negative cashflow? Are people concerned about this? 

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JD Martin
Property Manager
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  • Rock Star Extraordinaire
  • Northeast, TN
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JD Martin
Property Manager
Pro Member
  • Rock Star Extraordinaire
  • Northeast, TN
ModeratorReplied

RE is local so answers you see here aren't going to mean much unless they are in your area.

Aside from that, you cannot make the assumption that high rents will simply force people into buying. A lot of people will not buy because they cannot qualify. Others don't want the responsibility of owning a home, or do not have careers stable enough to guarantee they won't have to relocate one or more times. Where I work, rents have risen sky-high, but the real estate sales market is already hot. People who cannot afford the rent are not buying, they are just living further out and making a longer commute to their jobs. The more likely scenario is that wages in lower-wage fields will increase in order to retain workers who are commuting further than they used to. 

If your property only has cash flow because of some historical anomaly, you are going to be in trouble at some point in time. If you have bought a property that will only cash flow at wildly inflated numbers (do you know if the numbers are inflated?), then you are going to be in the red on that property somewhere down the line. Lesson? Don't buy property that won't produce cash flow under virtually all conditions. The difference shouldn't be between spending money and making money, it should be between making a lot of money and making a little less money. 

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Skyline Properties

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