Rents are getting soft so be conservative

As you might expect with Single Family housing prices falling more and more investors are choosing to buy rental properties as investments.  This means a couple of things are likely to happen in the short term.

First the floor of the market is either in or very nearly in as first time buyers and investors snap up properties that are either cheaper to own or produce oversized cash flow returns.  As more properties are converted from owner occupant to rentals in the short term we are likely to see rental rates fall as supply out paces demand.

I have already seen rental rates in my investment area take a $50 hit on several of my properties.  So when you are buying today run all of your estimates and calculations with very conservative numbers.  For example if you think you can get $950 a month, run the same calculations at $900 or even $850.  If the deal still looks good you really have a great deal on your hands.

Something else to keep in mind is has rents fall the value of multi family properties will fall which may cause additional distressed sales of small multi families as many of these suffer from the same type of over financing. 

As a new investor understand that in the short term rental rates are falling so buy with this in mind.  But also understand that this will turn around in a big way as inflation takes hold.

Good Investing