For a number of years the market has been in down for landlords. It's been so easy to buy a house that everyone did. You could get 100% loans without a problem, your credit score could be 550 and that didn't seem to matter too much.
Well, things have changed.
Financing is much harder to come by today and, week by week, programs are being adjusted to exclude more and more home buyers.
It's now much harder to get a 100% loan, in most cases those programs now require at least 5% down. Also, the credit scores required to get accepted is now, in most cases, over 620.
What does this mean for a landlord?
Well, foreclosures are going through the roof (I'm heading out this morning to list a pre-foreclosure and I sold a pre-foreclosure a few weeks ago). All the adustable rate mortgages (ARM's) are having their rates adjust upwards and people are not able to make their payments and their homes are being taken away.
They still have to live somewhere though. And they're not going to be able to buy anything for quite a while. So, they have to rent a home.
They might not have been able to manage the super high ARM payments but they should be able to afford cheaper rental payments.
Thus the demand for rental accommodation, especially in the lower end of the market, should be increasing quite dramatically over the next six months.
How should you take advantage of this?
Well, one way would be to buy more rental homes. You can still pick up properties for good prices. What should you look for? Well, multi-family investments would be a good way to play this market. However, if you're new to multi-family, make sure you're well funded and maybe start off with a duplex or a 4-plex. Easily locate multi-family investments here.
If you're going to buy multi-family, stick to 2 bedrooms. Efficiency or 1-bedroom units tend to attract more trouble and problems.
Of course, you could expand your portfolio of single-family residential properties.
Either way, think about the following steps when you do:
1. Get your properties ready (be a landlord not a slumlord)
2. Don't be lax just because of the demand, run credit checks. Have your tenants pay a tenant application fee which would cover payment for the credit check.
3. If the credit report looks really risky, don't necessarily turn the business away. You could increase the deposit requirements to 2 months worth of deposit which should cover you in case you have to evict.
4. Offer incentives to tenants for paying on time. Some landlords set the rent at, say, $1050.00 but the tenant is allowed to pay $1025.00 as long as they pay on time. As soon as they miss once, the rent goes up to $1050.00.
5. Reward good tenants annually with a gift for the home - a ceiling fan, new door handles, etc. Anything that makes the tenant feel good and adds value to your asset.
6. Don't miss increasing the rent each year. Make it a a small increase but stick to it every year. No-one wants a sudden 10% or 15% increase ever. But, 3% or 5% annually is acceptable.
7. Inspect your properties and the a/c & heating equipment at least twice a year.
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