Rental Market in full swing Can't Sell it Rent it!

By
Real Estate Broker/Owner with Turn-Key Properties LLC, Missouri and Kansas Real Estate

The years of 2004-2006 were dreadful for the rental market. I witnessed a continuing decline in both the rental rates and the availability of qualified renters. We literally had section-8 tenants move out and buy a house. While that was great for them the fact that anyone with a pulse could get a mortgage really killed the rental market.

Home ownership skyrocketed in the US to all-time highs! Unfortunately many people got suckered into ARM's or even interest only mortgages. Now the pendulum has swung the other way. Mortgages are getting harder to come by, lenders are getting scared and the market is flooded with vacant homes.

On the flip side what was a dreadful rental market is making a remarkable comeback. In the past two months we have rented more property in the Kansas City market than we probably did all year. While many of those who have been forced into foreclosure are leaving homes they owned, they have to live somewhere. The opportunities for investors are fabulous. All that available property has made sellers quite eager to negotiate.

Areas like Lee's Summit, MO are ripe for the picking, while still in high demand for home buyers, fewer can qualify to purchase. Prices are lower than they were even a year ago. Most prognosticators of all things economic say this is a temporary slow-down. I've seen projections from many sources including NAR that give this a three year bubble. So buy low, rent for a while and sell high!

Another interesting trend is that we are gaining more and more listings that have been on the market for months. Sellers simply cannot take the losses they are looking at with trying to sell in this market. So we are leasing their homes while they wait for the market to improve. This has created some unusual new types of rental property. While normally the higher end homes are reserved for buyers, we have been leasing them like crazy to professionals who are coming to the area and want to see what the area is like before they buy. They seldom cash-flow but if the seller can at least get enough rent for the interest, taxes and insurance then everything else is just equity building. Think of it as funding a retirement account.

I penned an article about the benefits of renting vs selling your home . I have had many comments on that article and it has convinced many sellers that this may not be the time to sell, they do have another alternative.

If your are interested in renting vs selling please visit that link and see if it is relevant to your situation. Should I sell my house or rent it is a question that is getting asked often lately.

Ben Edsall http://www.turnkeyproperties.org

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Rainer
48,229
Ethan Dozeman
Realty Executives Platinum Group - Grand Rapids, MI
Real Estate in Grand Rapids
I never had to consider that with my sellers, but this year I have leased 4 lisings alone.  I can't believe it.
Aug 20, 2007 02:37 PM #1
Rainmaker
95,756
David L. Britt
Platinum Realty, LLC - Olathe, KS
MBA
Ben, nice post!  I have been considering the rental market, my father's been in it for many years and we have remodeled many homes.  I like the idea that the interest rates are down, good reason to buy in my opinion.  However, I also thin there is a certain priced house to consider staying in for rentals.  Less and you get into issues with renters not taking care of your rental.  More and you have a hard time renting and it gets expensive to have it sit on the market.  I'm interested to hear more about your thoughts in this area.  I watch for your posts!  Thanks!
Aug 20, 2007 02:41 PM #2
Rainer
1,735
Shane Taylor
nFocus Realty - Grayson, GA

You are exactly correct and it is a feasible strategy for some who can't sell right now. Wait it out and sell for more once market begins to recover....

Aug 20, 2007 02:52 PM #3
Rainer
20,277
Monica Rich
Berkshire Hathaway Florida Realty - Coral Gables, FL
Coral Gables Real Estate
Ben.  Great info.  We are sooooo depleted in rental properties in South Florida and the prices are through the roof.  I can't imagine what will happen when the season hits.  So it's time to convert some of these renters back to buyers (why not right?)
Aug 20, 2007 03:00 PM #4
Rainmaker
417,264
Debbie Malone
Londeree's Real Estate & Property Management - Lynchburg, VA
From Lynchburg To The Lake (434) 546-0369
Excellent observations Ben. My daughter is a residential property management major and reminds me that while the current market may not be in my favor, it'll be in hers. 
Aug 21, 2007 02:00 PM #5
Rainmaker
335,143
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,
We, also, are picking up rentals from houses that aren't selling for the price the Owners want. The rental market here is very good (we're in small town AZ, about 90 miles north of Phoenix, and about 5,000 ft elevation, so we have pines and mountains). Our sales are way down but we can pretty much take our # of rentals as high as we can handle. The rental market was very good here, really, even when sales were zooming.
Aug 22, 2007 06:26 AM #6
Rainmaker
77,098
Ben Edsall
Turn-Key Properties LLC, Missouri and Kansas Real Estate - Kansas City, MO

Leslie, I will be in your neighborhood in September attending the NARPM convention in Scottsdale, AZ.

If you are interested NARPM (National Association of Residential Property Managers) is a good organization to get involved in. Check them out at http://www.narpm.org/  My wife is the Kansas City Chapter President.

D. Ben Edsall. Accredited Residential Manager - Broker

Kansas City Investment Property and Property Management

Aug 25, 2007 01:36 PM #7
Ambassador
566,489
Rosemary Brooks
BMC Real Estate - 209-910-3706 - Stockton, CA
The Mother & Daughter Realty Team
Great job and you see so many signs that have "Options" -- For Sale, For Lease or Rent.  I don't have any properties like that but I do have one that is willing to lease option to buy.
Aug 25, 2007 07:19 PM #8
Rainmaker
291,279
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

This holds true to the theory that rent and home prices have an inverse relationship.  When home sales are up, rents go down.  When home sales are down, rents go up.  People still have to live somewhere.

This would make it a great time to invest in property. 

Aug 27, 2007 06:05 AM #9
Rainer
233,668
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC

We are bombarded with phone calls from owners unable to sell.  We have to EDUCATE the client first.... if we believe their home is marketable FOR THE AMOUNT OF RENT they need to charge, we take it on.

Our rent-to-own department is becoming the most popular and neediest service we can offer to clients!

Sep 20, 2007 01:20 AM #10
Rainmaker
226,601
Tara Stone
eXp Realty - Alexandria Township, NJ
NJ Estates and Stables

As a newer Residentail agent I seem to have rentals and renters coming at me from every direction, and my company just doesn't do rentals..it's hard to refer $$ to other realtors, but I understand the amount of time and work that goes into it..as a newbie without commisson checks rolling in...It's tempting!

Nov 10, 2008 10:30 AM #11
Rainer
1,245
Kenneth Ferreira
Ramona Property Managers, Inc. - El Monte, CA

Tara--try contacting property management companies in your area and see if they offer a referral program. Property management and tenant acquisition services is very time consuming, but in a down market it may be just what you need to remain profitable.

Nov 19, 2008 11:32 PM #12
Rainer
4,090
Golden Estate Management
Golden Estate Property Management - Los Angeles, CA

You are very right. Thank you for sharing that with all of us! Have a great day!

Dec 08, 2008 08:45 AM #13
Rainmaker
254,432
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

In our area rentals activity stayed strong over the past several years.  It has cooled this month but I am sure it will pick up again in January.  The rental market never sleeps in Sacramento.

Dec 22, 2008 03:50 PM #14
Rainer
35,095
Charlie Burleson
Beech Mountain Realty and Rentals - Beech Mountain, NC

Here in my part of North Carolina, rentals and sales are down.  We have been cutting rental rates by 20% just to get a few people in our doors. 

Aug 02, 2009 01:57 AM #15
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Ben Edsall

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