Landlord's Learning Center- Know The Rental Trends Before Investing~

By
Property Manager with Investors Choice Property Management CAL BRE LIC# 01124954

As Broker of a small, service-based property management company serving the greater Sacramento area, I have the occasion to come into contact with investors from all walks of life. Recently during a meeting with some new clients in Lincoln, I was asked a few questions about the market in general, as well as current rental market conditions and trends affecting our area. Here are a few points worth mentioning:

 

1. The rental market is somewhat flat, with plenty of inventory in most areas, especially where the most new construction occurred during the last 12 years (Roseville, Folsom, Natomas, Elk Grove).There are some amazing deals out there for investors that have the cash and credit to buy in. The client I was meeting was in the process of closing on several homes, 2 of which sold for $580k and $280k respectively back in 2005. He and his partner were purchasing for $260k and $157k. While no one can definitively say how long the sales market will stay in this territory, it is clear that those with the ability to buy are doing so and are going to make a great deal of money in the process.

2. The most rental activity we are seeing is with smaller units where the focus is lower rent, and larger units where the focus is to move in enough people (up to health & safety maximum allowance) to accomplish the same goal- conservation is the word of the day. If you are planning on purchasing a rental property, the old idea of buying as much square footage as possible may not be the best plan. Renters are out there, but they are "deal-shoppers". Flexibility on lease terms are also important, as your best qualified renters desire to become homeowners sooner rather than later, making 12 month leases harder to secure.

3. Research is important. Check comparable rents in the areas you are contemplating a purchase, or better yet, retain the services of a property manager to assess the potential rental value for you. However, you should always check the rental rates in your area for yourself, as there are plenty of inexperienced property managers that promise a high rent that cannot be obtained, merely for the purpose of securing a signature on the contract, often trapping the client into a lengthy relationship that he/she may come to regret. Ask around- talk to your real estate agent- find out which property management company is right for you and your investment.

4. Know your true costs of maintaining an investment property. Most owners pay water, sewer and garbage, but this trend can vary from area to area. Rental properties need regular maintenance- most would agree that a safe estimate of maintenance costs over a 5 year period amount to 10% of the rent. Granted, this too can vary greatly based on the age and condition of the property, as well as the time and effort put into finding quality tenants to maintain the property. Again, here is where a good property manager can make the process not only easier, but more profitable in the long term.

If you or someone you know has questions about buying a rental- do not call us. We do NO Sales. However, if you or someone you know has questions about managing a rental, proper rental pricing, tenant qualification, or anything else related to property management, we are here to help. at Investors Choice Property Management, we like to think of ourselves as "the cure for the common property manager". 

Investors Choice Property Management (ICPM) manages 108 single-family units with the care and diligence our Landlord clients deserve, in a manner that has them referring their friends, co-workers and family members. With over 16 years professional property management experience, our business is 95% word-of-mouth referral, we do NO Sales, we do NOT markup repairs, and pay among the highest referral fees in the industry for management accounts. Visit our website at www.investorschoicepm.com today for more details, and find out what we mean when we say:

“Experience Property Management the Way it Should Be.”

 

Comments (6)

Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

Hey Thomas saw you post and wanted to ask what software do you use?

Feb 05, 2009 11:53 AM
Thomas R. Martin Broker/Owner ICPM
Investors Choice Property Management - Sacramento, CA
Property Management the way it SHOULD be.

With only 108 doors, I actually prefer Excel and quickbooks, but as time goes on we will be evaluating several management software options that I am familiar with (Yardi, Promas, Edge).

Feb 05, 2009 12:01 PM
Besim Kuduzovic
Principal Realty Group-Utah - Sandy, UT

Thomas,

great blog, keep blogging, those are very helpfull tips for us future investors. Thanks.

Feb 05, 2009 12:03 PM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

I have noted over the years that older rentals experience expenses of 20%.  A property that rents for $1,000.00 just needs to have one turnover and a few other repairs to achieve that.  10% may be cutting it pretty tight.  Factoring in roofs, sewer lines, water heaters, etc. is all a part of the 20%

Feb 10, 2009 03:39 PM
Thomas R. Martin Broker/Owner ICPM
Investors Choice Property Management - Sacramento, CA
Property Management the way it SHOULD be.

Thank you for your insights. I am certain that there are many factors that impact the long term costs of property maintenance- everything from simple economic obsolescence and property neglect to choosing the right vendors to maintain the property. The age of the property will undoubtedly play a factor, as will the cost of the maintenance itself. There will always be homes that make it through a 5 year cycle with only 5% maintenance, and others that devour rental income liike a hungry monster (25% or more).

Feb 11, 2009 01:44 AM
Sandy Shores FL RealtorĀ®, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County Real Estate, Florida's Space Coast

Thomas, Our rental market here is also flat. Our lower priced rentals are moving off the market fairly quickly.  But as you said upper priced rentals are not the way to go, at all!  One of the the questions I ask when a perspective tenant calls is, "How many people will be moving into the property?"

Feb 15, 2009 03:07 AM