Apartment Rent Growth Slows in Third Quarter

For those investors that own income producing properties or tenants looking to move, the following information may be of interest:

Apartment rents grew more slowly in the third quarter than they have since 2003, according to Axiometrics Inc., an apartment research firm.

During and after the last recession that ran from March to November of 2001, the economy lost about 1.8 million jobs. Since jobs are what drive the apartment market, rents didn’t increase for nine consecutive quarters, Axiometrics says.

Beginning in the first quarter of 2004, annual rent growth turned positive and continued to be positive through the third quarter of 2008, when rent growth slowed to 0.8 percent, the lowest growth of any quarter since 2004, Axiometrics says.

Axiometrics predicts that apartment growth will continue to slow during the current economy.

The markets with biggest declines in annual effective rent growth compared to a year ago are:

• Austin, Texas
• Charlotte, N.C.
• Chicago
• Los Angeles
• Portland, Ore.
• Raleigh, N.C.
• San Jose, Calif.
• Santa Ana, Calif.
• Virginia Beach, Va.

Markets with improved annual effective rental rate growth compared to a year ago were:

• Boston
• Birmingham, Ala.
• Durham, N.C.
• San Diego, Calif.
• Washington, DC.

With less rental properties available for tenants, this may be a great opportunity to look at purchasing your own home.  If you are a first time home buyer, check out our First Time Home Buyer Community for answers to your questions and resources to help you make your next move.

Tags: income producing, inventments, landlords, rental market, rental marketplace, rentals

Buying and Owning Rental Property

There are quite a few people today that are intrigued with the idea of owning investment real estate. It sounds like an extremely simple way to make money – Owning property, renting it out to tenants, and then collecting monthly rent payments. The truth is, it can be an extremely profitable venture, or it can be a train wreck.

Individuals who are looking to purchase rental property for the purpose of producing income have a long road ahead of them, and they should be involved every step of the way to ensure that their investment turns out positively for them in the end.

To start, you need to figure out if you’re ready to own investment property; ask yourself how much money you have to pay up front. Buying your own home can require costly down payments, but investment properties generally require that plus much more. You may very well have to come up with not only the down payment on the property, but also the cash needed to bring the place up to code and rental standards; this will depend on the municipality that the property is located in. There are different standards for a rental property than for a private home. Unless the place you purchase has been a rental before, expect to be shelling out quite a bit of cash upfront. Keep in mind, there are loans available for those buying rental properties. But rates and terms for investment real estate loans are harsher than those for private homes, since lenders believe there is not as much emotional investment for the borrower, and so their loan is more at risk. Explore your options and check into a few different lenders, trying to get the best loan rates you can. It may not be easy, but if you are not planning to back down from the task, you will not be wasting your time. In order to help in keeping you costs down, you may want to limit your potential properties to those that are currently rentals and have tenants in them.  This is where an good, professional real estate agent is invaluable.

But if you purchase one that has not been a rental, you may need to make modifications.  Once you have gotten your property renovated and you’re ready to go, you’ll face the issue of finding good tenants through the screening process. You can certainly hire a property manager to help you out here, as well as to deal with repairs that come up later,or a professional real estate agent to help with the screenings but most small landlords are much better off doing this process themselves. Screen tenants carefully and don’t let emotional involvement get in the way. Set some standards regarding credit reports and income, and stick to them regardless of who walks in your door.

Don’t expect to make a profit at first. Your return on investment (ROI) is going to be small, even if you have done the math and figured out your rent cost as carefully as possible. Also, you should mentally prepare yourself for unexpected repairs which are going to bring down your profit margin and require some work on your part. The first three years of a rental property are, typically, the shakiest. If you’re committed to being a landlord, if you’re planning to stick with it, and you’re not afraid to roll up your sleeves, you can reasonably expect a decent profit at some point in the near future.

Tags: income producing, real estate investment, rental properties, rentals