Competing with Property Investors for Ownership
Posted July 30, 2017 in Real Estate Trends
With many homeowners turning their homes into rental properties, how is one to compete for a first-time home purchase? It used to be the situation that the rental-home business was primarily made of local homeowners making a home available for rent. Many homeowners didn’t want to sell in the down market and instead rented out their properties; oftentimes purchasing a new one at the same time. However, during the same timeframe, big investment firms that previously focused on purchasing apartment buildings entered into the single-family rental home market.
When I spoke with three different home builders over the weekend, I learned that investors are accounting for 25 to 50 percent of the new homes currently being built for the purpose of making them available for rent. It would appear that rents may be significantly higher than the cost of ownership making investments attractive.
The Wall Street Journal this last weekend reported that it assessed four corporate owners’ purchase prices through county sales records in various communities. It also assessed the rents of those properties discovered through the companies’ marketing materials. The analysis assumed a 10 percent down payment and a 30-year fixed-rate mortgage, plus taxes and insurance. The result was that those homes’ rents averaged 32 percent more than the cost of monthly ownership.
A first-time home purchaser needs to become a hunter in this competitive environment. It’s not uncommon for many purchasers to bid on five or six different homes and only get one bid accepted.
What are some ways to arm yourself for competing in this market?
- Structure your finances to work to your advantage by working with a reputable mortgager;
- Hire a real estate agent that helps you do the homework in determining if you are seeking to purchase in neighborhoods where investors are concentrating;
- Have a letter prepared for the seller about why you are the best purchaser for a home;
- Be prepared to offer more than asking price or have your agent help negotiate a palatable offer, because it can be hard to compete with all cash offers that require no inspections.
We know that our State’s Office of Financial Management indicates that our population continues to grow. This means that investing in your own home to own is smart. And if you are an investor already owning multiple homes, understanding your options for gaining access to the money in those homes is important.
We lend where we live,