Posted by Bob (FL) on February 08, 2004 at 14:33:33:
>Hows the auctions in your part of the woods? They are still outragious here! Everyone bidding them up higher
>than what they should!
Even for multifamily? I thought it was mostly just SFHs that were being terribly overbid.
Vacancy rates increase for rental real estate - Posted by David Krulac
Posted by David Krulac on February 03, 2004 at 21:11:50:
Re: Vacancy rates increase for rental real estate - Posted by Gary
Posted by Gary on February 06, 2004 at 22:11:04:
We have not seen too great a decrease in renters in my area (CT, Fairfield County), primarily because (I think) the prices of houses are so high. Appreciation has been breath-taking (20-25%), so even though money is not so tight and interest rates are low, most young couples and singles cannot afford new houses. Even people who owned in other areas have problems here–one tenant is from CO (another high priced area), but he cannot believe the prices. He is renting from us for about two years, he thinks, while they catch up for a downpayment on a house.
Anyway, we have avoided the vacancy issue (if there is one here!) by selling off some of our lower-end properties–for profits we never, ever thought we could get. Our good luck–but when things fall here, they really fall! So we are going to be happy while we have the opportunity, then struggle with everyone else.
Re: Do you want to know why? - Posted by Gary -OH
Posted by Gary -OH on February 04, 2004 at 14:15:01:
Have you ever wondered why the vacancy rates are going up? Here is my take. Money is so easy to get for tenants these days it is ridiculous. In the old days you could rent to someone with a 600+ credit score and $1500 for 1st months and sec dep. Nowadays that same person can buy a house, many times without a downpayment and their first mayment isn’t even due until 30 days after close. Who would want to rent anymore? My typical tenant/buyer has a 520-580 credit score and either are fresh out of Bankruptcy or recently divorced. Until the money tightens up I see this as a continual problem here in Ohio.
Its all local… - Posted by Sean
Posted by Sean on February 04, 2004 at 13:54:46:
Low interest rates and easy qualifying have taken a lot of renters out of the pool… however record numbers of foreclosures due to those same factors have added a lot more to it as well…
At least in my market, I don’t think there is a huge softening of renters… I have heard from more more experienced its a little soft, but with a 600+ waiting list down at the PHA, and an expectation of over 5000 foreclosure filings this year, after over 4000 this year for the county, I don’t think there is a shortage of tenants in this marketplace.
No Doubt! - Posted by LeonNC
Posted by LeonNC on February 03, 2004 at 22:37:49:
I’ve got a house going into it’s fifth month of vacancy. Ouch! Tenant moved out halfway through the month in October of last year. I tried the “I lowered the option consideration” thing “if you’ll do the clean up and paint.” It didn’t work. We went through the holiday season and I fixed the place up. It’s back on the market cleaned up and I’m still not getting many bites.
It’s a nice 3/1.5 built in 1978 on a nice street. I don’t get it? I was asking $1395 down and $595 a month. I changed it now that it’s cleaned up to $995 down and $615 a month.
I think it’s just real slow here.
Leon
Speaking to several Bankers recently - Posted by JT-IN
Posted by JT-IN on February 03, 2004 at 22:07:51:
While speaking to several Bankers recently, I like to ask several questions of them, which I use as some form of guage as to what they are seeing through the Lenders rose colored glasses. My favorite questions to them are…
“How many defaults are they seeing…?”
“Is the trend trend on the uptick or decline…?”
“Which type of borrowers are in default…?”
Bingo to the last question… The answer to the last question was unanimous; muti-family owners are in trouble due to vacancies. This certainly makes sense based on what I see with my own eyes, based on all the “For Rent” signs posted in front of multi bldgs. You hardly see one with a sign, and especially the buildings that years ago, you would never see a “For Rent” sign, due to that long waiting list… which has lapsed into obscurity.
What puzzles me is the fact that folks seem to still be motivated to want to buy the darned dinosours… maybe driven by the fact that cash is earning 1.5% to 4%… and those who have are searching for a lower risk, more stable stream of income for their cash… I am astounded at those fools who are rushing in…
I am sitting back patiently waiting for these fools who are now rushing into a market that they know nothing about, and are buying at high prices into a market that has falling income… Whew, what could be worse…? Somewhere between 2 to 5 years out, these folks will be looking for the escape hatch, and I’ll probably be near the handle… ready to hand them 60% of what they are paying today, as their ticket out…
Just the way that I view things…
JT-IN
Re: Do you want to know why? - Posted by AnnetteFl
Posted by AnnetteFl on February 08, 2004 at 19:43:58:
In my area, the vacancy rate has doubled in the last 5 years. Most here think it is that supply has been running ahead of demand due to a lot of building of new units. I suppose the low interest rates also make it more affordable for builders to build. I am trying to only hold units which have something special going for them, so they will be competitive.
AnnetteFl
Re: No Doubt! - Posted by Nate(DC)
Posted by Nate(DC) on February 04, 2004 at 01:00:16:
Leon,
Just curious, where in NC are you?
NT
Re: Speaking to several Bankers recently - Posted by Bob (FL)
Posted by Bob (FL) on February 08, 2004 at 14:31:42:
>I am sitting back patiently waiting for these fools who are now rushing into a market that they know nothing
>about, and are buying at high prices into a market that has falling income
If one believes this is a market bottom, shouldn’t one be buying now? High vacancy and low rents are usually a sign of blood in the streets. When rents rise along with interest rates, you should be sitting pretty.
Office buildings are also suffering high vacancy and concomittant lowered rents, at least for non-trophy properties.
What’s your take on this? - Posted by rm
Posted by rm on February 04, 2004 at 06:53:10:
I agree with everything you’ve said except your last paragraph.
Why not short them and flip them for the time being?
There’s still a lot of stupid money out there looking for a parking place.
I’m in process on one right now. Buying super-cheap, I’ll do some light fix-up, rent out and flip.
Even if I have to lower rents a bit, I can still sell for a healthy profit based on the cash flow.
Hittin’ the nail on the head - Posted by rm
Posted by rm on February 04, 2004 at 06:44:53:
In my market, the number of multi’s in F/C has skyrocketed. It used to be extremely rare. Now, there are many. And, of course, when I talk to the owners, they are anywhere from 50-100% vacant…
yet they still want to try to keep them.
Or, get “what they’re worth.”
One thing’s for sure- they know what they WERE worth, but it’s hard to say what they’re worth now.
Re: Speaking to several Bankers recently - Posted by Hank FL
Posted by Hank FL on February 04, 2004 at 24:28:11:
Two thoughts; one obvious, one just nuts.
Rates will be going up w/in the next year and will take some pressure off of some landlords, no?
What about turning a 3/2 // 3/2 (I know, not many of those)in a mixed zoned neighborhood into a 3/2/1 w/a big garage? ?
OK, that last thought had no thought going into it. I’m just throwing stuff against the wall like a chimp.
Re: No Doubt! - Posted by LeonNC
Posted by LeonNC on February 04, 2004 at 07:13:34:
Just north of Charlotte about 25 miles. You coming to visit? I’ll be glad to take you on a tour of all the race teams.
Leon
Re: What’s your take on this? - Posted by Nate(DC)
Posted by Nate(DC) on February 05, 2004 at 24:34:57:
True, but do you want to be holding when the stupid money gets smart? 
Just make sure you’re buying cheap enough that you’re still OK if that happens.
NT
Why not short and flip them now…? - Posted by JT-IN
Posted by JT-IN on February 04, 2004 at 07:53:37:
rm:
This is simply a person preference, as I really hate to try to sell property with Tenants in them. Tenants complicate the process and I really do not like complicated, no matter how it is packaged. Just something that I try to steer clear of.
When I refer to making those purchases, I would intend to do so on a buy and hold basis. If your acquisition costs are low enough, you can then afford to install management and have a more passive investmens approach; hopefully. However, at todays selling prices at the multiples of rents, I can’t make sense of it since rents are too low; comparably. Obviously this will vary greatly from market to market.
I much prefer to flip empty stuff, and it continues to work for me… so like a broken record, I trudge forward…
Just the way that I view things…
JT-IN
Re: Speaking to several Bankers recently - Posted by JT-IN
Posted by JT-IN on February 04, 2004 at 07:44:58:
Hank:
I seriously doubt that a rate increase will make things better for the multi-family landlord. Any rise in rates will put more pressure on them, similar to the old adage of “being kicked while you are down”. This would relate more to the 2 to 5 year time horizon that I referred to, of when the true buying opportunit may exist; albeit on the lagging edge of any new problems caused by higher rates. Now I’m not attempting to be a prognosticator here and saying when rates are going to make a move, as I will know that they have made a move, after they have moved, not before.
The otehr point about converting a double into a single with a large garage… That would depend entirely on that local market, and which configuration brings a higher price. One way may be higher in one neighborhood, and the opposite may be true just blocks away. Each situation will stand on its own, without being able to generalize about which is best.
JT-IN
Re: Speaking to several Bankers recently - Posted by Nate(DC)
Posted by Nate(DC) on February 04, 2004 at 24:59:23:
Here, have a banana…
I did want to respond with some thoughts about your first point, that rates will be going up which will improve the rental market.
My analysis of what’s going on in most rental markets right now is that it’s being hurt in two separate ways. The low interest rates are hurting because more people can buy homes. However, you have to remember that interest rates have been this low, or lower, for the past year or more. So by this time a heck of a lot of people who wanted to buy, have bought.
The other factor, which is not directly linked to interest rates, is that there is NO job growth in a lot of markets around the country, and you can historically tie job growth pretty closely to apartment demand. If people have a job, they can move out of their parents’ house, or out of their roommate situation, or what have you…the demand for rentals goes up. When they lose their job, they have to move home, or what used to be two renter households double up to save money, becoming one renter household…you get the idea.
So yes, rising interest rates may slow the loss of renters to ownership. But I suspect that the bigger enemy in some markets today (not all - but certainly some) is the lack of job growth, which may or may not change soon.
NT
Re: No Doubt! - Posted by Nate(DC)
Posted by Nate(DC) on February 05, 2004 at 24:33:13:
No but I might be in Winston-Salem and South Carolina later this month…just curious cause some properties I’m working on there are having trouble - wanted to see if you were coincidentally in the same area.
NT
Re: Why not short and flip them now…? - Posted by Kristy-az
Posted by Kristy-az on February 04, 2004 at 12:38:00:
Hey JT,
Hows the auctions in your part of the woods? They are still outragious here! Everyone bidding them up higher than what they should! Are you still seeing the same thing there?
Kristy-AZ