Norada Real Estate Investments

Are Rental Homes the New Asset Class for Wall Street?

by

The landscape of investment opportunities is ever-evolving, and Wall Street is no stranger to innovation in asset classes. In recent years, a significant shift has been observed as institutional investors turn their attention to the single-family rental (SFR) market. This trend marks a departure from traditional investment preferences, which typically leaned towards multifamily properties and other scalable commercial real estate assets.

The single-family rental market has historically been dominated by individual investors or smaller-scale operations. However, the post-2010 era has seen a notable change. Large financial institutions like J.P. Morgan Asset Management, Blackstone, and Goldman Sachs Asset Management have begun to recognize the potential of SFRs, contributing to the rapid growth of this sector.

Several factors contribute to this burgeoning interest. The sustained monetary easing by the Federal Reserve has played a role in inflating real estate prices, making SFRs an attractive investment. Additionally, advancements in big data and computing power have enabled investors to conduct more thorough due diligence and forecast market trends with greater accuracy. This technological leap has also streamlined property management costs, enhancing the scalability of SFR investments.

The Impact on the Housing Market

The influx of institutional capital into the SFR market has had a profound impact on housing prices and rents across the United States. In the third quarter of 2021, residential real estate acquisitions by companies or institutions soared, with investors accounting for a significant portion of single-family home sales. This surge in investor activity has contributed to the rising costs of housing, a trend that continues to attract more capital despite negative media scrutiny.

The Controversy and Potential Risks

The move towards SFRs as an asset class is not without its critics. Comparisons are drawn to the pre-2008 era when the packaging of single-family mortgages into securities led to an economic collapse. The concern is that Wall Street's involvement in the SFR market could lead to similar outcomes if not managed responsibly.

Moreover, there is a debate over the social implications of this trend. As institutional investors snap up properties, there are fears that homeownership could become less accessible to the average consumer, exacerbating the affordability crisis in the housing market.

The Future of SFRs as an Asset Class

Despite the concerns, the single-family rental market is poised to grow as an asset class. With the backing of major financial players and the integration of advanced technologies, SFRs offer a new frontier for Wall Street's investment strategies. The key will be balancing profitability with social responsibility, ensuring that this new asset class contributes positively to the broader economy and society.

As the SFR market continues to mature, it will be crucial for investors, regulators, and the public to engage in an ongoing dialogue about the best practices and policies to govern this space. The potential of SFRs is undeniable, but it must be harnessed with caution and foresight to avoid repeating past mistakes and to promote a healthy and inclusive housing market.

Navigating the Currents of the Single-Family Rental Asset Class

The single-family rental (SFR) market has been a dynamic and evolving segment of the real estate industry, with recent years witnessing a significant transformation in its landscape.

Continued Demand and Growth Prospects

The demand for single-family rentals remains robust, driven by various socio-economic factors. The affordability crisis in the housing market has led many to opt for rentals over homeownership. This trend is further bolstered by demographic shifts, such as the preferences of millennials and Gen Z for more spacious living arrangements that SFRs typically offer.

The construction of new single-family homes has seen an uptick, with builders applying for more permits and completing more housing units. This increase in supply aims to meet the persistent demand and could potentially stabilize rental prices in the long term.

Technological Advancements in Property Management

Technology continues to revolutionize property management, making the process more efficient and tenant-friendly. Online tools and platforms are increasingly being utilized for various rental processes, from applications to payments, catering to the digital preferences of a large segment of renters.

Investment Trends and Institutional Involvement

Institutional investors have shown a growing interest in the SFR market, recognizing its potential for stable returns. This has led to a surge in investment activity, with significant capital flowing into the sector from various financial entities.

However, this influx of institutional capital has raised concerns about the potential impact on housing affordability and the accessibility of homeownership for the average consumer. It is essential to monitor these developments closely and ensure that the growth of the SFR market does not exacerbate existing social disparities.

Market Resilience and Future Outlook

The SFR market has demonstrated resilience in the face of economic fluctuations. Despite challenges such as rising interest rates and a correction in the housing market, the sector has maintained its appeal, thanks to its countercyclical features and the continued demand from renters.

As we look ahead, the SFR market is expected to maintain its growth trajectory, albeit with a more cautious approach from investors and stakeholders. The focus will likely be on sustainable growth that balances profitability with social responsibility, ensuring that the SFR market contributes positively to the broader economy and society.

11 Ways to Determine Rent for an Upcoming Vacancy

by

How to Determine Rent for an Upcoming Vacancy

The challenge of setting the appropriate rent price for a home that is currently unoccupied can be a hard one for landlords and property managers. Setting the rent too high can lead to longer vacancy periods and missed rental income while setting the rent too low can lead to less profit and underestimating the value of the property. On the one hand, setting the rent too high can lead to longer vacancy periods and missed rental income.

It is essential to have a strong awareness of the local rental market as well as the elements that influence rental prices in order to avoid these errors and make the most out of your income. In this piece, we will discuss several efficient methods for determining the rent for an upcoming vacancy, such as completing market research, studying the attributes of the property, and evaluating the level of competition in the market.

11 Ways to Determine Rent for an Upcoming Vacancy

1.) If the vacating tenant has been a long-term tenant, and you had a good relationship, simply ask him. I bet over the years he's followed the neighborhood and knows from friends and fellow renters. He can tell you if he thinks you should charge more or less. Feedback from your vacating residents should be ONE piece of the info you assemble to determine.

2.) The quickest way to figure out the market rent is to put your tenant's “shopping” hat on and start looking. I observe area rentals (signs, newspapers, etc.), see how they are priced, and watch to see how long they stay vacant. Many times, I'll even stop by to get up close to see the condition of the . In every case, one that is priced right and sits for very long has “issues”.

3.) Another resource is a property manager with local rentals (and a website) who knows what they're doing. They make the most money by pricing at the top of the market and usually have little interest in discounting unless a property sits vacant for too long.  I usually price mine 2% to 5% below their prices.

The caveat with property managers is that some have owners that force them to overprice. That happens fairly often, but it is usually pretty obvious.

4.) Be careful not to use an apartment as a comparable (“comp”) for a single-family home (or visa versa). Instead, I'd try to find another single-family home in the same neighborhood as your .

5.) Maybe, there aren't any single-family homes on the market to serve as comps. But, were there any in the past few months or years? Is there a way you could track those down by reviewing old newspapers or more importantly, your notes on what homes have been rented for?

6.) Check comps on www.craigslist.org.

7.) Do you feel that your current long-term tenant was paying the market rate when he moved in? I believe that a general guide to rental increase should be 3% to 5% per year. Use this amount as a starting point. (This rule of thumb may not apply in cities experiencing a large number of lay-offs.)

8.) Take a property manager to lunch. Maybe, if you said the right things in the right way over lunch, a property manager could give you her opinion — and maybe even back it up with some comps on properties she manages.

9.) A trick I have used is to always set the rent a little too high. If the phone does not ring with decent quality renters, I quickly lower it to $50 or $75, or so. If the phone starts ringing then, you can be pretty sure that you have the right amount.

If you find someone terrific and they tell you they would love your house but can only pay $50 less than what you're asking, you can always say yes. Be flexible and listen to market feedback.

10.) The key for me is not to wait until you get notice to vacate to begin your pricing research. Go through the rental ads from good sources weekly. That way you'll be on top of things when the time comes.

11.) Don't be overly concerned with the best rent amount. More importantly, keep turnover to a minimum. Lost time is more valuable than a slightly higher rental amount. This money can never be recouped. One lost month can cost more than leaving the rent too low.

Advertising, curb appeal, repairs, and even some paint can all be done during the current lease. It should only take a day or two maximum for cleaning and painting once they leave.

Play up the return of their deposit for super cleanliness at move-out. Remind your current tenant their lease ends August 31, not September 1. Your new lease should start September 1.

Bonus Tip: How to Build Value When Showing Rentals

When showing properties to prospective tenants, you must build value in the eyes of the prospect. Three ways you can build value are:

  1. Building interest or excitement in the property,
  2. Building trust in you, the landlord or property manager, and
  3. Building a connection between the prospect and the property.

If you focus on each of these points, you WILL rent your property faster.

– – –

Known to thousands as “Mr. Landlord”, Jeffrey Taylor is the author of a dozen publications, books, and reports on various aspects of rental property management.

Is the Fed’s QE3 Good for the Housing Market?

by

Last week, the Federal Reserve announced a new round of “quantitative easing,” or QE3, meaning the Federal Reserve will  fire up the printing presses to buy $40 billion worth of  mortgage-backed securities (MBS) every month on an open-ended basis in an effort to further drive down historically low interest rates.

Federal Reserve Chairman Ben Bernanke said QE3 should put downward pressure on mortgage rates, helping the housing market.  By lowering borrowing costs and spurring  banks to lend more, the Fed hopes to induce more spending and eventually set  the stage for more hiring.  The Fed tied its bond-purchase program explicitly to jobs, saying it will keep buying bonds until it sees a substantial improvement  in the labor market.

Who benefits from QE3?

[Read more…]

Just How Cheap is US Housing?

by

Consider Minneapolis, Minn.  You could’ve bought, out of foreclosure, a three-bedroom, two-bath house of 1,356 square feet on a quarter acre lot for about $29,000. It needed a lot of work, but houses in the neighborhood recently sold for $75,000.

Your mortgage would be under $100 per month and about the same in taxes. You could’ve got $1,000 in rent. Even if you had to put $40,000 in the house, your gross yield (cap rate) would’ve been 17.4% on the property.

This is one example sleuthed by my friend Gary Gibson. “The house had mold damage and needed a lot of work,” he wrote. “Beautiful yard, however.”

[Read more…]

Blog Posts

Contact

Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
BBB