Whether you own several multi-family properties, or you own a single family home, there’s nothing today that you can’t rent to a family who needs a place to live.
That’s because too many hopeful buyers don’t have sufficient funds for a down payment on a home, or, even if they do, there aren’t enough properties to go around. Those first-time buyers who come with 3.5% FHA mortgages lose out, time and time again, to cash buyers.
Short sale and foreclosed owners can’t get mortgages for several years
Former homeowners who short-saled their homes are frozen out of the credit markets for at least two years, and those who lost their homes to foreclosure will currently have to wait 7 to 10 years before a lender will talk to them again about a mortgage.
The result is that landlords of multi-family buildings or of single family homes in South Florida are able to charge record setting rents. Last year, rents increased by 4%.
Despite the fact that developers are in the planning stages of several dozen new rental apartment buildings, these apartments won’t come down the pike for 2-3 years. As a result, rent increases are expected to continue at a 4-5% annual increase for the foreseeable future.
New apartments 2-3 years down the road.
But even as cement is poured with a frenzy and the construction industry rebounds, the continuing population growth in South Florida is outpacing housing supply. As a result, rental rates increased 4% last year and shows no signs of abating this year.
In addition, because private equity firms are purchasing foreclosed homes in bulk, traditional buyers cannot find property to buy. Instead, they rent these single family homes from the hedge funds. Five to ten years down the road, many of these homes will be sold to the renters. But during that time, as they rent, these families will accrue no equity at all.
Housing costs remain a problem; more families will have to rent.
Of course, it is quite possible that as prices inflate, and incomes remain static, that these families will not be able to accumulate enough money to afford the down payments on ever more expensive houses.
Despite our seemingly idyllic lifestyle in South Florida, housing costs remain a problem for more than 725,000 households who fit into the low and moderate income ranges. That simply means these families spend more than 50% of their incomes on housing.
Although 32% of Florida homeowners fit into this category, our state ranks second to California, where the 34% of families spend more than 50% of their income on housing.
This goes on, year after year, despite the fact that economists suggest that housing costs for families should take no more than 30% of income. When a buyer applies for a mortgage, that 30% ratio is immediately applied.
Landlords have added up these numbers and figured out that rental housing remains an excellent investment, with ever increasing returns because of the number of families who can no longer afford to purchase a home of their own.
Marc Jablon, The Jablon Team
RE/MAX Complete Solutions