Category Archives: investing

Investors are focusing on brand new homes to rent out

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Buying New Homes

Rents and prices are on the rise in Central Florida, especially close to Orlando, FL center. I see a lot of apartments being built and I also noticed that out of state and out of country investors are looking to buy brand new homes to keep as a rental.

I’ve been a Landlord for a long time and I learned that monthly rent is similar weather the property is in a bad neighborhood vs or a good neighborhood. However, the quality of the tenant you are able to secure in a better area and ability to collect the rent makes a big difference. So, even though an old and beat up property in a rundown neighborhood may seem like it has better cash-flow on paper, after adding the turnover expenses, repairs and collection costs,  more expensive properties are less headache and more consistent cash-flow.

Combine that with low inventory in Orlando, FL area, it makes sense why investors are so attracted to brand new construction.

NEW YORK – May 26, 2017 – Investment companies are betting big that the rental boom will continue, which is why they’re still snatching up properties even as foreclosures dry up.

Following the financial crisis, investors purchased foreclosures on the cheap and then rented these single-family homes out for profit. It’s a move that worked for several years, but now there are fewer foreclosures to buy, home prices are on the rise, and there’s fewer homes overall on the market. That has prompted more investors to turn their focus to build-to-rent: If they can’t find a home to rent, they’ll build one themselves.

Indeed, American Homes 4 Rent, the largest publicly traded landlord by number of homes, is buying up lots and houses. U.S. Colony Starwood Homes says it plans to buy at least 600 just-built properties over the next year from more than a dozen builders. AHV Communities LLC says it’s planning to buy entire neighborhoods of single-family residences that would be available for renting.

Landlord companies believe there are a lot of people who want single-family homes but still can’t afford to buy them. They believe the rental market will stay strong for the foreseeable future.

Buying new costs investment firms more than acquiring an existing home, however. Companies are searching for discounts from builders. They’re also able to put less into maintenance and repairs on the new homes to cover some of the added costs of buying new.

Investors are betting that newer homes will bring in higher yields than existing properties. A new single-family rental tends to fetch a higher rent – 5 percent to 8 percent more than an older, renovated home – according to Alex Sifakis, president of JWB Real Estate Capital, which has built around 450 rental homes in Jacksonville, Fla., since 2011.

Still, some industry analysts warn that landlord companies may be miscalculating how long the rental boom will really stick around. True, the homeownership rate in the U.S. has been hovering near a 51-year low. However, the number of owner-occupied homes increased faster than the number of renting households for the first time since 2006 in the first quarter of this year, Census data shows.

Source: “Foreclosures Dry Up and a Hot Wall Street Trade Gets New Look,” Bloomberg (May 22, 2017)

Report: Orlando Home prices still ‘have room to run’

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improving-housing-market

WASHINGTON – Dec. 6, 2016 – There’s still a lot of equity-building potential for homeowners. Freddie Mac’s Multi-Indicator Market Index (MiMi) stands at 86, which the mortgage giant says is on the “outer edge of its historic benchmark range of housing activity.”

In Florida, the Index is a bit better coming in at 86.7 in the latest reading. An index score of 100 indicates a housing market that equals its historic, long-term average.

However, Freddie also found that Florida ranked second behind Nevada for most improved state year-to-year. In Fla., the index rose 11.58 percent compared to Nevada’s 11.74 percent. Freddie Mac’s study found it “in range” of its historically stable housing market and “improving.” Two Florida cities – Orlando and Tampa – rank in the top five nationally for “most improved.”

MiMi assesses each market – national, state and selected metro areas – relative to its own long-term stable range by looking at home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of current mortgage payments in each market and the local employment picture.

The index nationwide has climbed 45 percent since its all-time low set in 2010. It continues to trail below its historic benchmark normalized of 100 and far from its high of 121.7.

“The purchase applications indicator is up nearly 19 percent from last year, indicating strong housing demand and a market that’s poised to close out the best year in home sales in a decade,” says Len Kiefer, Freddie Mac’s deputy chief economist. “National home prices have surpassed their pre-recession nominal peak with about half of states still below their pre-recession peak. Factoring in low mortgage rates and modest income gains, house prices still have some room to run, as indicated by the MiMi payment-to-income indicator which is nearly 33 percent below its historic benchmark.”

Forty-one of the 50 states, plus the District of Columbia, have MiMi values within range of benchmark averages.

MiMi state ranking for most improved year-to-year

  • Nevada (+11.74 percent
  • Florida (+11.58 percent)
  • Massachusetts (+11.35 percent)
  • Mississippi (+9.76 percent)
  • New Jersey (+9.61 percent)

MiMi metro ranking for most improved year-to-year

  • Orlando, Fla. (+17.85 percent)
  • Worcester, Mass. (+14.49 percent)
  • Tampa, Fla. (+14.36 percent)
  • Chattanooga, Tenn. (+14.20 percent)
  • Dallas, Texas (+13.89 percent)

If you’ve been sitting on the sidelines, what are you waiting for? Get in and start building equity.

Not sure where to start? Let me help you. Contact me at http://TopOrlandoRealty.com