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)