Real Estate Blog

This week I'd like to recommend some "homework" for you. I think your time would be well spent on a careful read of the piece AnnaMaria Andriotis did for SmartMoney, "The New Costs of Renting." First, there's good -- and encouraging -- information there:

- Nationally the average vacancy rate for rentals fell 17 percent last year to just 6.6 percent.

- Rental prices are up with the average monthly on studios and one and two-bedrooms at $986. (Pre-recession was $930.)

Lots of folks are renting for lots of reasons. Some can't qualify for a mortgage. Some don't like the real estate market and are waiting for things to stabilize before buying. Folks who have just come out of a foreclosure really don't have much choice. They're getting their lives back together and renting is pretty much their only option.

- Here's a scary figure (regardless of the state of the economy, which is getting better.) Over the next two years RealtyTrac.com is saying another 5 million homes will go into foreclosure.

Again. I am not interested in capitalizing on people's woes, but for real estate investors, all these conditions equal two things:

- Quality properties coming up for sale at below market prices to be converted into rentals.

- A ready pool of potential renters that is likely to grow by 3.4% by the end of this year alone.

What I really like about the SmartMoney article, however, is the discussion of the "hidden" costs of renting -- things like the price of storing excess "stuff," the cost of renter's insurance, and so on.

Some of you are lucky and work with management companies, but many of us take on the management responsibilities for our own properties. A good landlord is not that different from a good bartender. There should be a lot of listening involved, especially when some of these clients with whom you're going to be dealing may likely be coming out of traumatic real estate scenarios.

Understanding their concerns and building a degree of reasonably flexibility into our management practices is a win/win scenario because long-term renters get invested in the property, do a better job keeping it up, and may well translate to buyers one day.

Theres no way as an investor that you can get "over educated" in your business. In fact, the more you understand about both sides of the rental equation, the better the numbers are going to shake out for all concerned at the end of the day.