Our take on the following article: The Phoenix market has been slowing down since July, 2013. As of this writing, 1/5/15, days on market is increasing and sales are slowing, not to mention the lack of buyers. The Phoenix landlord can capitalize on this opportunity by cashing out now, at the height of the market appreciation. Take their marbles now—40+/-% in profits, sell their asset with seller financing at the top of the market and reap a nice 8-10% return on their profits and still receive some cash on the transaction—as much as 20 percent of the purchase price. It is almost like printing money. With seller financing, the landlord can capitalize on the huge buyers pool that does not qualify for traditional in the box financing.
It is a win-win for all concerned. Additional specifics on Seller financing can be found at www.seller-carry.com
Single-Family Housing: Time to Cash Out?
It may be time for institutional investors to exit the single-family home rental industry in some markets, according to a recent report from RealtyTrac, a provider of housing data and analysis. Surveying the single-family home sector in December, the firm found that for properties purchased in 2012, investors could realize returns ranging from 38 to 43 percent if they were to sell out in the coming months, while many of the markets they’ve invested in would be facing much lower price appreciation in 2015 and beyond…….
When these investors go in and buy a home, in order to produce the types of returns on rentals they are looking for, it has to be at a certain price point or below, and in many markets we are hitting a ceiling on that. This is a very broad look at it, but the general price range I believe they are looking at is under $200,000. That’s a property that, broadly speaking, in most of the country, you can rent for $1,500 a month. That’s going to give you a gross rental return of about 9 percent a year, which is right in their sweet spot. But once you get above $200,000, those returns go down. In a way, institutional investors become a victim of their own success—by buying up properties, they push prices up very quickly, but that makes it difficult to acquire.
In terms of the markets where we are seeing the appreciation slow most dramatically, I would put Phoenix at the top of the list. For the last six months, it has seen single-digit appreciation…..
………….the biggest challenge, [from] talking to some of these guys, has been the day-to-day management of these properties. And that includes not just the maintenance, but dealing with vacancies, dealing with turnover and all those expenses and the headache that goes with being a landlord. I think that has been the really unpredictable part for these guys, and the toughest. That’s what Warren Buffet predicted in explaining why he wasn’t going to invest.
………… About 50 percent of the big hedge funds and private equity money that’s come into this sector will exit and 50 percent will stay for the long term.
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