Investor purchases of homes have been rising in recent years. Often, high cash offers from investor groups push out local buyers. They accounted for more than one in five home sales in December, making this a Macro issue.
Investors rent out the homes. Renters often don’t take care of the property as well as the homeowners, which degrades the value of the neighborhood. Homeowner associations are writing anti-investor rules into their covenants. Since the beginning of 2019, about 30% of the more than 1,000 amendments from HOAs in 21 counties in Florida, Arizona, North Carolina and Texas were leasing and usage restrictions, including restrictions on short- or long-term rentals.
At the same time, rents are rising rapidly and there is a shortage of rental housing. Local governments and rental associations are pushing back against the restrictions.
This is a Macro issue that will play out in local struggles across the country. In aggregate, it will affect home prices and the cost of renting.
Homeowner associations are writing anti-investor rules into their covenants.
That has been happening for many decades. I looked at condos/townhomes during the Reagan Recession (early 1980s), and one pre-purchase requirement I had was simple: I had to approve the bylaws, Rules and Regulations, and the financials of the HOA/Board before making any offer. Many/most of them had non-rental requirements (i.e. owner/occupant ONLY) and/or no significant business run from the residence. Most of them failed the financials portion of my assessment (far short of likely needs). Many were apartment conversions, which did not interest me because ongoing maintenance would be high AND no real privacy.
Investors rent out the homes. Renters often don’t take care of the property as well as the homeowners, which degrades the value of the neighborhood.
I wonder about that. I live in 150-unit condo development. When I bought my home 10 years ago, the HOA board was mostly people who lived in their unit and the focus of the board was deferring maintenance to keep the monthly assessment low. (The only exception was the $300,000 proposal to build a cinder block wall because somebody saw a Hispanic in the townhomes next door, but I digress.) A similar low-budget mindset caused that condo collapse in Florida last year.
Now the HOA board is majority absentee owners and the focus seems to be running the HOA more like a business. They built me a new deck last year after the insurance underwriter didn’t like the design of the structural supports. Better a deck for me than the “the Wall”.
That has been happening for many decades. I looked at condos/townhomes…
Yes, it has been common for properties with HOAs and shared walls. Now it’s becoming a thing for SFHs, well after the neighborhood was built. The neighborhood bands together and votes to commit to no rentals until it’s been owner occupied for a year or so. Some cities are getting run over by corporations looking to buy to rent it out.
I wonder if, like townhouse and condo complexes, we will get to a point where you won’t be able to get a mortgage for a neighborhood that has too many rentals. That would complicate things greatly.
I wonder if, like townhouse and condo complexes, we will get to a point where you won’t be able to get a mortgage for a neighborhood that has too many rentals. That would complicate things greatly.
On the other hand, if corporate landlords are in charge, a condo complex or SFH subdivision my benefit from a more business like administration and attention to maintenance and property values. I never had a problem when I was a renter, but then, I never rented from a “Mom & Pop” landlord.
Remember, the reason that condo tower in Florida collapsed, was because the skin-flint homeowners were reluctant to spend on maintenance.
a more business like administration and attention to maintenance and property values.
Big difference between a landlord and an owner-occupant.
The landlord will pass the costs onto the renter. Owner-occupant doesn’t have a way to pass the cost to someone else.
Most landlords can deduct expenses as a cost of doing business against the rental income. No real tax deductions available with owner-occupant regarding expenses.
Another useless anecdote to fill our time with macro concerns. A sidewalk bandit strolled through our neighborhood sticking personalized offers on the door of EVERY home. Apparently, saving the stamp was more cost effective than paying the guy $15/hour to walk the 'hood.
Our offer was marked “very generous” and appraisal backed - at only 20% lower than the last three months comps. (they did offer a 10 day close option, however)
Our HOA has no provisions prohibiting rentals - short or long.
Apparently, saving the stamp was more cost effective than paying the guy $15/hour to walk the 'hood.
How closely are the homes spaced? I used to deliver 60 newspapers in about an hour on a paper route as a teenager in a SFH neighborhood with lots 50 to 100 ft wide. I believe a first-class stamp is now more than 50 cents.
Developers are going to develop, and builders are going to build, as long as investors keep throwing money at them.
It won’t change until there is a major shift in the market–such as an economic downturn.
Demand FAR outstrips supply, particularly for starter homes.
When the market shifts, things will get “interesting”, shall we say.
Remember, at the end of 2030 (less than 8 yrs away), the last Boomer will be FRA (67–full retirement age). They will not all be retired, but they could retire if they made that choice. We are now closer to the end of the Boomer retirement cycle than the beginning–and it had an extra year or two in it as well.
Unless you’re building on bedrock, you’re going to expect some subsidence in any foundation design. That’s why it’s important to do periodic inspections and maintenance to keep up with it.
The landlord will pass the costs onto the renter. Owner-occupant doesn’t have a way to pass the cost to someone else.
No. The landlord will charge what the market will bear, and repairs come out of profits. They don’t charge less because there have been no repairs, and they budget a percentage of gross income towards future large repairs. We are getting a very nice windfall in ROE when we sell our rental because the 10% gross income we allocated towards maintenance current and future gets moved back to pure profit when we close. Similarly, owners will likely get paid back when they repair or improve their residence, getting higher profits when they sell.
But with previous properties there have been times when it was so much cheaper to buy than rent that we most certainly could not pass on the costs of repairs to the tenants. Was a local very down market in real estate values and it was hard enough to keep tenants at that time. We typically changed them out annually as they found something to buy, incurring higher turnover costs.
Again, the rents are charged based on what the market will bear. The market will bear higher rents for nicer properties…significantly higher. That, (and for some of us pride in property,) is why repairs get done.
By controlling so much of the market, corporate buyers via controlling supply can push the rents higher.
Apparently, saving the stamp was more cost effective than paying the guy $15/hour to walk the 'hood. … You also have to factor in the response rate. A single notice on your door may get more attention than another piece of junk mail in your mailbox.
If someone put adhesive on my door, they would get a decidedly negative response from me.
Yesterday we received a text about buying our cabin. Looks pretty generic, including “reply stop to end” Not sure how they got both our phone numbers, as we both received the text, but much more efficient than a sticker. Got the same type solicitation via phone call for our rental. One of those quick as is sales by owner, expressing ease, speed and no need to fix up. I chatted with the guy for a while and he admitted he was a low baller looking for distressed properties, that our property in good shape was not a likely candidate, particularly because I was considering a FSBO at that time.
Realtors can’t cold call you without threat of fine, but investors can.
On the other hand, if corporate landlords are in charge, a condo complex or SFH subdivision my benefit from a more business like administration and attention to maintenance and property values. I never had a problem when I was a renter, but then, I never rented from a “Mom & Pop” landlord.
The problem is that landlords in general are very hands off. By and large they do not serve on the condo board (which is the decision maker in the community), and their interests and those of the owner-occupants do not coincide. Landlords care if the rent checks keep coming in, with a minimum of work and expense on their parts. Maintaining the property is an expense to be minimized.
I’m part of a fairly good sized online community made up mostly of current and former board members and property managers. We answer questions from new posters (owners as well directors and PMs) and we discuss issues among ourselves.
The investor takeover of these communities is a big topic of discussion. What it is doing is gradually eliminating the stock of homes available to those of average means. And since for many people the equity in their homes forms the largest part of their net worth, it’s closing off a path to financial stability.
It is Not A Good Thing. It’s just one more instance of money flowing out of the pockets of them that hath not and into the pockets of them that already hath.