The major cause driving rental prices in many of these markets are not small rental investors. It is large corporations like Blackrock. Also, smaller REITs like Fundrise.
These companies buy/build apartment complexes. They are also buying multifamily homes in many markets. In some markets they are buying single family homes and renting them out.
They come in with ALL cash offers that make it very difficult for small investors to get into rental properties.
For all that do not know, an investment property requires 25% down payment. So, in many markets to purchase a 2-3 unit apartment building you have to put down $125K or more. It is a long term investment. The ROI on some of some of the local properties in my market is now under 10%.
I never heard the term BTR Build-to-rent before this year. I thought investors bought homes. I had no clue the current trend is to simply build your own complete subdivision of rental SFH.
That is competing with sales inventory in a time when supply chains shortages are slowing down home building, often by months and months.
Meanwhile, they are not building anything small at the low end for entry level buyers. It is really hard to get into your first home today. Move up buyers will hit a wall when interest rates go to 5%.
Oh, they have plenty of equity in their homes, but a lot of people are going to look at their current home payment at 3% on a $200,000 loan. Then when they see what it will cost to service a $400,000 loan at 5%, they are just going to stay put and pay that cheap mortgage, freezing up housing even more.
A lot of us are going to be renting for the foreseeable future.
We are being pushed into a nation of renters.
It’s always amazes me that everyone has to live in the highest priced areas with granite countertops, and every luxury thinkable.
If you want to have an affordable home like you grandparents did..
You have to compare apples to apples.
You would have to build or buy outside of the city in the country where land is cheaper. Then build something modest, a 2 bedroom 1 bath with no appliances and no central AC sitting on blocks instead of a slab.
This is the type of home your grandparents started with that they could afford to buy on a modest income.
The cities grew up around those modest home they build out in the country, they added additional bedrooms, added AC and additional baths and appliances later.
“The major cause driving rental prices in many of these markets are not small rental investors. It is large corporations like Blackrock. Also, smaller REITs like Fundrise.”
And Invitation Homes which is related to Blackrock.
Blackrock may also be fronting for the Chinese government’s investment fund.
American home buyers are now competing with investment funds that are indifferent to what mortgages or average incomes can support. This is especially true in parts of California, where full cash offers well above asking prices are now common for single family homes.