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Guest Post: The Crowded Trade: Buy-To-Rent Housing

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Demographically, it appears there is a generational glut of single-family suburban homes on the horizon.

 
A trade is officially deemed "crowded" when everyone is rushing into the market with eyes only on the upside and little concern for the downside--for example, buying homes as rentals. Here's a typical headline:
 
 
Any market that gets crowded quickly experiences a corresponding rise in price and risk. Rational minds then start looking at the potential downside--for example:
 
 
Why could the buy-to-rent housing party be running out of air? The basic reason is the difference between buying real estate as rental housing, which is a speculative market, and the rental property market itself, which is grounded in real-world supply and demand.
 
Simply put, if the supply of rental housing exceeds demand, rents (the cost of renting shelter) decline. That jeopardizes the fat returns the speculative buyer was counting on: Is There a Rental Supply Glut? (The Big Picture)
 

A key piece of the story is being left out of all the sell side research and financial press “housing recovery” stories. In the case of Phoenix — and most likely most other heavily distressed regions turned ‘investor havens’ throughout the nation — it looks like the missing piece of the story is the lackluster demand for the mega-supply and nowhere remotely close to the rental returns investors had hoped for unless you bought the right property in a relatively small window that slammed shut in early 2012.I have also believed for a long time that the lack of foreclosures — and the mortgage modification/workout bubble — would ultimately be a killer for those hoping to rent houses to distressed borrowers. Of course, that’s because the banks and gov’t let all these potential borrowers rent their own houses from them at 2% interest only for 5 years. And this is exactly how it’s playing out.

This is only one dynamic of many in the buy-to-rent stampede. Let's quickly review the other main dynamics.
 
1. Housing is clearly experiencing an echo bubble. No wonder, given the Federal agency and Federal Reserve subsidies: 3% down payments, super-low interest rates and a dearth of other investment opportunities:
 
 
2. The Federal Housing agencies are openly transferring ownership of what are quasi-public assets (defaulted private homes owned by Fannie Mae) to the usual financier predators and parasites: private equity funds, hedge funds, investment funds organized by investment banks, etc.
 
Structured Sales Transactions (i.e. the bundling and transfer of Fannie Mae owned properties to private capital)
 
In their desperate search for higher yields, these concentrations of private capital are buying thousands of houses and placing them in sprawling portfolios of rentals:
 
 
3. The demand for rentals ultimately depends on jobs, income and demographics.Demand for rental housing depends on household formation rates: people moving out of their parents' homes or the dorms creates demand for rentals. But they need jobs that pay enough to support the often-hefty rent for an apartment or house.
 
I have reprinted this chart from Doug Short many times because the foundation of the real-world economy is real wages, and an 8% decline in real wages does not reflect an economy with strong household formation:
 
 
As a percentage of the workforce, the number of fulltime employees is at multi-decade lows. Yes, it's possible for three or four part-time workers to rent a house together, but how much demand does this doubling-up create?
 
 
4. The basic premise of buy-to-rent--that people who lost their homes in foreclosure will need to rent a house--may be overstated. The number of homes in foreclosure--currently 1.5 million, according to RealtyTrac--may sound big, but compared to the entire U.S. housing market, it is marginal.
 
There are about 75 million owner-occupied homes, roughly 25 million owned free-and-clear (no mortgage); 130 million dwellings, of which around 111 million are occupied and 19 million are vacant. Of these, perhaps 4.5 million are second homes or vacation rentals. What We Know (and Don't Want to Know) About Housing (June 16, 2010)
 
How many households leave their foreclosed home and move into a converted garage, the family home, or an apartment? There are no reliable statistics (that I can locate), but if the Phoenix market described above is typical, the demand for rental homes may be more a figment of echo-bubble imagination than reality, at least in typical markets. (New York City and San Francisco are not typical.)
 
5. Demographics do not support robust household formation. Older folks are jettisoning the family home and moving into retirement communities, often in cities that offer amenities and nearby healthcare. If anything, it appears there is a generational glut of single-family suburban homes on the horizon: Housing and demographics (Acting Man blog).
 
6. A house is not a financial instrument: it is a real object in the real world, and it falls apart without constant maintenance and attention. The tenants are real, too, and they don't just spin off a 6% yield like a machine. They make demands for repairs, they get behind in the rent, they move out and create a vacancy, and so on. Real life has a very strong tendency to erode profit margins and net income in unexpected ways.
 
Crowded trades are often described as boats with everyone on one side. Boats loaded in this fashion tend to capsize once exposed to the slightest volatility (wave action). A crowded room is also a common analogy for a crowded trade: once the herd realizes the trade is no longer a guaranteed winner, the herd rushes for the exits, dumping their assets onto the market. This sudden rise in supply (inventory) causes prices to plummet.
 
The buy-to-rent boat is looking rather overloaded, and the bullish side's gunwales are only a few inches above the water.

A MARKET CLEARING EVENT: The Global End Game - Part II: CHS and Gordon T. Long discuss the cycle of deflation and the endgame of leverage, credit and phantom collateral:

 

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Wed, 04/03/2013 - 13:23 | 3404118 Mr. Fix
Mr. Fix's picture

This is not a good time to buy a house,  your cash will be taken away by the banks, and your house will be taken away in a tax sale.

 This is a good time to  stack, there will not be any more sales like this.

Wed, 04/03/2013 - 13:29 | 3404126 redpill
redpill's picture

I agree with you, but if you are absolutely determined to buy a house at some point, you might as well do it while the money is free.  That's the unfortunate reality when central bankers turn value of everything on its head.

Wed, 04/03/2013 - 14:01 | 3404292 New England Patriot
New England Patriot's picture

I bought a rental property in 2009 with the help of an FHA loan.

 

My life as the landlord of a four-family has been wrought with ups and downs. Lots of lessons learned; good life experience.

 

I will say that this past year was dreadful, as no fewer than three out of four of the units lost income and were unable to pay. To top it off, they were deadbeats, content to live on my dime until such time as they were evicted. And they were evicted, months and thousands of dollars in opportunity and legal costs later.

 

I have since targeted subsidized tenants, because the government will kindly deposit a check in your bank account each month. The day that Uncle Sam becomes a deadbeat, I figure my other "physical investments" will rotate into their "growth phase." 

 

Open question:

 

What will happen to rental assets in the run-up to open inflation and thereafter?

Wed, 04/03/2013 - 14:06 | 3404334 redpill
redpill's picture

Theoretically inflation would push rents up, but it doesn't really matter if no one can afford them.  Plus, by that time these fucking fascists will probably have imposed nationwide rent controls.  Whee!

Wed, 04/03/2013 - 14:12 | 3404368 New England Patriot
New England Patriot's picture

I have always envisioned selling the property at the point where inflation has raised the price in reserve notes, but before the dollar plummets to worthlessness. 

 

It may very well be rearranging deck chairs at that point.

Wed, 04/03/2013 - 15:00 | 3404646 MagicHandPuppet
MagicHandPuppet's picture

What will happen to rental assets in the run-up to open inflation and thereafter?

Governments try to "fix" the problem by price fixing (and rent fixing).  One of the books I read on Weimar Germany hyperinflation (I forgot which one at the moment but I think it was "Monetary Regimes and Inflation") went into great detail about how the government fixed rents, etc., while jacking up property taxes.  Just imagine what the populist outcry will be.  They will do anything to kick the can down the road.

I no longer trust a significant portion of my capital in real estate and am trying to unload my last rental now.

Wed, 04/03/2013 - 15:33 | 3404800 MagicHandPuppet
MagicHandPuppet's picture

One thing I forgot to mention: Those people with mortgages did win at first as the mortgage debt was inflated away.  However, the government later imposed new winfall taxes that severely punished many of those who benefited by their debts being inflated away.  When adding this to the severe property taxes that came along, the profits of many were temporary after the politicians were done sticking it to a lot of the "winners".

Wed, 04/03/2013 - 15:04 | 3404673 Bunga Bunga
Bunga Bunga's picture

+ soaring costs, that will never be covered by rents (no matter if paid or not). That's the perfect storm for landlords. During the Weimar hyperinflation many landlords went bankrupt, when they thought, they could own rental properties literally for free.

Wed, 04/03/2013 - 16:13 | 3405113 LawsofPhysics
LawsofPhysics's picture

Higher rents can only be supported with higher wages.  So everyone gets a raise or housing crashes again.  What would you bet on?

Wed, 04/03/2013 - 14:16 | 3404381 smlbizman
smlbizman's picture

i have been a landlord and property manager of a few major complexs....plus much more.... but on the landlord side very few individuals  are capable of managing people and property....they dont know how to qualify, or rule enforcement, or aggressive rent collection (you help no one buy letting them pay late)but you need to be compassionate when dealing with customers but very firm....they underestimate the  cost when rentals "get real" (chapple)....all profits if any wiped out by one bad resident....so if anybody thinks they are just going to buy a home and rent it...you really need to understand what you are getting into...i dont understand bitcoin i dont play....

Wed, 04/03/2013 - 14:20 | 3404406 duo
duo's picture

I thought those Section 8 people always paid on time.

Wed, 04/03/2013 - 14:48 | 3404580 localsavage
localsavage's picture

They just turned my friends rental into a meth lab.  You couldn't stay in there for 2 minutes without feeling sick.  Totally fucked and no recourse as the deposits are shit and the people are mainly broke.

Wed, 04/03/2013 - 14:58 | 3404631 smlbizman
smlbizman's picture

the sec. 8 lease is hysterical.......its very firm in drug use as an immediate disqualifier.....but alcohol and abuse is tolerable....but the beauty of the section 8 lease is, you  use it as the bad cop......always collect your rents in person...inspect ur premises at this time also......shoe up ass at this time too,....than ask how the family is and go to the bank....

Wed, 04/03/2013 - 14:30 | 3404464 cornflakesdisease
cornflakesdisease's picture

I do remodeling with my brother.  What we see are a large number of people keeping what they got and fixing it up.  They are not trading up.  We also do many rental make-readys.  Just repaired a $400,000 property in the hot houston market.  Former tenenat didn't pay rent for 3 months and tore the place up.  This is the fourth tenenat in 2 years and I'm sick of repainting the place each time they leave (though I don't mind the money).  I pity the owner because after taxes and repairs, I doubt if he makes enough to take the grandkids to disney world.

Wed, 04/03/2013 - 14:43 | 3404535 robobbob
robobbob's picture

heads up there and read your fine print.

depending which program you're working with, many direct pay contracts from uncle sugar contain a clause that stipulates that GOVERNMENT DEFAULT ON PAYMENTS does NOT CONSTITUTE grounds for a failure to pay eviction!!!! which means you get to play unpaid babysitter for the duration of the event. lets see if your mortgage holder will accept that excuse.

you have been warned. let they landlord beware.

Wed, 04/03/2013 - 16:11 | 3404627 New World Chaos
New World Chaos's picture

Kudos for this.  I figured they would just pay in clownbux (see below) but why bother when Kafkaesque gotchas are even more profitable.  This is what passes for rule of law these days.  Landlords will be unpaid babysitters.  Maybe it will be karma from being an accessory to Section 8 robbery of the taxpayers but it will still be rotten.

Wed, 04/03/2013 - 16:04 | 3405031 daveO
daveO's picture

This should tell everyone where this will end. A trap is being set! Landlords(suckers) will be stuck w/ Section 8 deadbeats and no recourse. I can see another gov. program to buy these deadbeat properties off of the 'suckers' for cents on the dollar. That way the gov. gets cheap housing for their 'deadbeat class' voters.  

Wed, 04/03/2013 - 14:44 | 3404559 New World Chaos
New World Chaos's picture

Ouch, sorry to hear about it... forgot what a nightmare the US legal system can be regarding renting (or squatting, as is often the case these days).  Don't expect Uncle Scam to adjust subsidized rent for real inflation when the time comes.  They will probably institute rent controls with piddling increases based on made up BLS statistics.  They will need producers like you to babysit the Obamaphone crowd for as long as possible.  Don't sign any long term contracts either.

You'll get better at picking tenants.  My first crew was a bad joke but luckily it is much easier to kick them out in NZ, plus everyone is on a weekly cycle here so deadbeats get found out that much quicker.  Still have dramas though.  Last month we kicked out a girlfriend-beater with a habit of narcing on people over stupid bullshit and burning cars over slights real or imagined.  Knives were pulled, a tranny showed up to threaten us with a pipe, nothing came of it. 

Might as well re-spam my housing manifesto because it has been a year.  Don't buy a suburban house for anything other than fix-and-flip.  Self-sufficient, defensible homesteads in the rural West can work, but consider the following:

Housing won't recover until rule of law is restored.  MERS, fraudclosure, and clouded title will be with us until the whole system burns.  All these things are part of an Illuminati plot to ensure that all of America's honestly earned wealth is consumed by various bottom-feeders.  This is designed to tip the national psyche further towards parasitism and sociopathy, which are more manageable.  Any non-rural house will also be a big fat target for legions of starving bureaucrats and zombies.  This is part of the plan too.

Advantages to renting:

  • No worries about fraudclosure, clouded title, etc.
  • When starving bureaucrats jack up all the taxes and municipal fees until they are more than the mortgage, you can move (or live in a car).
  • You won't be a sitting target for zombies or roving gangs of unpaid cops looking for forfeiture plunder.
  • No house for Feds, lawyers, banksters, or greedy exes to steal.
  • You can arrange to have your mail delivered elsewhere, increasing your chances of escaping the first big FEMA roundup (make sure your cellphone never leaves a trail to the place that you sleep.  Keep the battery out too).
  • You can be gone in 60 seconds and never look back.
  • No worries about desperate tenants strip-mining the place for copper and suing you when they electrocute themselves.  The system rewards such bottom feeders.
  • No worries about the Terrorist Blogger Asset Rehypothecation Act of 2013.
  • No worries about the Terrorist Gardener Re-Education through Labor Act of 2014.
  • No worries about a housing flash crash when the bond market implodes.
  • No worries about ending up with a nice place on the wrong side of the DMZ.  Location, location, location.

Possible advantages to owning:

  • You might be able to get a house with a 30-year fixed mortgage and very little money down, you might be able to pay back the mortgage after the dollar becomes worthless but before they switch all the contracts to a new (supposedly gold-backed) currency, the pig-men might decide to let you keep your house, rule of law might eventually be re-established, and the title might be clear when you sell.
  • David Wilcock's alien buddies might enforce a global debt jubilee.

Now, if you still want to catch the falling knife, consider this:

The bond crash, riots, and subsequent crackdown will destroy the mortgage market and also awaken a large number of people to just how screwed the system is.  Housing will crash again.  Then it will behave like the Zimbabwe stock market.

In a functional society, I am guessing housing is undervalued at 10x rent or 3x mean income.  You may pick it up for less during a collapse.  Interesting anecdote: A Zimbabwean says it was at 17x rent during their collapse.  This was due to a very strong system of protecting title (except for white farmers), houses becoming the main vehicle for savings, real rents collapsing due to people moving in with family, and the government forbidding local councils from raising their fees (they shut down).  I suspect it won't work out so well for America. 

Make sure not to buy in an area that will wither due to peak oil, lack of local water, poisoned frackwater, gangs, or a despotic local warlord/city council.  Sheriff Joe Arpaio will have his very own gulag utopia.

Wed, 04/03/2013 - 15:08 | 3404688 smlbizman
smlbizman's picture

i evicted a family when i caught their 8yr old red handed trying to set a home on fire with pipe cleaner and glue....dad ..alky...crazy grandmother raising.....hauled away in a police car handcuffed.........this one  made my mother stop talking to me , this woman was late evry month..... meetings trying to help this person understand her position and provide some guidance, cause she didnt make as much as her bills.....i finally evicted her....my sons kindergarten teacher, and a long standing woman in the church.....she was just to stupid to grasp it...every meeting .."as soon as i get out of this hole"....your hole is bigger than your dirt can fill.....

Wed, 04/03/2013 - 16:58 | 3405418 JR
JR's picture

Wealth transfer is the policy; take the money from the middle class and give it to the Democrat voter. The crime in all this is that the minority party – the Republican Party - helps with it. It’s hard to understand except, I guess, for personal bribery and, maybe, threats to their families. I don’t know.  But I think a lot of them run for Congress just to get paid the bribes. And most of them don’t want to retire until they die…  because it’s so lucrative.

I heard on the car radio this morning that one of the top ten love songs of all time, when people are asked their favorites, seems to be "He Stopped Loving Her Today." When I heard George Jones wailing it away on his guitar, I thought of Congress:

He stopped loving her today,
They placed a wreath upon his door.
And soon they'll carry him away,
He stopped loving her today.

http://www.youtube.com/watch?v=Tp5Rdb9ncfM

Wed, 04/03/2013 - 17:23 | 3405544 Lord Koos
Lord Koos's picture

If you think that there are not millions of Republican voters who recieve welfare and food stamps you sir are seriously deluded..

Wed, 04/03/2013 - 19:20 | 3406019 JR
JR's picture

Actually, the word is not “deluded,” it’s delusioned. The Republican Party is a minority party because its corrupted leaders do not represent a growing sentiment in this country that big government with a  declining private sector is headed in the wrong direction. And normal, would-be Republican voters are delusioned with their so-called "representatives."

As far as the wealth transfer to Democrat voters, fortunately it has ceased to be an argumentative equation as the results of the November election convinced every single skeptic that the Democrat Party is the party of government, non-producers, illegal immigrants, Asians, blacks, Latinos, homosexuals, abortionists, feminists, and liberals -- in short, a Hollywood-culture welfare state and those that feed off of it.

To suggest that because some Republicans get welfare is a valid rejection of the wealth transfer argument is to ignore the results of the November election and what has happened to this once great country.

It is no secret that immigration-driven demographic-change elected Obama. In the 2012 election,  Blacks voted 93% for Obama; Asians voted 73% for Obama; Latinos voted 71% for Obama; and Jews voted 69% for Obama. Romney carried 59% of the White vote.

“Eleven states now have more residents dependent on the government than they have people with jobs in the private sector.” These are:

Ohio, Hawaii, Illinois, Kentucky, South Carolina, New York, Maine, Alabama, California, Mississippi and New Mexico.

“Last month, the Senate Budget Committee reported that in 2011, between food stamps, housing, child care, Medicaid and other benefits, the average U.S. household below the poverty line received $168 a day in government support. To put this into perspective, the median household income in America is just mover $50,000, which averages out to $137.13 a day.

“Welfare now pays the equivalent of $30 an hour for a 40-hour week, while the average job pays $25 an hour,” or $21 after taxes, which welfare receivers do not pay.

And, yes, it does turn out that welfare largesse elects presidents. Of those welfare-dominant states…  

Obama won Ohio, Hawaii, Illinois, New York, Maine, California and New Mexico.

Mitt Romney was victorious in Kentucky, South Carolina, Alabama and Mississippi.

If the electoral votes of those welfare states were switched, Romney would be president with a total of 309 electoral votes and Obama with 197.

Out of Obama’s 332 electoral votes, those states represented 135 votes. Out of Romney’s 206 electoral votes, the 4 of those states that he won represented 32 electoral votes.

It's money for votes; you get people to vote for you and then you pay them. And if it turns out they need money, i.e., jobless, illegal immigrant, already on welfare, it's easier to buy their vote. And if it doesn't add up to enough votes to buy the election, you always can open the borders wider and sue states who try to protect theirs.

And it's Obama, the Democrat Party, that has posters in all 50 MExican consultate offices offering free food stamps to  Mexicans, gratis the American taxpayer.

Wed, 04/03/2013 - 17:28 | 3405574 Lord Koos
Lord Koos's picture

"...all of America's honestly earned wealth is consumed by various bottom-feeders."  

 

Really? I don't think so -- follow the money, fool.  It isn't the poor that are getting all your money, it's the rich that are getting richer. `

Wed, 04/03/2013 - 19:11 | 3405970 New World Chaos
New World Chaos's picture

I consider lawyers, bankers, politicians, and corporate welfare queens to be bottom feeders too.  And yes, the poor eat up chump change compared to them.  Should have clarified:  "Bottom feeders at all levels of society", or maybe just "parasites".

Wed, 04/03/2013 - 16:15 | 3405144 pitz
pitz's picture

Strong inflation *kills* the mortgage market, which eventually crashes the pricing of houses relative to salaries, etc. 

In a hyperinflationary scenario, real estate essentially becomes near worthless.

Wed, 04/03/2013 - 17:24 | 3405538 Lord Koos
Lord Koos's picture

So, you are now also making a living off the gummint.  I hd a close friend who had several rental properties in New Orleans, he would only rent to section 8 moms.  He did quite well with it.

Thu, 04/04/2013 - 08:01 | 3407315 New England Patriot
New England Patriot's picture

I'd shut HUD in a second.

Wed, 04/03/2013 - 14:29 | 3404465 Freddie
Freddie's picture

OMG - that is my boat sinking with my gold, guns and beans.  It was a tragic day.

Wed, 04/03/2013 - 13:23 | 3404120 redpill
redpill's picture

At some poing the investor cycle will be self-concluding, and the question will be whether traditional housing demand has strengthened in time to fill that gaping maw.  My guess is no.

Wed, 04/03/2013 - 13:55 | 3404263 ziggy59
ziggy59's picture

True, a snake that engulfs its own tail, goes bye bye ...

Wed, 04/03/2013 - 13:29 | 3404143 ebworthen
ebworthen's picture

And when the family you are renting to loses their job and can't pay the rent, wait and see how long it takes to get them out.

OOOPS!

Wed, 04/03/2013 - 13:35 | 3404174 redpill
redpill's picture

Yep you'll have squatters and it will take 6+ mos to get them out of there, but think about what ZIRP has done to the world of capital to begin with.  So the investor's money is then stuck in the house, not generating income.  That's not much different than if it were stuck in the bank, not generating income.  Yes you'll have to continue paying property taxes and maintenance, but you also have a massive tax write-off in the meantime from lost rent.  And the Fed and feds will continue to do everything they can to continue to inflate the housing prices.  It's a groteque thing, but that is how it pencils today.  Sustainable?  Of course not.  But nothing is anymore.

Wed, 04/03/2013 - 13:43 | 3404206 insanelysane
insanelysane's picture

The loop hole here on that is that if you have them pay rent weekly, you can evict them after 6 pay cycles which is 6 weeks instead of 6 months.  I still stay away from this as renters just abuse the apartment or house.

Wed, 04/03/2013 - 13:49 | 3404240 redpill
redpill's picture

Security deposit covers paint and carpet and then you get the next loser in there to start the cycle again.  I see people making money doing it, but it just doesn't look appealing.  Add to that the clueless people who know nothing about it and run in to buy whatever house they can find and it's a recipe for more problems.  But don't worry, Obama is pushing the big banks to give more loans to people with shitty credit!  What could go wrong?

Wed, 04/03/2013 - 14:21 | 3404408 Vashta Nerada
Vashta Nerada's picture

Just how screwed up is it that the Keynesians in the government are pushing lenders to increase subprime lending? 

Wed, 04/03/2013 - 16:14 | 3405128 daveO
daveO's picture

It has something to do with the cities going broke. They can't keep up their 'Projects', so the gov. is trying to con smaller landlords to take on their crap. In the last few years, I've noticed northern welfare types moving into my area, in NC. I know they're not living in a gov. subsidised high-rise, so that only leaves smaller landlords(suckers) to rent to them. It also serves their purpose of rigging elections, down the road.

Wed, 04/03/2013 - 15:45 | 3404854 JR
JR's picture

Good stuff, redpill.

And the IRS, not to open the exit door in their tax trap too wide, made sure the amount you can deduct in passive rental losses will decrease for every dollar your modified adjusted gross income is above $100,000. You will not be able to deduct any passive activity loss once your income reaches $150,000. (We don't want those "rich'uns" earning $150,000 competing with the Goldman boys' 60 million dollar incomes now do we?)

However, If you have passive losses from some rental properties but others throw off passive income, you can deduct losses up to the amount of income.

Any losses you can't claim are carried over to future years and allowed as a deduction against passive income, including gain on the sale of the property. If your income were to go below the thresholds, then you would also be able to claim the losses, including those carried over.

 A good article that explains the IRS maze on rental income, losses and deductions such as the "small landlord exception" is “Beat the Restrictions on Rental Real Estate Tax Losses…but don’t get your hopes up too high.

http://www.markredfield.com/taxbyte17.shtml

Wed, 04/03/2013 - 16:20 | 3405184 MachoMan
MachoMan's picture

This is why you have to partner with a lawyer on your real estate venture...  one guy handles repairs and maintenance, the other guy handles leasing, payments, and evictions... 

And it depends on your jurisdiction regarding how long an eviction will take.  Here, it is very landlord friendly, and I can get someone the fuck out in less than 2 weeks sometimes...  just depends on how much money they have and whether they can lawyer up.  If not, the sheriff will be along shortly to inventory their belongings, issue the writ of possession, and escort them off the property.  The biggest issue is service...  which requires notice of a demand to vacate...  and then a couple days later requires service of a summons.  You can get them the first time around, but the second service is sometimes a bitch...  you'll get the dip and then the chase is on. 

Wed, 04/03/2013 - 13:37 | 3404187 Osmium
Osmium's picture

Not to mention the family that is renting the property does not give a shit and complely trashes the house. 

Wed, 04/03/2013 - 13:40 | 3404197 redpill
redpill's picture

You can help prevent that by requiring a substantial security deposit up front.

Wed, 04/03/2013 - 15:10 | 3404700 Bunga Bunga
Bunga Bunga's picture

... which Ben makes worthless in no time....

Wed, 04/03/2013 - 13:45 | 3404221 Temporalist
Temporalist's picture

@ebworthen

No joke but I was witness to someone having to pay the tenant to leave...

Wed, 04/03/2013 - 14:03 | 3404313 New England Patriot
New England Patriot's picture

Been there done that. 

 

When confronted by the prospect of hiring a moving van and getting their asses out... or taking them to court, and then paying a bonded moving company 1.5X market rates to move them out by force, taking a $1,000.00 hit early on can look mighty enticing when compared with the alternative. 

Wed, 04/03/2013 - 13:54 | 3404259 Stoploss
Stoploss's picture

Apparently it really does take a rocket scientist to figure out if there is no job creation, there is no money to pay rent. The tax sale bubble is already bursting, plus there is so much fraud in it from every entity involved, you can't get a clean title to save your life.

These fools think they have clean titles, and a lot of them have paid a shitload to have them "cleaned".

It's all bullshit, there is no such thing as clearing/cleaning a property title.  You only get good title on a legacy property that has never been tax delinquent. Ever..

If you think the buying bubble is bad, wait until the title bubble pops, when you can't put a finger on the true property owner!

Wed, 04/03/2013 - 13:57 | 3404273 ziggy59
ziggy59's picture

Doesnt Linda Green own all titles?

Wed, 04/03/2013 - 14:02 | 3404295 Stoploss
Stoploss's picture

Why yes, yes she does.

Now you know where the "housing recovery" is coming from..  Tax sales, why do you think they still come get your trash every week?

Tax sales go to the general fund of the counties, which is tied straight to the city/county payrolls.

That is how close reality is..

Wed, 04/03/2013 - 15:59 | 3404984 toady
toady's picture

My wife had her name legally changed to Linda Green.

Wed, 04/03/2013 - 14:03 | 3404315 Groundhog Day
Groundhog Day's picture

The 99%'s wants to downsize or look for a cheaper place.  With all the supply even the PE firms will realize quickly that it is a medicore investment at best and will probably try to be rid of the Securitized product off to some muppet...i mean pension investor

Wed, 04/03/2013 - 14:32 | 3404481 cornflakesdisease
cornflakesdisease's picture

You buy one month by saying you will have the money in two weeks, then another month by saying I don't have it, and then the final month waiting on the sheriff.  See it all the time in my business.  In Houston half the people rent and half of them don't pay.

Wed, 04/03/2013 - 17:12 | 3405499 pursueliberty
pursueliberty's picture

I can get them out within 14 days of late rent here in arkansas.  In five years with five residential properties I'm out less than one month rent.  One punch hole in a wall, one in a door, otherwise no problems.  It depends a lot on how your county views landlords.  Here we have an agressive judge who doesn't play around with dead beat tenants and the sherriff office will let you put the stuff on the curb on day 15.  Renters know this or have a personal friend who does so they don't mess around and get out 95% of the time.  A good friend of mine has around 50 single family homes and never has  a problem getting them out.  His biggest problem is he won't let them sit empty until a good renter comes along and charges as much as the market will allow.

 

It isn't about evicting anyway, it is about picking a proper tenant with stable income/work history.  Last year I let one sit for rent for 6 weeks to find a great tenant.  I have a list a mile long of disqualifiers.  Stick to it and you come out okay.  I also avoid high turnovers by charging slightly under going rate. 

 

A much bigger part of the equation is being handy, having a bitching set of tools, and a stack of frn for repairs.  Stuff breaks.  I spent several thousand last year on HVAC between two properties.  Good thing is one has a new unit with ten year parts warranty/five on labor.  I'm still a buyer but only of 3/2 properties and am working on plans for a fourplex of 2/1.

Wed, 04/03/2013 - 13:31 | 3404154 LawsofPhysics
LawsofPhysics's picture

I guess this all depends on whether or not you really believe that wages matter.  Many countries already have 50 and 100 year mortagages.  Talk about being born into slavery.  The banker pushes a button to add some zeros and you, your children, and grandchildren pay the banker interest for your entire life.  Roll mother fucking guillotines already.

Wed, 04/03/2013 - 13:43 | 3404210 insanelysane
insanelysane's picture

A lot of them have all generations of family living in the house because that is the only way to afford it.

Wed, 04/03/2013 - 13:34 | 3404169 RationalPrepper
RationalPrepper's picture

I'd like to buy and start my own homestead.  If not now, when?  I'm currently renting a farmhouse, know and trust my landlord, and I have a large garden and the ability (i.e., permission and infrastructure) to raise small livestock.  Do I sit tight?  Wait until I can buy without financing?  Is that ever likely?  What a circle-jerk they've created.

Wed, 04/03/2013 - 13:47 | 3404229 insanelysane
insanelysane's picture

Buy!  Fixed rate mortgage.  Go 30 yr but pay more every month and get it done in 15.  Land is physical.  Just don't go overboard on the house because the reality is the house depreciates at least as fast as autos.  The land is what appreciates or at least has the potential to appreciate.  The building never appreciates in value.

Wed, 04/03/2013 - 14:33 | 3404491 cornflakesdisease
cornflakesdisease's picture

Wrong!  Buy at the cheapest interest rate you can and extend as long as you can.  Put the extra money you save in precous metals.  Use inflation to pay for your home. 

Wed, 04/03/2013 - 15:37 | 3404818 CoonT
CoonT's picture

Exactly!

Wed, 04/03/2013 - 16:18 | 3405170 pitz
pitz's picture

Nah, you want to buy housing when its cheap, and interest rates are very high.  Right now, there is a huge premium put on house prices because of the cheap financing which certainly will dissipate when financing becomes very expensive.  Inflation kills the price of debt-supported asset classes such as real estate.  Real estate doesn't start to behave as a 'real' asset until the debt has mostly been removed. 

Wed, 04/03/2013 - 16:54 | 3405399 Midas
Midas's picture

I like the way you're thinking pitz.  Stack now, wait for the inflation and housing to collapse, then you make your move.  Trouble is, it will take some patience.

Wed, 04/03/2013 - 18:06 | 3405758 Hubbs
Hubbs's picture

A great cascade of responses here. The problem I have had with counting on inflation to decrease the price you pay for your house is that in an inflationary event, the cost of living for everything else goes up, and you may lose your job as well, and then even those seemingly low nominal payments on your mortage can be really burdensome.

Wed, 04/03/2013 - 14:52 | 3404600 Diogenes
Diogenes's picture

If you like it where you are ask the landlord if he is interested in selling. He may hold financing, after all he knows you are good to make payments and what interest rate will he get at the bank?

Try dividing the price by 100 and offering to pay that amount for 100 months. Example, the property is worth $75000 you offer to pay $750 a month for 100 months. If he goes for it you have the place paid for in 8 years and 4 months with no interest. Sometimes it works.

Wed, 04/03/2013 - 16:00 | 3405009 RationalPrepper
RationalPrepper's picture

I've thought about this quit a bit.  Our rent is $750 a month.  Objectively, the property (assuming about 8 acres of non-tillable would come with the house) would probably currently sell for around $150k.  And the house is very livable, but needs lots of updates if we were to own (electrical, flooring, etc.).  Landlord has owned it outright for years, so there's little incentive for him to sell at this time.  He is in his 70s, though.

Wed, 04/03/2013 - 13:39 | 3404176 SillySalesmanQu...
SillySalesmanQuestion's picture

Yesterday, a landlord in Dayton, Ohio had 22 rental properties foreclosed on by Montgomery County Sheriffs. The mortgages were with 6 different banks in 6 different states. Declining rental prices, tennants moving for fifty to one hundred dollar lower rentals, cost of cleanup and rehab, time rental properties sat vacant with no rental income and decreased cash flow to landlord, contributed to this epic failure. The rental bubble has burst....coming soon to a neighborhood near you soon. MOAR AT 11:00

Wed, 04/03/2013 - 13:39 | 3404195 Binko
Binko's picture

Wife and I went to visit her mother yesterday. She lives in an older suburb of Vallejo California. Small houses, built 40 years ago, many of them rundown, in a city that has a lot of problems.

I noticed that the house across the street was all fixed up with new paint and new grass and had a "For Rent" sign out front. Just about fell over when I heard they were asking $1800/month. Seemed obvious to me that somebody bought it, fixed it up and now is trying to rent it out for a rate that will cover their costs plus a little profit.

My guess is that you might get $1000 a month tops in this neighborhood and then there would be a 50/50 chance that the renters would actually pay rent and not just stiff you and trash the house.

Morale of the story is that people are delusional. Renting to the lower middle-classes in a decaying economy is a recipe for pain.

Wed, 04/03/2013 - 13:45 | 3404218 CH1
CH1's picture

Morale of the story is that people are delusional. Renting to the lower middle-classes in a decaying economy is a recipe for pain.

But hey, a fancy guy in a three piece suit told me I was being really smart to do it.

It's his fault!

Wed, 04/03/2013 - 14:34 | 3404498 cornflakesdisease
cornflakesdisease's picture

Amen!

Wed, 04/03/2013 - 16:34 | 3405280 daveO
daveO's picture

Check the county records and see who's the owner. I wouldn't be surprised if it's a Corp. That area is one they (Federal Reserve) seem to be intentionally propping up, to bail out banks. No one else would be so foolish!

Wed, 04/03/2013 - 16:36 | 3405295 MachoMan
MachoMan's picture

Exactly, you either rent to upper middle class or lower upper class...  or go government guaranteed/subsidized housing.  Locally, I've seen a ceiling develop for RRE at about $1,300/mo. or 1/100 of ~3x family gross income.  At this level, anyone that can afford to rent simply chooses to buy given the monthly payment is about half, at most, of the rent.  Practically speaking, you start catching credit worthy tenants at the $1,000/mo. level and then by $1,300/mo., you've weeded out all prospective tenants.

The simple fact is that you cannot make any money on buy-and-hold speculation when you're leveraged to the gills.  Same goes for farm land.  If you can pay cash for the property, then you've got plenty of wiggle room to make a nice return...  If you're just pinching a spread between your cost of financing and a tight rental market, then you've got a lot of risk, especially when the price of housing has a hard ceiling over it.  All you're doing is hoping that when the mortgage is paid that you get to keep the residual...  however, what happens in between might change matters a bit.  

Wed, 04/03/2013 - 13:40 | 3404199 yogibear
yogibear's picture

Hope box of Rocks, Blackrock, loaded up on plenty of buy to rent properties!

 

Wed, 04/03/2013 - 13:50 | 3404224 FLUSA.com
FLUSA.com's picture

all hedgefunds have group think and bought a lot of houses....huge batches

Wed, 04/03/2013 - 13:42 | 3404204 azengrcat
azengrcat's picture

The low hanging fruit has been picked in my local bubble town if you have observed the action on Homepath.com.  The local real estate pumpers on the radio are now saying they are buying up preforeclosures for investors directly from homeowners (no listing) in a rent-to-flip scheme similar to what they were doing 2003-2005.  

So another deflationary implosion or is the Bernank going to full printard this thing along with Obama $9 minimum wage?

Wed, 04/03/2013 - 13:48 | 3404227 CH1
CH1's picture

or is the Bernank going to full printard

He already is. $85 Billion per month, forever, on top of the national deficit of 1.x Trillion every year.

Bennie's riding the parabola!

Wed, 04/03/2013 - 15:13 | 3404711 azengrcat
azengrcat's picture

Wait till SPY and QQQ is on the POMO to-do list OR ELSE THERE WILL TANKS IN THE STREETS

 

Wed, 04/03/2013 - 15:13 | 3404712 Bunga Bunga
Bunga Bunga's picture

yes, the parabola of BTC ... and only 10 mln more can ever be made.

Wed, 04/03/2013 - 17:18 | 3405523 NihilistZero
NihilistZero's picture

Which will/is causing inflation in Food, Energy, etc which will in time lead to massive RE deflation.  Benn fooled the specuvestors into thinking he was on their side LOL!  Helicopter Ben wanted to clear the banks toxic "assets" and he's done a great job.  Pause in the deflationary spiral is almost over though...

Wed, 04/03/2013 - 13:46 | 3404217 GraveyardSpiral
GraveyardSpiral's picture

@Redpill:  Actually, if you continue renting you are at an advantage when the riots start since you'll be able to walk away and rent in a better neighborhood.  Rinse, repeat.   "Movin' on up"

After all, your stash is buried (or sunk) and guns are portable.....

Wed, 04/03/2013 - 13:49 | 3404234 CH1
CH1's picture

After all, your stash is buried (or sunk)

Definitely sunk. It's a freekin epidemic!

Wed, 04/03/2013 - 13:53 | 3404252 redpill
redpill's picture

You can always walk away and rent somewhere else.  If the SHTF chances are you'll be underwater on the place anyway, so who gives a shit, let them have it.  We're talking about the big banks here, no one should have any scruples anymore, all is fair in love and war, and this sure as hell ain't love.

Wed, 04/03/2013 - 13:46 | 3404222 QE 4 EVA
QE 4 EVA's picture

I'm on board with the thought process here but what is the event that begins the liquidation of homes bought to rent? 

Wed, 04/03/2013 - 13:48 | 3404233 GraveyardSpiral
GraveyardSpiral's picture

Obummer losing the next election....oh, wait...

Wed, 04/03/2013 - 13:57 | 3404271 redpill
redpill's picture

Several events could occur that would trigger a chain reaction:

1)  The next hot fad for yield comes along and the investors all bail out of housing and move their capital another direction.  Housing prices stagnate, rental markets weaken, landlords are underwater and walk away, and the foreclosure cycle starts again.

2) Interest rates go up, profit margins on rentals are squeezed, landlords start dumping properties to get their capital into something with more yield.

Wed, 04/03/2013 - 13:49 | 3404243 TN Jed
TN Jed's picture

Two of my employed and solvent neighbors have been kicked out of their apartments in the last 3 months because the "owners" were foreclosed upon.  I bet it stings like hell to know your rent never made it past a hole in a pocket.

My "owner" has asked me thru the landlord if I would be interested in buying my unit.  Since the HOA is half the rent I said, 'thanks but no thanks'.  Being counter-party risk free still isn't risk-free as I sleep with visions of suitcases.

Wed, 04/03/2013 - 14:42 | 3404538 cornflakesdisease
cornflakesdisease's picture

During the housing bubble, our friends mocked us because the wife and I have no kids and live in a really nice modern apartment.  "Your throwing your money away . . "

Well, the rent here is $550 less then owning a small starter home in a neighborhood where no one speaks English or people barb-b-que on the street esplanades.  Anyway, for the last twelve years, I have been saving that money; mostly in silver.

Plane to buy an RV and live in the Texas Hill Country when we retire.  We'll be renting then too at an Rv park, currently about $208 a month with everything included (wi fi too).  That's what my dad does.  Live in the Ozarks right by the white river.  Fishes out his window just about.

Wed, 04/03/2013 - 13:51 | 3404246 G_T_A_44
G_T_A_44's picture

Are those the plastic ships and rubber duckies floating in the bath water, that is, until the plug is pulled, draining the tub?

Wed, 04/03/2013 - 13:51 | 3404247 ParkAveFlasher
ParkAveFlasher's picture

1) Location

2) Location

3) Location

Wed, 04/03/2013 - 13:58 | 3404256 ziggy59
ziggy59's picture

These days, Economic laws are so disconnected from physical laws...
Almost as crazy as the in-laws!

Wed, 04/03/2013 - 14:00 | 3404286 adr
adr's picture

If housing looks like a ship with all the passengers on one side, what does the Bitcoin ship look like?

A Carnival cruise ship with all decks built on top of the bow?

Wed, 04/03/2013 - 14:10 | 3404296 rogeliokh
rogeliokh's picture

It's f*cking disaster, Gold miner shares which already been pushing 2009 lows drop 6-7% again today after falling by same amount yesterday that's 14-15% loss in 2 days alone. Un f*king believable..

Gold better go up soon.. How much Dow should drop to start Gold run? I think 500 points in one day should do it.

Wed, 04/03/2013 - 14:19 | 3404400 Croesus
Croesus's picture

"Buy when there's blood in the streets".....

Wed, 04/03/2013 - 14:10 | 3404355 fromthedeepersouth
fromthedeepersouth's picture

Gordon, you're a really smart guy, but you talk WAY too much.  You have great guests, you ask them a question, and then  you drone on about your own answers.  I want to hear what you're guests have to say!!!  Charles Smith is one of my favorite bloggers and here you have him on and i'll bet he spoke only 15% of the entire time during the "interview".  It's because you so much dominate the conversation with your guests that I rarely listen to your podcasts....just sayin'...

 

Wed, 04/03/2013 - 14:17 | 3404379 pashley1411
pashley1411's picture

Real estate is local.   If you have a steady client base, in my personal experience housing near universities for flush students, prices are still going up.   Dunno for how long, but it is, today.  As they say, the market (government subsidies) can stay stupid for longer than you can remain solvent.

On the other other hand, I don't see how you could make it work in, for example, busted polities, like Stockton, Detroit, etc...     There is no spare cash. 

Wed, 04/03/2013 - 14:26 | 3404445 Bastiat
Bastiat's picture

Bursting of the student loan bubble and the resultant higher ed bubble will change the situation in a most University rental markets, I'm afraid.

Wed, 04/03/2013 - 14:43 | 3404549 cornflakesdisease
cornflakesdisease's picture

Students destroy eveything.  Dear God, I know.  Run from college students, run!

Wed, 04/03/2013 - 18:52 | 3405659 John Law Lives
John Law Lives's picture

You got that right.  I bought a condo about 15 years ago, and the place was filled with homeowners early on.  Unfortunately, the HOA bylaws did not regulate the percentage of units that could be rented out vs. those occupied by owners.  Well, many of the original owners decided to move out over time and rent out their condos.  The place started filling up with kids in their early 20s (mostly guys - including some still in school) who took on one (or more) roommates to help pay the rent.  The quality of life declined (imo).  There came a point when the property no longer qualified for FHA-approved mortgages by prospective buyers.  I heeded the warning signs and was fortunate to sell my place to someone who qualified for a conventional mortgage.  Now, that condo complex has approximately 3 renters for every 2 owners, and there is no realistic chance the Board could get the necessary votes to change the HOA bylaws and restrict the percentage of rentals.  I am glad I was able to sell the unit, as I believe that condo is doomed.

Wed, 04/03/2013 - 14:21 | 3404411 GoldRetriever
GoldRetriever's picture

Want a good barometer of how shaky the housing market is? Toggle on over to Craigslist.

Take a look under "Rooms/Shared" in any given large town or city. You'll find many ads from homeowners who can only cover their monthly mortgage nut by renting out all but one room in their house. Many of the ads reek of desperation/delusion as homeowners seek to rent one room at a price that will cover the entire mortgage payment plus utilities.

There are also tons of ads on Craigslist under "Apartments/Housing" where the desperation is evident. You can watch the monthly rent drop by $100 per week on some ads.

There are more multigenerational families living under the same roof now than during the Great Depression. Add in all of the foreclosures banks are stalling on and it is obvious that the buy to rent strategy will be financial suicide for most.

We are only in the 4th or 5th inning of the housing/foreclosure crisis. Look out when this current bubble blows. It is going to get ugly.

 

 

Wed, 04/03/2013 - 15:34 | 3404811 billsykes
billsykes's picture

people on CG are geneally retarded anyways- I saw and see the same thing prior to the boom and post bust. There is always someone out there that think they can ____________ (boneheaded idea) with a $_________(pie in the sky valuation)

In the end, stupid begets and attracts stupid, sure they will get some guy to pay the rent(mortgage) one month but the next he will be gone with all your stuff.  - sent from IPhone.

 

Wed, 04/03/2013 - 17:20 | 3405521 W74
W74's picture

Seen it, I can vouch for what you're writing here.  I don't know what cities you frequent but I look quite often in the Baltimore classifieds and occasionally in Annapolis and York, PA.  The desperation is indeed evident.

I saw one Colonial for sale go from 195,000 to 115,000 (in hilariously written increments!!!) over the course of two months.  Basically a contractor bought a property and actually wrote in the ad that he "didn't have enough cash to finish fixing it" (paraphrasing here).  This is a property that might go for 175K remodeled/refurbished and spotless (in a pretty decent 80% White area with is darn good for working class MD), but which was missing siding, plumbing, HVAC and probably much, much more. 

I assume the guy sold it because he eventually stopped posting.  Of course it took an e-mail from me to suggest to him to *not* write about his desperate situation (some people want to post their sob stories) when trying to sell a product.  He did change the ad language after that, so maybe I inadvertently helped him out.

Also, I've noticed a lot of people are still stuck in 2006 mode thinking they're going to get their money back or only lose a couple grand at most.  Nope, nope. Not going to sell.  Realtors here have a 884sq/ft on a 5Ksqft (1/10th acre roughly) lot going for 225K.  The owner (property records database here is pretty good) bought in Jan '06 for 230K.  If it sells they'll have to come down to 120K.  The only thing propping it up are decent schools and a park within walking distance.

Edit: ...and gub'mint jurbs.  Those are about all that's left propping up the market in central MD.  Balt. City and PG county have homes selling anywhere from 1K to 100K max, but that has to do with demographics and not the age kind.

Wed, 04/03/2013 - 14:24 | 3404437 SmittyinLA
SmittyinLA's picture

"Buy to Rent" is a call bet on govt goonery, an easy bet to fix, all you have to do to make a profit is:

  • Restrict the housing market (a slam dunk)
  • Allow immigration, legal or otherwise (a slam dunk)

Do those 2 things and you can guarantee a profit, ya it lowers living standards and screws our future with millions of broke renters but today's profits are what's important, not America's future, they can make 80 year old 800 sq ft tract houses in the immigrant City of Bell CA work at $375,000.00 each, you just need 2 dozen paying renters per home.

No problemo is a rental income property 

Wed, 04/03/2013 - 14:55 | 3404618 data
data's picture

I hear all the sob stories on rental properties, but as an experienced landlord I can tell you there are ways to make them work. I've actually had tennants so good I was sad to see them move on (married, tranfered etc)

1. If this is your first time trying this, consider buying a duplex and living in a part of it. This way you can keep an eye on the tennants untill you learn the ropes and most of their typical tricks. If there is somebody there everyday who will phone the police  (at the first sight of trouble) many of the problems won't occur.

2. Learn the relevant laws, poilcies and guidelines. Some cities and areas have laws that are unfavorable to landlords. Know  enough not to buy there. Know how to write a lease that is as favorable to you as possible. Know step by step how to evict a persson for damage, non-payment and prohibited activites (some home businesses, foster kids, additional people not on the lease etc.) Do all this reading before buying the property. If you haven't done the reading, don't buy the property. You aren't ready for it.

3. Keep the the place it tip top shape with regular maintanance. Do yearly maintanance inspections. Most laws allow for this and related regular maintanance work. Stagger the work schedule so that you are inside the living area every 3 to 4 months. Use these opportunities to confirm that the tennants are taking good care of the place and be on the lookout for illegal or non-permitted  activites. If possible schedule your work during their vacations away from the property. Good tennats will like having a place in tip top shape with a minimum of inconvience.  Tennants with something to hide will quickly find somewhere else to live

 

Wed, 04/03/2013 - 16:15 | 3405139 LawsofPhysics
LawsofPhysics's picture

Precisely, location and management are everything, always have been.  These are common sense lessons that apply elsewhere as well.

Wed, 04/03/2013 - 16:52 | 3405354 daveO
daveO's picture

I've had renters who were like my brothers and sisters. Then, I've had 'professional deadbeats'. The law protects them like an endangered species, and they know it. By far, the best way to weed them out is to ask for their SSN up front and tell them you're going to do a credit and/or criminal check. I've watched the blood run out of their face when I told them that! 

Wed, 04/03/2013 - 17:08 | 3405481 W74
W74's picture

Isn't this pretty much standard operating procedure?

Wed, 04/03/2013 - 17:06 | 3405472 W74
W74's picture

And don't forget about CREDIT CHECKS. 

Don't just look at the score either, look at the history.  Collection? Nope.  Evictions? Hell nope.  Did they try to screw over the cable company? Well guess what they'll try to screw you over too.

Wed, 04/03/2013 - 17:25 | 3405556 toady
toady's picture

You are correct sir, but it is still possible to be a landlord by hiring property management to do the items you listed and 'manage the management'.

I fell into rentals accidentally. I was transferred multiple times in IT from '93 to '10. I usually received transfer assistance packages and always had high wages, so I usually had a house/condo paid in full every 2-3 years when I transferred.

I never could manage the rentals from a distance and was burned by evictions / damages more than once.

Now I do quarterly or biannual calls and work a list similar to yours on the phone. It costs me between $75 & $125 a month per rental, but I do not get calls in the middle of the night or worry about keeping tabs on the properties.

I bought most of my properties pre-boom, so they've paid for themselves, the earlier ones have paid for themselves multiple times.

Would I do it now? Probably not, especially at todays prices. But it's possible ..

Wed, 04/03/2013 - 15:30 | 3404781 billsykes
billsykes's picture

I agree but there has to be a time to hop off the ledge of "moral highground"  and get involved.

Really in the big scheme of things there are many, many people failing upward and getting rich while their companies/entities go BK or re-org, shuffle the paper and start anew.

I say hop in, eat like a pig and keep some on the side and know that this will end. Just don't start getting stupid and think this will be different or that you are smarter than everyone else. 

 

 

Wed, 04/03/2013 - 15:41 | 3404839 dolph9
dolph9's picture

The government artificially inflates the price of housing by subsidizing mortgage and rent for those unable to pay.  This makes it unaffordable for honest, working people.

So the wrong people get into the houses and apartments with subsidized money.

The net result is that housing becomes both more expensive and ultimately in disrepair and worthless.

Well done, Jews and liberals!

 

There is no way out of this clusterfuck other than precious metals.

Wed, 04/03/2013 - 15:50 | 3404925 alfbell
alfbell's picture

I like that idea of being mobile. Being fabian and flexible. RV trailers and motorhomes today are very nice inside (like living in a small modern condo or apartment). It is very safe. Keeps you open to all opportunities that may be available to you anywhere in the country. If the area that you are in becomes a hotspot or undesireable... you just hitch your trailer to your tow vehicle and head for another trailer park in a desireable area. You can also be a snowbird and follow the sun and mild climate and avoid having any more Winters in your life. Low energy costs too if you stay in mild climate areas (where there is no need to crank up the heat or the A/C). No home ownership costs, hassles or risks to deal with (maintenance, repairs, property taxes, utility bills, risk of tornadoes or hurricanes or floods or earthquakes). Instead of your money going into black holes like home ownership it can go into your portfolio. Plus, I understand that many fleets and buses are converting their vehicles over to natural gas (which is currently half the cost of gas or diesel now) so if you have a motorhome you may soon be able to convert the motor over to natural gas which will really cut your travel costs. I'm going to really consider this as an option for the future. As things get more unstable... mobility, fexibillity, frugality, and being fabian will be the winning conditions.

Wed, 04/03/2013 - 16:57 | 3405401 W74
W74's picture

Not to mention all the interesting people.  I met a couple such wayfarers as you described as I RV'd the southwest last summer. Very level-headed dudes. 

Oddly other RV'ers are more likely to provide you with assistance (should you ever need it) and good tips and tricks than a next-door suburban neighbor that you never talk to ever could.  Think about it.  If you spent 60 minutes talking to a stranger at an RV campground you may very well have had more speaking time with them than you've had with most of your neighbors over the course of a decade.

Wed, 04/03/2013 - 16:04 | 3405045 Zer0head
Zer0head's picture

"Not to mention the family that is renting the property does not give a shit and complely trashes the house."

 

LOL

Arianna Huffington trashes fancy Chelsea loft: lawsuit

" punctured" wood floors, bloodied mattresses and broken appliances, the Manhattan Supreme Court suit charges"

 

http://www.nypost.com/p/news/local/manhattan/arianna_huffington_trashes_...

Wed, 04/03/2013 - 16:19 | 3405176 geewhiz190
geewhiz190's picture

with just a few exceptions, probably one of the more interesting and informative comment chains I've seen in a long time. people who speak from experience are great sources of insight. thanks!

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