The U.S. government is reporting that the national vacancy rates in Q2 2018 were 6.8% for rental housing and 1.5% for homeowner housing. The rental vacancy rate was 0.5 percentage points lower than the rate in Q2 2017 and not statistically different from the rate in Q1 2018. The homeowner vacancy rate was virtually unchanged from the rate in Q2 2017 and Q1 2018. The homeownership rate of 64.3% was not statistically different from Q2 2017 nor from Q1 2018. In addition, approximately 87.7% of the housing units in the United States in Q2 2018 were occupied and 12.3% were vacant. Owner-occupied housing units made up 56.3% of total housing units, while renter-occupied units made up 31.3% of the inventory in Q2 2018. Vacant year-round units comprised 9.5% of total housing units, while 2.9% were for seasonal use.
Local Market Monitor, a National REIA preferred vendor, recently released their National Economic Outlook for July, 2018 where they share their thoughts on developments taking place in the U.S. economy. Interestingly, they report that “…the new manufacturing jobs have a special impact on real estate markets because they provide fairly high pay….[AND]…..Real estate investors might want to assemble a list of such markets and keep track of new plant announcements..”
National Economic Outlook – July 2018
July 24, 2018
By: Ingo Winzer
Manufacturing is no longer the engine of the US economy, like it was 50 years ago, but it’s had a rebirth of sorts over the last few years as companies in America find they can produce many products better and more cheaply than foreign manufacturers. A lot of these are intermediate products, specialty components – used in other products – where precision, speed of delivery, and adaptability to changing specifications are important to buyers, along with price. Two of the biggest job gainers have been machine shops – highly automated and flexible operations – and makers of structural metal products.
Two other expanding segments are producers of heavy equipment – mining and construction machinery, for example – and producers of industrial equipment – the automated machines that are the vital ingredient for sustained growth in the manufacturing sector. Production in these segments depends on creative design and heavy use of computer technology rather than low-cost mass production.
Aside from providing a boost to the economy in general, the new manufacturing jobs have a special impact on real estate markets because they provide fairly high pay. And because they tend to be mid-sized operations that can be located anywhere, they’re quite likely to show up in markets where the cost of manufacturing is low but the workforce is skilled – such as Midwest markets with available land and a technical college nearby.
Real estate investors might want to assemble a list of such markets and keep track of new plant announcements.
Including the strong 2.3 percent increase in manufacturing jobs in the past year, total jobs increased 1.6 percent in June. Jobs were up 2.6 percent in business services, 2 percent in healthcare, 2 percent at restaurants, 1.5 percent in finance, and 0.5 percent in retail.
NEW!! To learn more, Ingo has put together this FREE 7 minute webinar which expands on the data in this Outlook.About the Author: Ingo Winzer is President of Local Market Monitor, and has analyzed real estate markets for more than 20 years. His views on real estate markets are often quoted in the national press and in 2005, he warned that many housing markets were dangerously over-priced. Previously, Ingo was a founder and Executive Vice President of First Research, an industry research company that was acquired by Dun and Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in Finance from Boston University. He resides in Cambridge, Massachusetts.
A recent article on Curbed.com discusses how online platforms such as Roofstock and OwnAmerica have made it much easier for investors to purchase Single Family Residences (SFRs). In particular they cite Roofstock as one of many SFR investment platforms that have popped up since the housing crisis. Curbed says these new platforms make it easy & convenient as well as allowing investors to buy and own rental homes in multiple parts of the country at the same time. However, they do point out that while institutional SFR companies own around 250k SFRs most SFR landlords are “mom and pop” investors who own only one house – many of whom are landlords only after moving and renting out their previous house. In fact, they cite data showing that about 70% of SFR properties are owned by someone whose primary residence is located 10 miles or less of the rental property.
“OwnAmerica and Roofstock work like a listing service for SFR properties the same way Zillow is a listings service for owner-occupied housing. The companies don’t own the houses, but charge sellers a listings fee and advertise the home to potential buyers…After a customer buys a home on the platform, the company will help the buyer secure a mortgage if needed, and also find a property management company to handle leasing, maintenance, and rent collection, although buyers are free to facilitate these services on their own.”
The U.S. government is reporting that sales of new single-family houses in June, 2018, were at a seasonally adjusted annual rate of 631k, which is 5.3% lower than May’s revised rate but is 2.4% higher than June, 2017. The median sales price of new houses sold in June 2018 was $302,100 and the average sales price was $363,300. There were an estimated 301k new houses for sale at the end of June representing a 5.7 months supply at the current sales rate.
“Evictions are an awful side of the rental housing business that causes pain for both tenants who need a place to live and landlords who have to run a business.” That’s the synopsis of a recent interview with National REIA’s Charles Tassell (while wearing his Greater Cincinnati Northern Kentucky Apartment Association hat) that was posted on apartmentheadlines.com.
“As America faces an affordable housing crisis, there are many sides to the story on what causes evictions besides just poverty. Evictions are not just the terrible landlords fault, but a more complex issue…”
We’ve seen several “Airbnb-like” start-ups in the last few years but none like this one. Recently we came across a pretty cool short-term rental platform that is geared for hunters & fishermen called Private Acre. Basically, they facilitate the renting of private land for outdoor pursuits. Land owners can connect their property to a community of outdoor enthusiasts that will pay to use it, based on the owner’s terms. In addition, it’s all covered under Private Acre’s $1 million liability insurance.
“With PrivateAcre, you no longer need to know someone who owns land. Now you have access to your own exclusive lake, forest, stream, mountain, beach, and more… Discover and create a personalized experience with over 12 different activities from a growing list of properties available on PrivateAcre.”
Buying a good rental property has the potential for some incredible passive income opportunities. However, in order to be successful you have to do your due diligence and make sure you do it the right way. Our friends over at FortuneBuilders put together the following infographic that will not only prepare you with what you need to know before buying a rental property, it also outlines the steps of buying a rental property, and provides some questions to ask when making the purchase.
Their 10 steps to success are:
- Evaluate your personal and financial goals.
- Ask yourself if you’re ready to become a landlord.
- Look into the benefits of hiring a property manager.
- Assess how much property you can afford.
- Pick an ideal location and property type.
- Carefully filter through rental properties.
- Secure your financing.
- Commit to a property and make your offer.
- Schedule a professional property inspection.
- Await your closing date!
How Do I Get Started Investing in Real Estate?
By Christian Bryant
One of my favorite responsibilities as President of NWREIA & PAROA is mentoring real estate investors. Roughly 90% of my new clients are either people that I have helped for free in the past or people they refer.
I have helped hundreds of investors over the years and find new investors share similar questions or problems. There are three main hurdles that all investors must get over and in my experience the majority struggle with at least one of them. In my opinion, these hurdles are also the three most important skills of every real estate investor.
First is the ability to have a conversation and be likeable. An investor’s net worth is directly related to their network. Growing up I was an introvert. I was the kid who was friends with everyone in school but never outgoing, stood on the sidelines during dances, and was ultimately happiest alone with my thoughts. It was simply what made me feel comfortable. When I got into sales about ten years ago I realized that I had a problem. My natural state in a room full of professionals that I don’t know is to be quiet and just get through it. To be successful, though, I needed to learn how to “work a room” and have a pleasant conversation with complete strangers.
At first I took to reading a few books on how to be personable. Many of those books are very good reads and worth the investment. It finally “clicked” in my brain when I realized that the key is to relax, focus on the other person and listen. Without getting personal you ask about their work, their family, their goals, etc. Then sit back and truly listen to what they are saying. Fight the urge to interrupt and respond thoughtfully. The only thing that you should have running in the background of your mind during the conversation is trying to figure out how you could help them. Then it just comes down to the basics, being respectful and remembering your manners.
The second hurdle that new investors struggle with is simply getting started. Let’s face it, committing to your first deal is nerve wracking. You could lose all your money. You could go into massive debt. You could get sued or taken advantage of. At some point, you must take an educated leap into that first deal. Most people that talk about getting into real estate investing continue talking about it their whole life. The first question to ask yourself is, what happens if you never even try? Maybe you’re financially safe, but how many life goals will you be giving up on? How many years will you be adding to your retirement age? To me these thoughts are much more terrifying than the thought of failure or debt.
Remember that I said take an “educated” leap. Real estate investing is a risky business and much can go wrong. Do not skip your research and due diligence prior to committing to a deal. There will be a point, though, where you must take that leap. Trust in your analysis, education, and the advice that you received from your mentors.
The third hurdle is what I contend is the only major difference between the 5% who make a sizable living and those who struggle. That is the realization that this is not a hobby! Here’s a little tough love for you: either fully commit to making this happen or move on. When you are an investor you must treat it like a real job. The dream is of course to be able to work 10-20 hours a week on your portfolio, but that typically only happens after years of hard work. In the beginning, you need to commit as much free time as possible. The amount of time obviously varies for each person. but whether it’s five or 80 hours a week, keep moving forward. Eliminate time-wasting activities and fill that time with self-education, attending networking events, real estate investing classes, and searching for or analyzing your next potential deal.
If you feel ready to tackle these three hurdles the next step is deciding what your first investment will be. Typically, your financial situation will determine this. If you have some money to invest then you of course have more options. I suggest picking something that you are interested in and focus on that as your first. If money is tight or non-existent then you may want to consider starting with something like lease option deals, which don’t require a cash investment and won’t rely on your credit. There really is a first deal for every level of investor, which means there’s no excuse to hold back.
Get out there and get started! What are you waiting for?
If you need help finding or analyzing your next deal, let’s schedule a meeting.
Christian Bryant is President of IRC Real Estate & Property Management
The NAHB’s Eye on Housing recently took a hard look at building data from the U.S. Census Bureau and found that the average completion time of a single-family house is around 7.5 months – which normally includes about a month from authorization to start and then another 6.5 months to finish. They found that the average completion time in 2017 was the same as it was in 2016, however it was slightly more than in 2015.
“The time from authorization to completion varies across the nation and depends on the geographic location, metropolitan status, and whether the house is built for sale or custom-built. According to the 2017 SOC, it takes anywhere from less than a month to 77 months to build a single-family home from obtaining a permit to completion.”
The folks over at Arbor remind us that the average suburban home with a yard and a two-car garage may not be the first image that the word “rental” brings to mind, but single-family homes have quickly become one of the most sought-after rental sectors on the market. To that end, they put together this handy infographic that takes a look at the demographic factors that are contributing to a surge in single-family home rentals. Happy Friday!!!