One of the hot themes in residential real estate this year is the notion of houses being snapped up by investors who plan to fix them up as rental units. And in a similar vein of housing stock being purchased as other than primary residences, now is the time of year to begin looking at the vacation, cottage and second-home markets near you to see if the sales uptick has penetrated that sector after a handful of dismal sales seasons.
I already had this blog post in mind when word came Thursday that the giant private equity firm Cerberus Capital Management plans to back small investment companies that are buying foreclosed houses to turn them into rentals; the Wall Street Journal also had a piece last week noting that “Investors pile into housing, this time as landlords.” It’s not surprising that real estate is an increasingly attractive haven for investors, despite record new highs on the Dow Jones industrial average and S&P 500 stock indices. Stocks are volatile, cash investments pay virtually nothing in the present zero-interest rate environment, but real estate has been performing marvelously, with residential real estate investment trusts (REITs) returning about 20 percent last year and expected to put in another double-digit performance in 2013, according to an article in HousingWire. Another recent HousingWire report divvies up the REIT market by sector (note for future story idea reference other interesting niches like the “storage” and “industrial” sectors, both also pulling double-digit upticks) and shows a very strong residential upswing so far in 2013.
Clearly this trend is one you can apply to your market in many ways: As a small business/small landlord/second-career profile (with personal finance sidebar using expert advice from lenders, property management firms, home inspectors, lenders and lawyers about dos and dont’s of operating rental units.) As a look at which neighborhoods in your area are attracting activity from investment firms – try banks, real estate brokers, title companies, real estate attorneys and city officials for this angle. As a look at how rentals are changing or affecting the character of established neighborhoods — what’s it like for existing residents (and their property values) when the neighborhood is turned into a transient community. How are existing apartment complexes and single-family rentals, and rental rates, affected by increased competition. (Trulia.com’s rental monitor might be of help here depending on your market, as baseline information for context. And searching for rental houses on Zillow.com might turn up some interesting anecdotes.) And check into how ancillary businesses like property management, maintenance services and landscaping companies may be benefitting by new business as properties are maintained by landlords rather than residents.
Meanwhile, the National Association of Realtors will be out on April 2 with its annual Investment and Vacation Home Buyers Survey, which will be a trove of information. The NAR is not offering embargoed copies of the report this year, but you can contact media relations to be placed on a distribution list. In 2011, investment purchases were up a boggling 64 percent; it will be interesting to see the 2012 lookback as a prelude to this year’s activity. And when the vacation-home figures are out, I’ll do a separate post on resources for reporting on the cottage and snowbird markets in your neck of the woods.
