Rental Parity

biscuitninja said:
Is it just me or are we reaching rental parity in places like Mission Viejo/Aliso and others?

Just wondering....

-bix
Click to expand...

We are seeing properties at rental parity in fringe markets and those wiped out by subprime borrowers.
 
Before you start snapping up rentals, are you sure that you can find renters willing to pay current rent rates?

How long will they stay if the economy tanks further?

If they have really steady good paying jobs, won't you lose a lot of good tenants who will be able to afford to purchase as prices fall further?

I think one of the big problems with using GRM calculations (while still a ton better than irrational exubarance) is that it assumes a steady state economy/rents. I'm not so sure that this assumption will remain valid for 5 or more years going forward.

What happened to the rental market during the last slowdown and jobs left and house prices dropped, 19991-1996?

IR? Beuller?
 
Freedom,

I don't use GRM calculations.... Plus I am purchasing close to the beach. In talking with most rental agents as well as looking at the rental history, any place close to the beach has been a very desirable place. Unfortunately purchasing land there usually expensive, hard to find or both. I am kinda lucky.

I also price my properties somewhat lower to keep the renters happy as well as keep the vacancy down. I do understand what you mean about the dropout we had with engineers here in the area. It was bad, but I also think things won't get that bad. But we will see.

-bix
 
Hah, I'm renting a 2/1 back house with a 1spot garage 4 blocks from the sand for $1250

let me know if you want to keep me happy!
 
I was looking at quad condos about 2-3 blocks from the beach. There are current renters there.... We will see though, i'm in negotiation... they bought quite a long time ago and the place needs some work. so I might be able to squeeze them down for a few $$ if i'm lucky.

-bix
 
How do you know what rental parity is in those areas?

Basically how do you know how much people pay for rent in those areas?
 
Research the rent in that area with the cost of purchasing a property. We are reaching rental partiy on a single purchase. The only way i'll be able to get significantly better than rental parity is to purchase in bulk and lower the overall cost. I am also working with the lenders to also try to again, lower the mortgage cost, rate, etc. etc. etc.

Things aren't looking good because of the lender situtation though. We will see.

-bix
 
i would honestly chill for a couple of years. this is a variation on the same value trap i've fallen into with my oil stocks. we're doing every single move the japanese did 12 years ago, and real estate values fell every single quarter sequentially for a decade there.
 
Hormiguero said:
i would honestly chill for a couple of years. this is a variation on the same value trap i've fallen into with my oil stocks. we're doing every single move the japanese did 12 years ago, and real estate values fell every single quarter sequentially for a decade there.
Click to expand...

But if you don't own your property and renting right now, then would it not make sense to buy a place where your mortgage payments will be lower than your rent payment, given the currently low interest rates? You would be saving money regardless, no?
 
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