It’s no surprise that landlords are on the rise. With many owners either unable to sell their home, or deciding to delay the sale, many have become situational landlords. Additionally, the heavy activity of distressed properties became a viable investment tool for many cash-ready purchasers. Cash flow properties, attractive capitalization rates and returns were at times performing better than other investment vehicles.
Class A properties had little trouble in maintaining occupancy, stabilizing rental rates, or even in some cases increased rates. Class C properties still show promise in some segments but with higher inventory, especially distressed properties for sale, this has affected the rental rates and available housing.
The chart below illustrates which housing segment has been the busiest and at which month of the year. The two bedroom segment was the most active, which was of no surprise. Two bedrooms units comprised of 55% of closed attached housing in 2010 (13,699 units out of a total of 25,103 total attached closed, data from MRED). That is not to say that all purchases were solely for investment reasons. However, the potential for rentals units are increased and could adversely affect rental units in smaller tiers if owners are upgrading (and deciding to keep their previous home for investment).
For landlords and investors, planning lease end dates to follow rental season is highly desirable but not always the case. For Class A and B areas, it is still feasible to locate tenants even during winter months. In the downtown / Loop area, approximately 25% of all rentals since Nov 15, 2010 have reflected market time of less than 100 days – this considering the holidays, unemployment and general economic climate.
Many developers unable to sell units have decided to transform developments into upscale rentals as well. This could create fluctuations in inventory in certain micro-areas. Add to this the continually change in situational landlords who are designated to be short term landlords. With stabilization starting to occur on the market, slowly, charting potential for growth could bring a larger return in the months and years to come once inventory is consumed.
As a landlord, remember to keep up to date on all the changes in the law regarding security deposits, disclosures and notices. As a registered subscriber, you are invited to attend an upcoming webinar with a local attorney specializing in rental laws, procedures and violations. The event will be free and questions will be taken from those attending. Contact me if you have any questions or would like to submit your question to be answered in the webinar.
Site Tags: Investment, Rent, Landlord
Sherwin L. Sucaldito, REALTOR®, GREEN, ABR, CRPM
@properties
The Institute of Luxury Home Marketing
Green REsource Council, GREEN
Accredited Buyer’s Representative , ABR
Certified Residential Property Manager, CRPM
