Year of the Landlord?

By on 3 February, 2012 in Real Estate, Sandra Nickel with 0 Comments

Will 2012 be the “Year of the Landlord” in Midtown Montgomery?

You rarely hear a news broadcast or read a news report these days without encountering a reference to declining rental property vacancy rates. On Wednesday, NBC’s popular Today Show carried a report calling renters “the next victims of the housing market.”

The problem of few vacancies and rapidly increasing rents is most acute in those cities that are “landlocked,” with no room for growth: Places like New York City and San Francisco are particularly hard hit. And the trend is finally beginning to show itself here in the River Region, especially in Midtown Montgomery.

At least a couple of times a week, I get a call from someone wanting to rent a home or apartment in our neck of the woods. They are generally dismayed to learn that rental homes are quite scarce and that apartments that have been upgraded bring a good bit more than units of similar size in East Montgomery megaplexes. What’s more, they often discover that little to nothing is available at the time.

So it seems to me that if you’ve ever considered buying an investment property (what a great way to pay for your child’s college — I’ll write about that later), now is the time! We finally have some local banks that will loan to investors with reasonable (20-25% typically) down payments and reasonable 5-year rates. If you don’t mind having to bare your financial soul, you can get a FNMA-backed 30-year conventional loan in the 4% range.

Let’s pretend you buy a $150,000 house and put 20% down, financing 80% at 4%. Your entire payment would be in the $750 range. And that house should rent for $1200-1300. You don’t have to be a financial genius to see how well that would work for you, even if you hired a professional manager and had an occasional vacancy!

Houses in areas other than Midtown currently offer even more tempting scenarios. As an example, I have a home just off the Atlanta Highway — rented for $475 per month to a good tenant — that is being offered for sale for $27,500. Using the rates and information in the prior paragraph, that house payment would be about $200 per month.

And then there are two little bungalows in Capitol Heights, each rented for $525, that can be had for $16,500 each or about $125 per month.

So … might this just be the year that YOU become a landlord?

Sandra Nickel has been listing and selling residential real estate for over 29 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.


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