This is the fourth blog I have been a part of, and by far the most successful. On Sunday, while watching all my favorite teams lose in the last 2 minutes — why, Green Bay, why??? — I put pen to paper about why most blogs lose it in the 4th quarter. Sure, they start out strong, full of enthusiasm and self-congratulation, but more often than not they’re gone within 6 months.
Just got back from this year's Greenbuild conference, an absolutely HUGE annual builder's conference, this year in Boston, MA. There were probably 1,000 vendors selling everything from flooring, to rain barrels, to reusable shingles, concrete, desks, automated homes…you name it.
For a bunch of stuff, my wife turned to me and said, "Is that really eco-friendly?" Probably not.
Which boils down to one thing: call something "Eco" or "Green" and it sells.
So this year, I'm becoming the first "Green, Eco-friendly Landlord". Just ask me what I've done to go green and I'll get into the weeds about the flyash content of my cinder blocks. I'll talk about the eco-friendly asbestos and plaster I use. Will you buy it?
Apparently most people would.
I like reading a wide spectrum of news sources, some of which are heavily slanted in their coverage. I like to think that it's good. Helps keep the mind open to new ideas and different perspectives.
In this month's issue of The American, a right-leaning publication that covers politics, ethics, and the economy, they ran an interesting poll…What are the most prestigious occupations?
We're in the middle of some tough times. I got a call last night from another good friend who's just been laid off. That makes a total of about 30% of my graduating class at Babson College MBAs who are still looking for a job or who've been laid off. That's not encouraging.
Check out this report from last week, courtesy of Urban Land Institute's brain trust. If everyone's scrambling because of dropping home prices, it's probably time to buy.
I've also been reading more lately, comments from "experts" who say the market is going to drop again next year by 20%-30%. My problem with that is this: Those are the same experts who predicted in 2005 that prices would continue to rise steadily through 2010.
Take a look around you. In some Boston areas, home prices have dropped 40% in the past two years. That's the evidence that property is cheaper now than before. The big question is, do you think prices have dropped back to what you would consider "fair value" based on the economic conditions in your area? Are they at a place where a reasonable family on an average income (for your area) can afford a place to live? Or, have prices dropped below "fair value" in your estimation? These are the questions we should be using to decide whether or not to buy today. The "experts" forecasting…future guessing…crystal ball using…that's what got the country into this mess.
The best answer is to look at what other rentals that are comparable to yours (comps) are being rented at. If you own a modern two-bedroom two-bath condo near public transportation with assigned parking, find comps in your neighborhood and see what they are renting for. Websites like www.Rentometer.com can provide general guidance, but a better technique would be to visit 2-3 comps in your area and take a look inside. A good rule of thumb is not to be the highest priced rental on the market. It's better to charge a moderate price and have it rent quickly to a high quality tenant than to overprice a unit and have it sit vacant or only get 1-2 tenants to choose from.
It's great to read inspiring, and very true, commentary on the potential of the market we're in. My basic rule of life has been:
When everyone is running left, run right. When everybody sells, buy. When they panic, stay calm.
I've been blessed many times over and wanted to write a short note to the landlords out there who are struggling to keep their heads above water. Maybe you're wondering if you should hold on to your properties or sell. Is this landlord thing even for you? It's a terrible market if you're a seller. But, it's a great market if:
Basically, the cheap mortgages and real estate hype brought a lot of people into home ownership who should have probably stayed as renters. As a result, there's a shortage of high quality rentals and Congress is currently evaluating several stimulus packages specifically to help encourage the development of a more robust rental market. This could mean accelerated depreciation schedules, tax incentives, and renovation assistance. It's not clear yet, but the trend seems to be moving in our (landlord) direction.
On this cloudy night, there's a lot to look forward to. Hang in there.
"Thank God I've got some of my money in rental property. Otherwise, I'd be in serious financial trouble!"
–Joe T., Somerville, MA at about 9am this morning.
Zillow's announcement today that they, too, are laying off a huge percentage of their workers suggests a couple of things to me:
There are a lot of real estate gurus…a lot of companies that have a lot of hype…that were borne in the middle of an explosive real estate market. I remember seeing Kendra Todd (former winner of "The Apprentice") shucking condos in southern Florida in 2006. She said something to the effect of, "I learned the secret to making millions in real estate is condo conversions!" She forgot to mention that she'd started investing less than 3 years earlier…in Naples, Florida, the #1 market in the country. How hard was it to make money in Naples? What did she really know about good investing versus bad investing?
But success breeds blindness a lot of the time. I genuinely like what Zillow does and how they've changed the market. But, losing 25% of your people on one day is gross negligence by the management team. Did they, like Kendra Todd, think that life was going to keep booming indefinitely?
Apparently so.
Just a few weeks after what seemed like the complete collapse of the financial markets, I'm still waiting to see how things shake out in the rental market.
On the one hand, timid buyers and increased foreclosures may help fuel the market for rentals in the coming year–lots of people either preferring to rent, or renting because they've been forced to. It should also help to drive up rent prices faster than last year.
On the other hand, as a country, we're sitting at an all time high level of home ownership. And, with scary financial markets and dwindling home prices, I think a lot of landlords and homeowners will stay put. Demand may be growing, but it's at an all time low…
The next few months should be interesting. November - March is the rental "dead zone" for most rental markets; nobody's looking to move in the middle of winter. I'm curious to see if there's life left out there or if things will stay quiet.
