RealtyTrac: Top Markets for Single-Family Rentals

With institutional investors playing a major role in the home-buying market as they snagged tens of thousands of homes in 2012, RealtyTrac set to work to determine which markets still offer the best opportunities for investors intending to purchase single-family homes to rent. Topping the list of top 20 markets were Memphis, Tennessee; Saginaw, Michigan; Toledo, Ohio; Ocala, Florida; and Las Vegas, Nevada. In Memphis, Tennessee, the median sales price for a three-bedroom home is $72,605, and investors can expect a cash purchase capitalization rate of 10.38 percent.  

Read more... http://www.realtytrac.com/content/news-and-opinion/single-family-rentals-top-20-markets-7670?accnt=16444

Phoenix-area rental homes a red-hot commodity

Crowds of people swarming open houses. Multiple bids on properties from desperate home seekers. Palpable fear over losing the "right" place to a ravenous market.
Read more:  http://www.azcentral.com/business/realestate/articles/2012/09/04/20120904phoenix-area-rental-homes-red-hot-commodity.html

Combs: Single-asset LLC will provide best protection

Question: I recently inherited a small amount of money from my grandmother. I decided that I would use most of this money to buy investment homes at foreclosure sales.

I bought my first investment home at a foreclosure sale. I then formed a limited liability company, and I transferred the title to this investment home into the LLC to avoid personal liability.

In the next month, I plan on purchasing three more investment homes. Should I then transfer the title to these three investment homes into the already established LLC or should I have a separate LLC for each investment home?

Answer: You should have a separate single-asset LLC for each investment home. The reason is that, if one of the investment homes turns into a rotten apple, the other investment homes will not be affected. For example, if there is mold in one of the investment homes and the tenant and the tenant's family are injured by this mold, many insurance companies will not cover, or will severely restrict, mold claims.

The cost of forming an LLC is minimal in comparison to the potential liability, and after formation of the LLC, unlike corporations, there is generally no government involvement.

by Christopher Combs Combs Law Group Nov. 4, 2011 05:24 PM




Combs: Single-asset LLC will provide best protection

Phoenix rental market showing signs of rebound

by J. Craig Anderson The Arizona Republic Jun. 17, 2010 12:00 AM


Commercial-property owners are counting on apartment buildings to lead the Phoenix area's real-estate market toward recovery, based on a recent rebound for units rented and buildings sold.

That means renters are less likely to see future discounts and giveaways as aggressive as those they have received in recent years, although the mild recovery has not translated into higher rent prices thus far.

An immediate recovery for rental housing is by no means assured, but after two years of dismal sales and high vacancy rates, the double shot of good news has left some local real-estate professionals with a sense of hope.

"We are seeing a tremendous amount of buyer interest for multifamily assets in the Phoenix area," said Bret Zinn, vice president of multifamily investment services for commercial real-estate firm Transwestern in Phoenix. "There is a scarcity premium being paid today, as the availability of saleable assets does not meet the demand of the deepening pool of investors."

Zinn, a 15-year veteran of the apartment-sales business whom Transwestern hired in late January in anticipation of a market upturn, said significant losses in the value of apartment communities over the past two years are responsible for the shortage of buildings for sale.

As with all commercial real estate, many apartment owners are "upside down" on their commercial real-estate loans, meaning that they owe more on the loan than the property is currently worth, he said.

Zinn said most commercial real-estate lenders have been reluctant to accept the financial losses they would incur from approving short sales on the properties.

"Owners of apartments that would like to sell and take advantage of the many well-capitalized buyers in the marketplace are not able to do so without getting their lenders to agree to take a loss," Zinn said.

Still, the return of buyer demand is a positive development that has yet to happen with most office, retail and industrial properties.

In the fourth quarter of 2008, only three apartment buildings changed hands. A year later, that number had increased to 13 sales, and it has gone up every quarter since then.

In the first quarter of this year, 18 apartment buildings were sold, compared with 13 in the first quarter of 2009. In the second quarter this year, 19 more were sold.

Nationally, the rental-housing market took a positive turn in the fourth quarter of 2009 and posted even bigger gains in the first quarter of this year, with the value of apartment properties increasing by 3.3 percent.

The same cannot be said for apartments in the Phoenix area, where the average sale price per square foot decreased by 20 percent from the first quarter to the second quarter, going from $43.91 to $34.83.

But other indicators have turned positive this year, including a huge jump in net move-ins, from 531 units in the fourth quarter to 4,179 in the first quarter. Total move-ins during the first quarter of 2009 was 1,121 units.

Apartment-building and other commercial real-estate owners across the U.S. have struggled to survive since the overbuilt real-estate market began to collapse in late 2007.

Job losses, a mass exodus of Hispanic residents and ever-growing competition from investors in foreclosed single-family homes have contributed to a precipitous drop in apartments' value and an explosion in vacancies, experts said.

Apartment buildings usually lead the commercial real-estate market during both upswings and downturns, because the tenants' leases, from six to 12 months, are shorter than with other commercial-property types.

A number of real-estate-related businesses that haven't traditionally gotten involved in the rental market are doing so now, hoping to ride what passes for a positive wave.

One of those businesses is Internet home-listings site Trulia.com, which in November added rental-property listings to its online portfolio.

Trulia.com spokesman Kent Schumann said Web traffic to apartment-finding sites such as Rent.com and Apartments.com doubled during the past year.

"Seven of the top 20 real-estate (web)sites now are for rentals, whereas a year ago there were only three," Schumann said.

Those numbers don't necessarily add up to higher revenue for apartment owners, said Jon Pastor, founder and CEO of RentJungle.com, a Google-inspired apartment-finding service that Pastor launched in September.

The recent surge in available single-family homes for rent has kept many apartment owners from seeing the increased demand for rentals translate into lower vacancies and higher rents, although the Valley did see a very slight rent increase of 0.5 percent in the first quarter, he said.

Pastor said his reason for entering the rental-property market as a technology entrepreneur was a belief that the industry's listing and search technology was in dire need of an overhaul.

He said the two biggest factors affecting apartment vacancies are population change and consumer confidence.

Because Arizona's growth has slowed significantly, a significant drop in vacancy would require a boost in confidence, such as recent college grads moving out of their parents' homes and roommates deciding they can afford their own places.

One group that generally has not helped fill apartment communities is the recently foreclosed upon, Pastor added.

Most former homeowners are opting to rent single-family homes and not apartments, he said.

Still, a number of real-estate experts said they have noticed a positive change in most consumers' attitudes toward renting in general.

"I would think that adage that it's always good to buy a house has kind of gone out the window," Pastor said.



Phoenix rental market showing signs of rebound

Deciding Whether To Rent Or Buy A House | ThinkGlink

by Ilyce Glink ThinkGlink May 13, 2010

Summary: Deciding Whether To Rent Or Buy A House



If you are thinking of buying a home, you might want to consider whether you are better off renting or buying a house. As the real estate market has changed, many would be home buyers have become home renters and many renters have decided to go and buy a home. But the decision whether to buy or rent a home can be an emotional decision but a would be home buyer or home renter should also make the financial decision whether he or she is better off buying or renting a home.


Are you trying to decide whether to rent or buy your next home?

Due to the financial devastation caused by the recent recession, more Americans seem to be thinking about renting rather than buying their next home. According Experian’s Hitwise, the number of people visiting real estate websites dropped 22 percent. But visits to home and apartment rental websites increased 45 percent.

Hitwise also found that the most popular term ranked by overall share of search clicks is “apartments for rent,” which is up 162 percent from two years ago.

According to Peggy Abkemeier, president of Rent.com, whether you decide to rent or buy your next home depends on four key factors: How much you’ll pay to either rent or buy and the difference between the two; lifestyle factors; where you are in your career; and, what your long-term financial obligations will be.

1: Rent Ratio. Abkemeier says that a common way of comparing the financial decision to rent or buy your next home is to create a rent ratio for your neighborhood.

Although it sounds complicated, the math isn’t too hard: Simply take the cost to buy the home you’d want to live in and divide that number by the amount of rent you’d have to pay to rent a similar home in the same location. For example, if you’re looking at 3-bedroom, 2-bath home that costs $500,000 to buy, but you can rent a similar home in the same neighborhood for $24,000 per year, the rent ratio is about 21.

“Experts vary in opinion where the tipping point is, but most agree that it is a rent ratio of 15 to 20. The higher the ratio, the higher a spike in housing prices you’d need in future years to justify the price you’re spending to buy the property,” Abkemeier explains. So if the rent ratio is 34, then you’d probably want to rent. If the rent ratio was 13, you might want to buy.

Just remember that the rent ratio only looks at the cost of purchasing the property. It doesn’t include property taxes, insurance, maintenance and upkeep, all of which could tip the scales back toward renting, Abkemeier adds.

2: Lifestyle Factors. Where do you want to live? What kind of amenities would you like to enjoy?

If you want to live on the beach, you have to understand that the beachfront property you love, though highly sought after by other buyers and renters, may not be located in a good school district. That might be fine for you, if you’re not married with kids.

But if you’re married and are thinking about having kids, you may want to rent a beach house for a couple of years to enjoy those amenities, and then buy a house
in a great school district when your kids are old enough to need it.

3: Career Stability. These days, there’s little point in buying property if you can’t stay that home for at least 5 to 10 years. It’s possible that home prices won’t appreciate for years in some parts of the country. And even if home values do rise, it will likely be a slow rise, rather than an 80 percent stock-market-like jump.

Career stability is an important factor to consider. If you like where you are, and feel you’ll have a job there over the long run, then you might want to look for a home to buy near where you work.

But if you’re hankering for a transfer, or if your job requires that you move every few years, you might wind up losing money on a property you buy. In this case, renting makes more sense, even if the rent ratio is below 15, Abkemeier notes.

4: Long-Term Financial Obligations. The rent ratio, lifestyle and career stability might all work in favor of buying. But if you have long-term financial obligations on the horizon, you might want the flexibility a rental lease would bring.

Deciding Whether To Rent Or Buy A House | ThinkGlink

Cash-strapped landlords let evictions lag

by Edythe Jensen The Arizona Republic May. 21, 2010 12:00 AM

Fewer tenants are being evicted from apartments across the Valley, but the decline is more about the dismal state of landlord finances than tenants paying their rent on time.

Lawyers, a tenant advocate and a commercial real-estate broker point to a variety of factors. Overbuilding in recent years saturated the market with apartments just as homebuilders and investors added hundreds of single-family dwellings to the rental mix.

Many owners bought large complexes at the market's peak and then saw values plummet. Forced to cut rents to keep units occupied, they have been left without enough income to pay debts and keep up maintenance. People leaving the state have only added to high vacancy rates.

And although the recession has left many renters unable to pay each month, apartment owners don't have the money or inclination to boot them.

Andrew Hull, a Phoenix attorney who represents landlords and property managers, said his eviction caseload has declined about 20 percent this year.

"Owners are working with their tenants more, letting them make partial payments or giving them an extra month to get caught up," he said.

For some of his clients, vacancy rates have skyrocketed, and half of the units in their large complexes are empty. Those in bankruptcy don't have the money to hire attorneys for evictions, Hull said.

Paul Henderson, another attorney who represents apartment managers, said more owners are in receivership or bankruptcy than there were a few years ago. Some of his clients wait six months for payment from tenants just to keep units occupied; others never file eviction notices because they, too, don't have the money for legal fees.

Records show there were 8,142 eviction cases filed in Maricopa County's 25 Justice Courts in February and March, the most recent months for which the numbers are available. They have been declining since early 2009 and are down from a peak of 14,996 in July and August 2007.

For struggling renters, landlord reluctance to pursue evictions can be a welcome reprieve.

For potential renters, the heightened competition for tenants has in many cases lowered rents or brought concessions, such as the first month free, said Alison Melnychenko, a spokeswoman for Grubb & Ellis, a commercial-real-estate advisory firm. For instance, Mesa and Gilbert apartments that rented for $880 a month three years ago are $706 a month now.

The financial pressures on landlords isn't all good news. Some complex owners not only lack the means to evict tenants but also the money to fix up deteriorating apartments, which can bring troubles for renters.

The financial collapse last year of California-based Bethany Group, one of the Valley's largest apartment investors, had thousands of tenants in 13 giant complexes across the Valley worried about the stability of their living arrangements.

Before a management company was appointed by a Bankruptcy Court judge, water service was shut off at some locations, pools were green, landscaping was untrimmed and garbage bins overflowed.

Jodi Sheahan is one of the owners of Phoenix-based MEB Management, the company hired to manage several Bethany Group properties during bankruptcy. She said the Bethany Group's abandonment of complexes was an extreme case and not typical of what happens during foreclosure, bankruptcy and short sales in the apartment industry.

As for the eviction drop, Sheahan said it makes sense for managers in today's economy to work with residents so they can avoid costs associated with eviction and preparing a unit for new occupants.

Recent realty-listing records provided by Thomas Bade of Coldwell Banker Commercial show that the Bethany Group's failure was not an isolated one. At the beginning of this month, 41 large Valley complexes on the market were in foreclosure, nine were in bankruptcy and 22 were listed as short sales or with owners who are behind on their loan payments.

The ages of the complexes vary, but most were bought by the current owners during the real-estate boom years of 2004 to 2007.

"This will have a ripple effect on renters who thought they were safe from it all," said Stan Friedman, a Chandler resident and volunteer attorney for Community Legal Services.

William Bell and his family live in the 120-unit Dobson Springs Apartments in Mesa. "I've lived here for nine years; it used to be a nice complex," Bell said. "Then, we got letters about the bankruptcy." Now, the paint is peeling, blinds are broken and carpet was torn out but not replaced.

Records show the owner, California-based Pacific Property Assets, bought Dobson Springs in January 2008 for $9.25 million and filed for bankruptcy protection in June 2009. A phone message left at the Dobson Springs office was not returned.

Cash-strapped landlords let evictions lag