Seasonal reductions in asking prices for homes currently listed for sale could provide a unique opportunity for real estate investors. Fall and winter price reductions have long benefited house hunters willing to wait out the late-summer real estate feeding frenzy and then buy homes at reduced prices. But those purchases are typically owner-occupied sales. Why, then, do current price reductions present an opportunity for real estate investors?
There are three factors in play throughout the majority of San Francisco Bay Area real estate markets. The first is that the home ownership rate in California remains low. Statistics vary depending on the source, but First Tuesday Journal reports home ownership at 54.1% at the end of 2015 (based on federal government census data). This is slightly up from the end of 2014, but still among the lowest ownership rates in the past 30+ years. Estimates for the Bay Area are about 53%. The growing supply of renters is producing a higher demand for rental properties.
Low home ownership plays into a second market factor – residential rent amounts are up. Affordable Bay Area rental homes in the most common configuration (3 bed, 2 bath) are difficult to find. And not just in San Francisco, but also in better Silicon Valley, East Bay and North Bay/Wine Country neighborhoods.
The third market factor is that many home prices are falling into investment range. Investment range consists of selling prices that make a property capable of providing an attractive return on investment as a rental. Most desirable single family homes are normally not priced in the investment range unless they require significant rehabilitation. Current fall/winter price reductions provide a unique opportunity for residential real estate investors to take advantage of low asking prices or to negotiate listing prices down into investment range.
With these three factors aligned to produce a healthy rental market, what can real estate investors do to take advantage of current market conditions?
- Assess their ability to purchase rental homes during October/November/December of this year.
- Prepare financially and operationally to add rental properties to their rental portfolio.
- Establish guidelines for their property search (type, location, investment, target ROI)
- Obtain the assistance of a knowledgeable broker to find and purchase the right properties
If you’re interested in acquiring single family or multi-family residential rentals, please Contact Us with your investment criteria. Add to your bottom line with our Investment/Management services (available in Silicon Valley, East Bay and North Bay/Wine Country).