Why the Residential Rental Market is Ripe

The residential rental market is really doing well right now. I have heard it said that the new American dream is to own your own home. While I disagree with this theory, I do see quite a few Americans that have such low goals in life, that I can understand the logic behind this mentality. With an estimated 1.4 million home owners going into foreclosure in 2008, it seems that Americans have grabbed on to this dream, despite having the means to cover their payments.

It’s sad for me to see so many homeowners lose their homes. But there are two very basic, fundamental problems that have fueled this financial collapse – the lack of education, and greed. Combined, these two forces have created a whirlwind of brain dead decisions. Let me show you the trend:

The Downfall of the Residential Owner’s Market

It all started back during the Clinton administration. His administration attacked banks and other lending institutions under the guise of “redlining” (not lending to low income areas), forcing them to provide loans to people that did not have the means nor the credit worthiness to repay the loans. This eventually lead to the massive expansion of sub-prime loans. And those sub-prime loans began to fail around 2005. Later on, mainstream loans began to go into foreclosure as the realization of this failed policy came about.

You see, since the secondary market was forced into taking many loans that it had no business taking, unscrupulous mortgage bankers an institutions began to capitalize on potential homeowner’s lack of understanding, and desire for nice homes. They put them into ARM (Adjustable Rate Mortgage) loans, interest only loans, and other types of loans that had fluctuating interest and payments. These new homeowners did not understand what they were committing themselves to.

Of course, for the first few years there were no problems. Payments were low and homeowners could afford their respective properties. But when the adjustment periods came during those loans, these homeowners did not remember (nor did they previously think about) the potential for their loan to become overbearing. They did not understand why the payments were increasing at such a high rate, and did not have the money to make the payments. Having no way to combat the situation, they lost their homes to foreclosure.

What Foreclosure Means to the Residential Rental Market

The collapse of the mortgage market is upsetting. However, for the real estate investor and marketer, this creates a fabulous two-fold opportunity. Because foreclosures are rampant, we have the ability to buy in at severely reduced prices, while at the same time having a larger market of renters to pull from.

You see, these people that lost their homes have to go somewhere, and why not to one of your newly acquired rental properties? Do you see the potential that this market has created for real estate investors and property managers? It’s tremendous.

In fact, right now, I am getting new listings for property management without even promoting myself for more properties to manage. It’s great, people have heard of what I do, and are ready to hand over the keys to their homes for my care and management. So if you are looking to get started in real estate investing, or are looking to expand your current business, now is the time to buy.

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