“When it comes to property management and the credit crisis, things are changing all the time…this is unprecedented in our 40 years of experience.”
This is a quote from an interview I conducted with a partner of a prominent Southern California residential property management company. She is also an owner of both single family and multi-family residential rental properties.
The consensus around the U.S. right now is that credit continues to be very tight, and when it comes to borrowing money to buy residential income properties or to refinance existing loans, “these are the most challenging of times” according to several reliable sources I’ve spoken to recently.
In Southern California lenders are sticking to a “Ten Mortgage Maximum” rule that includes the property manager’s or owner’s own home mortgage.
So if you or an owner or client of yours needs to refinance a building and there are currently more than ten mortgages in your name (or tax ID #) you are going to be turned down. That is precisely what even the people with the highest credit scores are being told.
Lenders are a bit “paranoid” at the present time, as anyone who is keeping up with the rate of defaults and foreclosures would anticipate. The qualifications for loans are the most stringent they have been in decade.
The difficulty in qualifying for a loan used to depend on the relationship that the buyer/owner had with the lending institutions that they were “shopping” at. Not any longer. Although it still helps to know the right people and have “connections”, the biggest criteria now is how much you can put down (loan-to-value ratios) and how much outstanding debt you already have.
That is one of the predominant reasons that so many single and multi-family rental buildings are on the market all over the country. My interviewee told me that she has never seen so many unsold rental homes and apartment buildings in her 40 years of being a property manager and owner.
“It’s a ‘buyer’s market’, even in multi-family residential properties”, she said with emphasis. “It’s a very bad time to be a seller.”
As far as we know this is true in every region of the United States. Will these conditions change soon? We don’t think so, but for property managers, this actually can be good news. Encourage owners to purchase additional properties and expand their portfolio, look for the sellers who can’t sell their properties and manage their properties. These challenges are upside for smart property managers looking to grow their business.
My opinion if you go green you have a better chance of selling.
ReplyDeleteCheck this out.
There has never been a better time for creative ways to attract and retain the kind of residents you want to rent or lease your properties. Appealing to thoughtful, conscientious and responsible people is actually easier than you think.
When I was a practicing counselor (I have an M.S. in Psychology with an emphasis in Marriage, Family and Child Counseling) I noticed that people who were passionate about conservation, protecting the environment and social responsibility were usually also the types who were financially more careful, cleaner and often more socially responsible.
Later in life when I owned my own residential rental properties, I noticed that the folks who paid their rent on time and took good care of their dwellings often also had “green” interests.
In other words, they would be involved in recycling, eating organic food, using non-toxic forms of pest control and conserving energy in their apartment or house.
Yes, I know there are always exceptions to the rule, but my experiences taught me that people who we refer to as “Green” or “Greenies” made good residents. They would respond positively to certain features and incentives that property managers and owners offered to them.
Some examples of “green” features that would benefit both the owner and the renter would include: thermal windows, insulating window fixtures (such as pull-down shades that insulate from external heat and cold while also helping keep the interior at a desired temperature), energy efficient furnaces, air conditioners, appliances and solar energy.
If you, as an owner and/or property manager, are willing to make these kind of “green” improvements to your properties, by all means advertise proudly to potential residents and your current ones too.
Again, conversation-oriented personalities are the types that appreciate such thoughtfulness. They often respond with loyalty and by taking care of their homes and apartments.
Solar energy (such as solar-generated hot-water) is more lucrative for landlords than homeowners. Why? The Federal Tax Credit for Solar Energy is capped for personal residences at $2000, but there is no cap for “investment” properties.
In addition, landlords can depreciate the value of their solar installations over a shortened period of 5 years.
Finally, landlords can take a 50% Bonus Depreciation for items purchased and placed in service during 2008 and 2009 (expires 2009). See www.depreciationbonus.org for details.