Alex, I’ll take “Rental Housing for a Thousand”…

6 Sep

As hurricanes, tornadoes and flooding ravages American families…

It just gives fuel to further thought about ISBU based rental projects:

All over the country, apartment landlords are enjoying rising rents and falling vacancies.

According to the Wall Street Journal;

“The average effective rent, the amount paid after discounting, was $997 in the second quarter of the year, up from $974 a year earlier, according to a report scheduled for release Thursday by Reis Inc., which tracks leasing data for 82 markets. Second-quarter rents rose in all but two markets.

Rent levels rose fastest in San Jose, Calif., to $1,501 in the second quarter. The average effective rent in San Francisco was $1,806; Wichita, Kan., $495, and New York, $2,826.”

Where we live, rentals have moved up at a rate of about a 3 percentage points a month, IF you can find a rental unit at all.


Rental prices are rising  because Real Estate Home inventories simply aren’t moving.

It’s become MUCH harder to get money out of the bank to buy a home. It’s like waiting for really cold honey to drip out of the bottle… Oy.

You know it’s going to be sweet when it finally gets there, but man… the wait will kill you.

And it gets worse as the noose around “house money” tightens.

In October, the federal government will begin it’s first retreat from the mortgage market by reducing the size of loan amounts eligible for government backing.

Three years ago… Congress raised loan amounts to include monster loans of $729,750.

That meant that Fannie and Freddie (Mae and Mac) could guarantee BIG loans.

That made it easier (and cheaper) for buyers in more expensive (primarily metro based) housing markets to obtain mortgages.

Again, I have to ask… Why?

This is ridiculous. This means that you and I personally back (by guarantee – with taxpayer dollars) a guy that we don’t even know… so he can buy a $725,000 home. Think about that.


You and I are on the hook to the tune of $725,000 for the sole benefit of ONE PERSON/Family.

That’s just stupid.

There are thousands of families who cannot even begin to afford getting into the housing market and we’re throwing money at people who want to take advantage of plummeting house prices to play “Metro-Movin on up…”

I am totally against this.

The government should get out of the mortgage business altogether so that the market, not bungling, self-serving bureaucrats, can dictate loan limits and down payment amounts. In fact, IMHO – FHA, USDA, Fannie, Freddie, HUD, should all be totally defunded over the next 3 years and made to disappear.

FHA, USDA, Fannie, Freddie (and I’m not talking about Freddie Mercury) and  HUD are worse than worthless.

No? You  mean… it’s all worked okay so far?

Did I miss it?

Um… wait… Those “big loan homeowners” are already defaulting by the busload.

They represent one of the largest areas of failure.

Google it. It’s called “Strategic Foreclosure”.

Essentially, they’re walking away from their loans in droves (guided by websites that will show you exactly HOW to do it) because they have the ability to “let someone else take the loss”.

You’re a politician. The Tea Party sent a message. Politicians are nervous. It’s that time again… Re-Election time. It’s time to position yourself to keep your seat.

What do you do?

Well… you reduce your “exposure to loss” target.

As a result, starting in October, loan limits are set to decline modestly in hundreds of counties across the U.S. as the government attempts to reduce its outsized footprint in the mortgage market and create room for private investors to compete.

It should be noted that Government-related entities stand behind MORE THAN 9 of 10 new mortgages (thanks to taxpayers who have sunk over $138 billion into Fannie and Freddie whether we wanted to or not) underscoring the “eagerness” to dial down the government’s share.

According to my banker (I spoke to him today to “fact check”) you can still get a home loan, but in most markets you have to almost double your down payment, in order to actually get it.

Look… I know it’s hard to find a decent home in a good school district and I feel your pain… and… I’m gonna get flamed for this, but… my position is that if you can’t plop down a pretty substantial downpayment (at LEAST 30%) and save six months of house payments in advance,  you probably don’t really “need” that new $725k house.

The lack of job growth isn’t helping matters either.  Again, where I live, unemployment is in double digits. If you actually HAVE a job, the big challenge is to KEEP it. People simply aren’t willing to take the risks that buying “that new house” will bring, due to the economic downturns we’re all feeling.

Despite what your local realtor will tell you – Real estate does NOT drive the economy.

It’s the other way around.

The economy drives real estate.

Any chance at “recovery” won’t happen until jobs come back (from places like Malaysia and Mumbai) and “synthetic efforts” to prop up real estate prices do NOT create jobs.

This is only creating a shortage of rental properties as families all over America “hunker down and hold their breath”.

“Rising rents and falling vacancies are the perfect situation for landlords,” said Rich Anderson, an analyst for BMO Capital Markets. “It’s like drinking without the hangover.”

And as this whole stew cooks down, fewer and fewer apartment units are available. That makes being a landlord a “boomtown” situation. I can just picture landlords gleefully rubbing their hands together as they mop the “worry sweat” off their brows.

Experts are saying;

“Vacancies should continue to decline while rents rise at an even faster pace than we observed in the first half of the year.”

And that means that an affordable, energy efficient, wait for it… sustainable, almost there… weather resistant, here it comes… low maintenance ISBU based housing complex of 4 units would fill itself up, before you even got it built. 🙂

And that 30% LOAN DOWNPAYMENT I referred to?

It would BUILD this FOURPLEX with money left  over.

I’m just saying…


2 Responses to “Alex, I’ll take “Rental Housing for a Thousand”…”

  1. The Urbivalist (@Urbivalist) September 6, 2011 at 11:40 pm #

    Love it.

    What is the best bet on getting a loan to build an ISBU 4-plex? Suggestions?

    • Renaissance Ronin September 6, 2011 at 11:59 pm #

      Are you still on good terms with your “In-Laws”? 😉

      Because that’s about as close as you’re gonna get to “financing” considering the “Alternative” path you’ll take…

      Most of these projects are built using investors or by self-financing. That said, stack this 4plex up three stories and then drop them three at a time with “Stair Atriums” connecting them together and you have 36 units just waiting for school to start!

      In fact, we’re working on a project where we’re doing exactly that.

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