Boise Rental Market Trends

Posted by: admin  :  Category: Boise Market Trends, Investment Property, Market Updates

The rental market appears different depending on which side of the rental market fence you’re on – renting homes or owning rental homes.

Investors with rental property in Boise, aka landlords, have been enjoying a long run of a strong rental market in Boise. Rents have steadily increased, and the number of quality candidates has seemed high for years – I first noticed it when the housing market crash led many homeowners back into the rental market.

Renters, on the other hand, have experienced a steady stream of increase in rents and wonder if or when it will slow. Locally and nationally, it’s getting harder to afford rent, as this data-packed MSN article details.

The number of rental households has been sharply increasing since 2005. Thank you Ada County Association of Realtors and Marc Lebowitz for sharing your data.

Rental market trends in Boise

While I can’t provide the crystal ball, I can and will provide data and indicators into the Boise real estate trends and rental market trends and how they’re shifting.

Typically, the rental market and the real estate market work conversely. With the real estate market slowly recovering, one must wonder if, or when the rental market will slowly balance that trend and weaken.

I’m often leery of national sources predicting local trends, however here’s one quote from RealFacts, “In 2014-2015 rents will stall or drift downwards as occupancy rates decline.”

When compared to the national housing market recovery trends, Boise has been speedy.

 

Landlords and investors in Boise shift their ROI/cash-on-cash return expectations

Investors who enjoyed a solid position in Boise since 2009 or so report that new purchases have been dropping and their rate of acquisition has slowed. It’s happened as prices have increased, distressed inventory has decreased and quality investment properties have been challenging to find. With interest at an enticing 4.5% or so and predicted to rise, returns on new purchases will further be affected.

That said, if you have a quality investment property you’d like to offload, the pool of buyers is hungry.

The rental market has seasons and seems to run a little slower in winter than in the busiest Boise moving seasons (spring through fall). If the overall strong rental market weakens in conjunction with the strengthening housing market, landlords would have fewer candidates to choose from, need more time to find the right renter, and start paying closer attention to how each property compares from a price and condition standpoint.

Thank you Ada County Association of Realtors and Marc Lebowitz
for sharing your presentation.

Renters smart to consider buying in Boise

Its safe to say that as the housing market recovers and interest rates eventually rise, it will trend toward costing more money to own less home. If you’re renting and considering buying, it will not behoove you to wait. The housing crash created a lot of fear and is a common reason for waiting to buy. If that’s your primary reason, it’s time to test those emotions with numbers and sprinkle in some market trending for motivation.

Take note- homes on the lower end of the price range are in high demand.

That said, if the rental market “weakens” or “levels out” it’s good news for you, your negotiating power and the future of those steadily rising prices you’ve endured. Landlords priced at the high-end of the scale for their property tend to consider “scaling back” on rents during a weaker market, which would put renters back into a less-competitive position.

Let me know if and how I can help you, wherever you may fall in the process. I’ve had positive reviews from my investor clients (buyers and sellers) as well as my first-time home buyers who make that leap from renting.

Sincerely,

 

Shana Moore, Your Local Boise Real Estate Professional

 

 

Your Local Boise Real Estate Professional

 

3 Essential Considerations BEFORE BECOMING A LANDLORD

Posted by: admin  :  Category: Investment Property

The rising prices and market indicators are acting like a thermometer in March, suggesting a market warm up. The bottom is soon to be as distant as winter. Many buyers are asking about renting out their current homes and holding out for the optimum time to sell. 

#1 – The Numbers. Run the numbers. 

First, check Craigs List and any nearby for “rent signs” for current pricing comps. If your property is awesome, you can price it toward the high side, but there is a ceiling. Rent prices are limited by the market. Create a spreadsheet to compare your income and expenses (or ask me for one of mine).

For a home you already own, $100-$200/month loss isn’t a bad proposition if it creates an annual break even or gain after principal pay down and tax write-offs. While counting on appreciation is speculative, prices went up 14%-35% in the past year.

That said, if you’re shopping for a new rental, that requires a loan and down payment, you can (and should) do better than a break-even or loss (but not for long if prices continue to rise). You may want to consider a multi-family property in your comparisons. 

Multi-family rental property sales trends. Source:www.loopnet.com/Boise_Idaho_Market-Trends

#2 Value and Leverage. Understand it and compare accordingly.

The rising value of your home (appreciation) applies to more than your down payment money and overall money invested. It applies to the bank’s portion too.

Source: www.FosterBoise.com. Reuse with permission citing source.

As depicted above, you may have $20,000 cash in a home you purchased for $100,000 last year. With 10-30% appreciation, this home could be worth $110,000 – $130,000 when you sell. That’s a $10K -$30K gain in value. To me, this means if you have the cash flow or break even point cushion to ensure you’re not speculating fully upon appreciation (which I never recommend), it’s worth holding onto for a bit longer.

Remember- your taxes will go up when you claim a homeowner’s exemption on another property and I can help you calculate the factors. Also, there are costs to selling. 

As depicted above, you may have $20,000 cash in a home you purchased for $100,000 last year. With 10-30% appreciation, this home could be worth $110,000 – $130,000 when you sell. That’s a $10K -$30K gain in value. To me, this means if you have the cash flow or break even point cushion to ensure you’re not speculating fully upon appreciation (which I never recommend), it’s worth holding onto for a bit longer.

Remember- your taxes will go up when you claim a homeowner’s exemption on another property and I can help you calculate the factors. Also, there are costs to selling. 

Costs of Doing Business

Mentally prepare yourself to do touch up paint and work prior to selling and include this expense in your numbers. Also budget for carpet replacement. Small damage can be more emotionally taxing than budget taxing, so be prepared and accept it as a cost of doing business. It often pencils out. (Repainting and re-carpeting doesn’t cost $10K, which is a sample amount of gain one might speculate/hope for in the next year, depending on all the unknown factors).

If you think tenants kill landscape, you’re right. Set your automatic sprinklers yourself if you have them and take charge of the annual blow out (or make sure your property manager does). It’s fine to make the tenants manage the mowing if they have a private yard. For single-family homes, tenants often pay all their utilities. Don’t expect them to weed or improve and buy them a six-pack of beer or soda if they do!

#3 – Prepare to be Active (Even With Property Management) 

Real estate is not a passive investment, even with a property manager. You either manage your property manager or your tenants (and the difference is notable). The standard management rate for one home is around 10%, with 8% being realistic for those companies who undercut a bit to generate some business. Be careful who you hire. Bad property managers are a liability whereas good ones become an asset.

DIY Management –You also could do it yourself .

If you do your own property management, don’t wing it. Careful screening and a strong lease are key. Also, make sure you’re committed to minimizing your vacancy. One month extra of vacancy,induced by your busy lifestyles or lack of experience, would pay for nearly one full year’s worth of property management (less maybe $200 or so). Also, management is a write-off but your own time is not.

Pre-order a copy of a friend’s book, Property Management-Free, containing all the documents you need (and tutorials on how to use them) by emailing PropertyManagementFree@Gmail.com or call me for a property manager referral. 

Sincerely,

ShanaFosterMoore@gmail.com
Your Local Boise Real Estate Professional