Wednesday, August 11, 2010

Recession's Silver Lining

While there are few silver linings to the ongoing chaos that is the U.S. economy, investment in residential real estate for income purposes appears to be one of them.

In the Greater Boston area, residential real estate vacancies are at an 18-month low and we are seeing a stabilization (and perhaps slight improvement) in rents. (Source: The Boston Globe 8/10/10)

Unfortunately for many, foreclosures continue at historic levels and the jobless rate remains alarmingly high. Thus, it stands to reason that rental units are in demand. Of course, with a dwindling supply comes added value in the form of higher rents. Not only are apartments easier to rent and in higher demand, but foreclosures are, for the time being, creating bargains for investors. This is a win/win for those of you who intend to purchase rental properties at this point and time. The lag time between the increase in rents and a future increase in per unit purchase cost is what creates this window of opportunity. With that said, I caution those of you with minimal experience in rental real estate to do your due diligence prior to diving into this area of investing.

Regardless of your experience with owning rental properties, keep in mind that the landscape has changed. It is common practice to vet a potential tenant in many ways, including verifying credit scores. Although there is certainly merit to considering credit scores, given the current economic conditions, you may want to place more emphasis on less objective standards, such as conversations with prospective tenants and verification of references. Remember, the opportunity being discussed is predicated on foreclosures - which destroy people's credit - and unemployment which almost always leads to similar credit issues. In order to take advantage of the opportunities in today's rental real estate market, in all likelihood, you will need to take chances on people you may not have considered credit-worthy in the past.

As always, for any issues regarding real estate, feel free to contact me at 978-423-9309 (cell) or john@jw-realestate.com.