General Discussion
In reply to the discussion: The Rent is to damn high. [View all]MineralMan
(146,288 posts)driving single-family home prices up way too quickly. Investors, large and small, are buying up houses, in the belief that prices will continue going up. So, they're renting those houses out, based on the price they had to pay for them and the cost of servicing the mortgages they got to pay for them.
As single-family home rents rise, owners of apartment buildings think they should raise rents, too.
However, the rapid increase in the price of residential real estate may not continue at the pace it has. My wife and I moved this year, and paid a premium price for the 2 bedroom townhome we bought. We then fixed up our previous home with a new roof, fresh interior paint, new flooring, and other stuff and put it on the market.
Both places are near the bottom of the market in the Twin Cities area in Minnesota. We were expecting our previous home to sell at an increased price from its previous valuation. It did not. It was not in the right neighborhood, apparently, and prices in that neighborhood had not increased as much as in our new neighborhood.
We didn't take a loss on the house, which we bought in 2004, but we also didn't make much of a profit on it, either. That's especially true after we spend the money fixing it up for a sale. It wasn't a big deal for us, and our new house and the old one had roughly the same value. It was a wash, really.
However, the person who bought our previous house is a real estate investor and will be renting it out. The problem for him is that rentals in the neighborhood where it is are not priced as high as he will need to get to service his mortgage. He's spending more money on the house, too, getting it ready to rent with a new AC system and new siding and some new windows. The reality is that he will not be able to find a renter for rent that will cover his mortgage costs. Of that I'm certain.
Not my problem, of course, but real estate investors are about to discover that what they can buy in today's market cannot support the rents they need to get to service the mortgages. That will tend to pull prices back down a bit.