| March 2008 - The single family home market is a mess! Over building by developers, foreclosures and short sales, and tightening of credit standards have created a glut of inventory that will take about two years to work through. The information below applies only to a normal market.
Safety: In a normal market single family rentals are considered one of the safest investments available. Rental rates rarely if ever, decline. Vacancy is extremely low. Tenants of homes are more stable than apartment dwellers so you have lower maintenance and vacancy costs. Homes also offer the best inflation protection available.
In the event you need to cash out, there is normally a market for houses. Remember, multi-family units are purchased only by investors. Houses are purchased by owner occupants or investors.
Profit Potential: There exists in Fresno an excess of inventory of single family homes at this time. This means that there is a short window of time before the market adjusts where the wise investor can get some great deals. The greater Fresno market has seen remarkable appreciation for the last 5 years. Home prices have more than doubled in that time. What is amazing is that Fresno housing is still the least expensive in the state and near the national average home cost. With the population of this area predicted to double in the next twenty years I do not see how this market can go anywhere but up. The question is when will the current oversupply of homes for sale balance with the number of buyers. If you are buying now looking for appreciation in value, be very, very patient. Look 3 to 5 years out to see significant appreciation.
Ease of purchase and resale: Unlike apartment units, one can acquire, finance, sell or refinance homes on a one each basis over a period of time. Individual homes also resale much faster than apartment complexes and buyers of owner occupied homes have government assisted/guaranteed financing available to them.
Financing: Typical non owner occupied financing is 20% cash down. Current interest rates are changing daily so we must shop loans with each transaction. My best source for direct funding loans has been Washington Mutual - Lisa Dipple 408 399-4273 or Countrywide - Nancy Kaiser 559 448-1333. For those preferring to work with mortgage brokers talk to Bernie Araiza 559 436-6446 or Linda East at 559 435-5593. See Estimated Cash F/ow Work Sheet
What to buy: Location is critical, schools, shopping areas, traffic, common sense choices that an owner occupant would select.
Age: 1990 or newer is better because of appeal of design to tenants and less maintenance, lower energy costs, and the likelihood of fewer rentals in the neighborhood, and the probability of being in the desired direction of community growth.
Purchase Price: The purchase price should be in the bottom end of newer, desirable homes for sale. In Fresno that means $220,000 to $270,000. Size: 3/2 with 1,300 plus sf of living area, two plus garage, 6,000 sf lot or larger. |
