The news for investors who own rental property keeps getting better. According to Moody Analytics, demand for rentals is expected to remain strong for at least the next two years. They cite the foreclosure crisis, an uncertain economy and fear of making a bad investment as influencing people to choose renting over buying.
While Moody’s data is national in scope, their findings hold true in Bend and Central Oregon. Preferred Residential’s property management division currently has zero vacant properties. When we do have a tenant move out we are having very little trouble finding new tenants ready to move in. In fact, I can’t remember a time in the last year where we had a house sit vacant for more than 15 days. Additionally, our owners have generally been able to raise their rents between 5 and 10 percent this year.
With all this good news for residential investors we have seen a large number of new investors coming into the market. Recently a client asked us if he should buy a nice, big “house on the hill” as a rental. Our answer was, no. It might make sense for some investors to buy a house like that, especially if the investor intends to move into the house at some point in the future. But this client wasn’t buying his dream, retirement home. He was just looking for a place to invest $300,000. Our suggestion was that he buy multiple homes instead of just one.
There are a few reasons that buying two or three homes instead of one expensive one makes sense. Rents don’t necessarily increase in step with the purchase price. A house bought for $150,000 will likely rent for about $1100/month in Bend. A house bought for $300,000 might rent for $1800. Of course this isn’t always the case but it is true more often than not.
Another reason to consider buying more than one rental home in this situation is cash flow during vacancies. What happens if the tenant moves out of your $300,000 rental? You have no income for as long as it takes to find another tenant. If you own two $150,000 homes and a tenant moves out it might be a little painful but at least there is still money coming in from the other rental.
The size of the pool of prospective tenants is also a reason that we would suggest buying multiple homes in this situation. No one wants their rental to sit vacant between tenants any longer than absolutely necessary. In Bend, a house that rents for $1100 fits within the budget of far more prospective tenants than one that rents for $1800. More prospects means a better chance of finding someone to move in and minimize the length of any vacancies.
Whether you are looking for multiple properties or just one, if you need expert, professional advice about investment properties in Bend and Central Oregon look no further than Preferred Residential. Send us an email or give us a call at (541) 508-2930. Whatever your real estate or Bend property management needs might be, we can help.