Sunday, November 4, 2012

How to buy rental houses without getting your hands dirty

Over the years I’ve done fairly well buying single family houses then renting them out. I was fortunate to have sold most of them by 2006, not long before the bubble popped. Now that prices seem to have hit bottom and mortgage rates are at historical lows, I think this could be a good time to get back in.

But to be honest, even though I think this sub-sector of real estate could be a good source of income with potential for appreciation along the way, I’m not sure I want to work that hard again. When you’re a small operator like I was with no more than 20 properties at any one time, you need to do most of the maintenance yourself.

Cleaning up after tenants move out, painting, patching holes in walls, fixing minor plumbing problems are just a few of the responsibilities you must assume. Plus you need to keep after tenants who don’t pay, even hauling them to court if needed.

So at this point in my life, you can understand why I’m a tad reluctant to jump back into the rental market.

However, in the near future there may be a way for me to invest in rentals without buying a house myself. And you might be interested, too ...

American Residential Properties is a real-estate investment company that buys, renovates, leases, and manages single-family houses. The Scottsdale, Arizona company operates as a private real estate investment trust (REIT), and recently sold $224 million worth of stock mainly to institutional investors. Now it is considering the idea of creating what I think is the first publicly traded REIT for single-family rental homes.

Two California companies, Waypoint Homes and Carrington Mortgage Holdings, are also looking into setting themselves up as publicly traded REITs investing in single-family rentals.

I’ll watch for further developments and post an update if something comes on the market.

Meanwhile keep this mind:

·         Hundreds-of-thousands of single-family homes are in foreclosure in many sections of the country

·         The homeownership rate has fallen over the past several years

·         For every percentage point drop in homeownership, the demand for rentals jumps by almost one million

·         A certain percentage of the population will always be renters because they have lousy credit, can’t come up with a down payment, or simply prefer to rent

Add them all up, and you can build a real good case for taking a close look at single-family rentals. And REITs could let you get in without the hassle of buying a house on your own.

Best wishes,


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