ProAPOD®

Real Estate Investment Software Blog

Unless you live in a vacuum, you probably know that the residential housing boom we enjoyed over the past several years is running out of gas and stalling. How bad is it? According to the National Association of Realtors it’s bad. Here are just a few of the statistics.

1. Home prices are projected to fall for the rest of the year
2. The supply of homes for sale are at a 13-year high
3. The median-priced U.S. single-family detached fell 1.7% in August compared to a year ago
4. Prices haven’t fallen nationally since April 1995 (the second-steepest in 38 years)
5. Sales of new and existing homes, as well as building permits and new construction, are all off 10% to 25% in the last year
6. There’s now a 7.5-month supply of homes for sale, up 60% from last year

In other words, the bubble has burst, single-family home sales are declining, and experts are saying with inventory still rising, there is no chance of any short-term relief. Almost overnight, its become a buyer’s market, and sellers, if they want to bring buyers back to the table, will have to lower their prices.

Okay, so what do we do? Here are a few suggestions.

1. Consider making rental property a portion of your business. You might call it diversifying your portfolio, or as the proverbial saying goes “not putting your eggs all in one basket.” If you haven’t done so already, start working with real estate investment property more proactively. One or two sales of a rental property can easily help offset commissions you might otherwise lose from your single-family home business.
2. Watch for rental investment property to become more active. Think about it. Interest rates are still very good and some homeowners may decide not to sell their homes (at a lower price) and opt instead to use their equity to purchase rental property.
3. Look for some homeowners that might choose to sell their rental property in place of their homes.

Prepare To Meet With Rental Property Investors

1. Acquaint yourself with your local market. Get an idea about what residential income property has been selling for. A good source would be a local appraiser that has experience evaluating apartment buildings.
2. Learn a little something about the most common terms used for evaluating income-producing property like capitalization rate, internal rate of return, and annual property operating data (APOD). You don’t have to become an expert, you just want to be sure you don’t look like a deer staring into the headlights of a car when its brought up.
3. Invest in a good real estate investment software program so you’re prepared to present professional rental cash flow analysis reports. First impressions are crucial, and being able to give professional property analysis reports to buyers and sellers when you first meet with them can surely make the difference.

Of course it’s not the end of the world. The sky isn’t falling. We’ve all seen real estate cycling up and down for years. But we must face the reality that this is a real estate down turn and becoming a more full-service realtor may help you survive it. Besides, you might not only do well working with residential income property, you might like enough to devout some portion of your future business to it regardless of home market trends.