RealEstate Investing :Spur Investment in Real Estate to Ease Rising Rental Costs

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I met yet another renter who would like to own a home but cannot. Poor credit, not enough money for a down payment. Nothing but time and discipline is going to solve that problem. So, they have to rent.

And with rents in the area rising due to increased demand, renting seems like less of a deal. People are spending more of their income on housing - 25% of renters pay more than half of their income on rent and utilities (according to a survey by Harvard’s Joint Center for Housing Studies via CNBC).

One solution to rising rents is to increase the supply of rental properties. According to this CNBC article, there has been some discussion within the Federal government to become a landlord. I’ve been hearing this for a while and can’t imagine it will happen - at least not with a Federal agency becoming a direct landlord.

As the article mentions, real estate investors may be the best hope - both for easing rental rates and for improving property values.  Why not incentivize investors to buy properties (multi-families and single families) and rent them out? 

I know, I know. Real estate investors are an evil lot and they shouldn’t make any more money, right? But who else believes in real estate more than investors - in it’s power to transform an individual’s life, build wealth and create community? 

And who else wants to deal with the hassle of tenants, contractors, the IRS, local officials, lenders on a regular basis?

And who else has the money?



Right now, lending for multi-family investment is very tight. That’s problem number one.

Problem number two is that it usually doesn’t make financial sense for an investor to buy a single family home (the majority of distressed properties) in need of rehab, fix it up and rent it. The interest rates on the loan would be higher than for a loan on an owner-occupied property. And the investor would have to settle for little or no cash flow and to hold onto the property for many years in order to recoup the investment. The only way for an investor to make money is to flip - renovate it and sell it. But that’s difficult in distressed areas as buyers can’t qualify.

Rather than the Federal government becoming the nation’s largest landlord, why not spur investment in multi-familes and create incentives for investors to buy, renovate and rent out single family homes, particularly in distressed areas where people are not likely to be able to qualify for owner-occupied loans?


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