Let me begin by telling you that the current crop of young working people, either out of high school or out of high school and college aren’t looking for a house and many cases they aren’t looking for work either.The youngsters are not excited about owning a house because they haven’t convinced themselves as of yet, that they are their sole responsibility. While the baby boomers were coming of age they not only were house oriented they were work oriented and anxious to get both started.
Today the graduates will work for executive salaries even though only a small majority of them have enough education and work experience to qualify for the jobs and pay they want. One of the reasons they don’t have work experience is student loans. Today everybody has them; in my day almost everybody worked through college and learned the basics of hard work.
Home loans aren’t particularly easy to get today, but virtually impossible to get without working for a period of time before applying for a loan. Many of the student/workers or non worker do not have an opportunity to live at home and must seek an apartment or a rental property to shelter themselves. This is the foundation of the rental market and it is growing. Amazingly the rents in many cities are in line with the mortgage payments on an entry level house which was never true in years gone by.
Developers generally build tracts of homes for owner occupiers with very few building them for renters. Apartments are going up throughout most cities and are renting for higher prices than ever before. Individuals with an eye to the future have been buying up older houses, refurbishing them and renting or leasing them to the crowd of humanity that is trying to find a decent and less expensive way to live.
Others are buying homes in new developments and renting those to married couples as well as groups of two or three roommates that are looking for something that is more like a home than just shelter. In the suburbs of Los Angeles I have been helping investors buy these properties and rent them for $1.40 to $1.65 per square foot for 4 and 5 bedroom houses in 2400 to 2750 sq. ft. houses. 1800 square foot houses are renting for even more.
With long term mortgage rates in the 3% range the rents from the properties not only cover the costs but produce positive cash flow. If you currently live in a more expensive neighborhood the rental rates escalate very quickly and many seniors have moved to second homes, or rented smaller houses, to use the rent on their house to specifically meet their monthly overhead. There are many that make this work..
I have written this article to show what is really happening in the real estate industry. You can probably find a way to increase your cash flow without switching professions or adding a second job. Those who have cash in the bank can purchase a home that will produce a cash flow that can close any gap you may have between your current income and your expenses. Those of you who are 62 or older can possibly get a reverse mortgage, take out cash from your house and purchase a rental. The reverse doesn’t require payments on the mortgage and if you buy the rental with the cash you get from the reverse from your house you may have a balanced budget for the first time in years
Please feel free to contact us to help you design a program specifically for you. It isn’t impossible to become landlord and it can make all the difference during your senior years.