Rental Units During A Down Market

4 Replies

I'm now 100% on board with REI. I just made my first offer on a local tri-plex with great cash flow potential.

I realize haters are going to hate but a friend just sent me a recent Forbes article regarding the impending doom on the real estate industry.

https://www.forbes.com/sites/jayadkisson/2020/10/29/the-serious-disconnect-between-a-hot-residential-real-estate-market-and-the-coming-tsunami-of-foreclosures/?sh=4192b11067eb

Personally, I see this as an opportunity to purchase more properties at a great savings.

My question is what happens to the rental market during a down turn? Is it easier to find renters when there is a surplus of foreclosure? Does demand increase?

It seems logical that demand would go up as people still need a place to live.

Thanks for reading,

Howdy @Trevor Miller

In March there were scad loads of people calling for an upcoming foreclosure crisis.  In July fewer.  In October almost no-one, except this forbes article and a few others who aren't connecting the data with the government's behavior.

Typically if there is an abundance of foreclosures then there is an abundance of bad credit.  Sale values of properties may tank, but rental values will only be affected IF the the supply and demand dynamic of rental properties is altered.  In 2008 there was some substantial movement in the rental market (I've heard) due to the on-ramp that we used to get into the GFC.

If we see a rash of foreclosures now it won't be because of toxic loans and the systematic fallout of the markets built on those loans.  It will be due to something different, and if the GOV doesn't do EXACTLY what they have shown a willingness to do thusfar and stimulate the market out of the lulls with figurative moneyprinting, then it's completely unclear what will happen to the housing market, but it's highly unlikely to mimic 2008 because the origins are unrelated.

Looking at it from a macro perspective:

Someone cannot afford to pay for their mortgage so they are kicked out and foreclosed on. They'll either be homeless or NEED a place to stay. Population goes UP every year (even with COVID), housing inventory isn't keeping up.

Oh if only we had a crystal ball!! LOL. This is uncharted territory not mimicking anything the housing market has ever seen before. Anyone's guess is as good as the next guy's guess. My financial plan is to be in the position to purchase foreclosures in the next 6-18 months.