Why We Do What We Do
The primary reason property management is profitable for us is because many of our clients continue to add to their portfolios over time. They continue to buy because they are confident in our ability to successfully look after their investments as if they were our own. While property management is a very low margin business, selling houses and earning the resulting sales commissions is very profitable for us.
Making Our Owners Money Post 2008 and 2009
We are experts at identifying suitable rental properties for our clients. This is due to our unique experience in the market. Since I earned my real estate sales license in 2001, I have actively worked and pursued foreclosed property listings. This work resulted in my team listing well over 1500 distressed properties during the five years after the crash. Many of these properties made several of our property management clients a lot of money. That is something I am very proud of.
The ‘Pool’ Sales
A little-known fact outside the real estate industry, is that HUD, Fannie Mae and Freddie Mac disposed of tens of thousands of homes using what are called ‘pool-sales’. These government and quasi-government entities were still sitting on inventory years after the crash that would have taken another decade to dispose of one house at a time. This would have potentially delayed the housing recovery. The solution was to group these properties into ‘pools’; and sell them to various large investment funds at very attractive prices.
Today We Are Seeing Appreciated Assets On The Market
Many of these investment funds immediately got into the property management business and rented them out. They sold off the properties that were uninhabitable as soon as they could while still complying with HUD (Housing and Urban Development) Guidelines. Now that the market has improved we are seeing these funds list and sell these appreciated assets and begin to harvest their profits. We now seeing listings come in from private investment groups that in the past would have been listings that came to us from Fannie Mae or HUD.
The Challenge Today – Historically Low Inventory Levels
As I write this, we are still at historically low inventory levels across the board, and at almost all price points. I believe that while the economy and the jobs situation has improved for many these last few years, it certainly has not improved for all. Consequently, many people are unable to qualify for a mortgage, or if they do qualify, they are unwilling to commit. This is why rental housing is, and will continue to be, such a prudent investment. It is also why market rate apartment building continue to rise in virtually every metropolitan area of the country.
Opportunities Are Fewer Today
There are still opportunities in every market we work in. However, they are harder to identify and we and our clients have to be ready to act quickly because the competition is fierce. I do anticipate a downturn in the next 12 to 18 months as move into another presidential election cycle and possible recession. If prices continue to accelerate like they have the last three years, I think we will be in bubble territory.
Collaborate With A Realtor® To Help Navigate The Market
An experienced real estate professional can work with you expand your portfolio by helping to identify and evaluate potentially great new investments for you. More importantly, they can help you navigate the complexities of a foreclosed property purchase and get you to the closing table. My advice is to keep some cash and credit in reserve because what goes up must eventually ease back down. That could happen sooner than many think. When it does, we’ll be here to help you expand your portfolio.
Care To Learn More?
- Are you interested in diving deeper into your personal mindsets and motivations as a real estate investor? Set aside 15 minutes and complete the Making Real Estate Work Mindset Scorecard. You will get instant results and insights to your own personal view of the business you may not even be aware of.
- For a free download of my book A Real Estate Investor’s Guide to Profitability – Making Your Real Estate Investments Work For You and Not the Other Way Around, fill out the form below.
- For more information about The ROOST Landlord Advantage™ property management system, visit us at www.ManageWithROOST.com.
