[Anonymous]

Anonymous

Dynamics of Neighborhoods Changing

Most of my rental properties are in neighborhoods in the $120,000 to $150,000 price range. My rents are $1100 – $1500 per month. For me, this price range has attracted quality tenants who pay on time, take care of the property, and stay for many years.

Ten years ago I also owned rentals in the $70,000 – $90,000 price range and found that I had much higher tenant turn over, problems with collection, and they usually left the house a mess when they moved out. So I sold or exchanged all those houses in to better quality neighborhoods.

The problem is that some of the $100,000 – $150,000 neighborhoods have been hit hard by foreclosures and short sales. When the property is resold, it is selling for $70,000 to $80,000 as an REO or short sale.

So, despite my efforts to keep houses in better quality neighborhoods, the dynamics of the neighborhoods and the price range of homes are changing because of market conditions.

Investors are buying some of the REO properties, doing minimal fix up, them renting them out. Unfortunately, many are renting to Section 8 tenants so they can get maximum rents. Previously there were no Section 8 tenants in these neighborhoods.

Luckily, most homes are resold to owner occupants.

But here?s the dynamic that?s changing entire neighborhoods:

Just a few years ago these homes were owned by people who made $70,000 a year or more and had disposable income to maintain the house. You?d see new cars in many driveways. And the yards were always landscaped to perfection.

The houses and the whole neighborhood looked very nice a few years ago.

Now, these homes are being sold to people who make a fraction of that income and live paycheck to paycheck so there is no visible sign of home improvement and the yards are not kept up like they once were. You see old cars in the drive way ? some running and some not. There are many more cars which seems to indicate that there are multiple families living in the same house.

The complete dynamic of the neighborhood is changing rapidly because of so many foreclosures and the current economic conditions.

For now, I?m still able to attract quality tenants, collect the same rents, and in some cases even raise my rents.

But, as the look and feel of the neighborhoods change I?m concerned that rents will go down and it will be harder to attract quality tenants to these neighborhoods.

When I drive through some of these neighborhoods now, it does not even feel like the same place.

I wish I had taken Jack Miller?s advice and sold ALL my rentals 3-4 years ago at the top of the market. I did sell most of them but I thought it would be a good idea to hand on to some. Once again, Jack Miller was right!