The real estate market often attracts non-business people more than other business fields. There are many reasons for this, some of which are the promise of residual passive income, building equity, and a “simple” business model that can be understood. But for all the great reasons to jump into real estate, there are always newbie landlords that end up failing, in debt, or bankrupt.
Although every situation is unique, here are the top 5 reasons why new landlords lose in the real estate game. Missing even one of these will make a new real estate venture turn south.
You might be a losing landlord if you’re:
Yesterday, a mortgage settlement was announced between Federal and State Governments and 5 major banks. The deal will require lenders to write down the mortgages of certain borrowers who are underwater. Homeowners who owe more than their homes are worth will see a reduction in the principal amount. The hope is this will curb the number of foreclosures and house prices will start increasing again.
The reality is that this deal has great points but a lot of shortcomings.
There are many waves changing the tide of real estate. Among them are the Obama administration’s plan to convert foreclosed homes into rental units and the boom in the rent market from tech jobs. But the biggest factor shaping the rent market of the future might be demographics.
As the Baby Boomers retire, there’s a new group ready to take their place. They are called Generation Y, Millenials, or Echo Boomers.
Defined as those born between 1977-1989, they make up 70 million strong. That’s larger than the Baby Boomers, and three times the size of Generation X.
Generation Y is checking into the workforce. By 2025, Gen Yers will make up roughly 75% of the world’s workforce, according to a BPW Foundation’s study published last year.
Those 70 million individuals wield a spending power that exceeds $200 billion.
The plan would create roughly 200,000 new rental homes this year.
Though still in the works, the US government has indicated it plans to carry out the operation in “early 2012”. That’s a relatively specific guideline, all things considered.
Despite encouraging signs, the housing market is still not recuperating at a healthy pace. Home prices remain low, yet the buyers just aren’t there. But where one market drags, another one flourishes.
Rental properties are providing huge returns for those able to make the investment.
The price of rent has been increasing rapidly in cities all over the country. But the cities where demand has increased significantly are those with strong job markets. Cities on the coasts like Washington D.C., Boston, Los Angeles, and Seattle are seeing rent demand push prices up as they add more jobs.