Can your real estate investment compete with non-profit or government projects?
Short answer is no. Here is what you are up against:
1) Properties for low end housing that cost as much per square foot to build as high-end homes.
2) Brand new vs. renovated.
3) Low rents
4) More services.
Well the government has decided to partner with non-profit groups to revamp the housing situation providing housing units that cost 3 times more than your unit to maintain and build because they don’t have to concern themselves with whether or not the property is profitable. As a matter of fact, they are built under the assumption the properties Darcy Mercieca will be losers, but that is okay.
For me personally, I didn’t have this available to me until I had put myself through college, a master’s program, and getting a decent paying job working for a decent firm. Not to mention paying all of my bills on time for the previous seven years to make sure my credit was good enough to qualify.
Can you make money in the real estate market right now? Is your government making decisions, making you pay for these decisions and reducing your earnings potential?
Now you the landlord are left with reduced rents and a higher than normal population of the real trouble makers to rent to. In effect you will be left with more property abuse, reduced rents and lower property values.
Based on the economics of the market, you have invested the right amount of money into the property based on what you are receiving in rents, which is probably pretty minimal. Moral of the story, we as a community of real estate investors do not need to support these types of projects. These are primarily the ways to move a community forward, and these types of projects accomplish none of that. We need to stand up and point out what these projects really are doing to our communities.
Keep your eyes open, make good investments, and eventually it will become clear the free ride solution just doesn’t work. Don’t be afraid to raise your voice to stand up against these types of projects.
The whole concept works assuming you can get the three types of residents in, those who are willing to pay market rents, those who are provided a rent subsidy, and those who’s rent is paid directly by the state.
Stay abreast of what is going on in your community. We need to stand up and point out what these projects really are doing to our communities.
The question is where does that leave you, the professional real estate investor who has provided low income housing for your investment career? Based on the economics of the market, you have invested the right amount of money into the property based on what you are receiving in rents, which is probably pretty minimal.
I left a meeting last week where a non-profit group was extolling the virtues of their new quasi-high-end mixed income community. They spoke of the benefits to the community, such as reduced crime, less density, more services, rents that can be afforded by straight and low-income rent subsidy tenants.
All of the sudden it is not the big win-win for the community that they anticipated. Now back to square one, but wait you as an income earning tax payer now have to support this amenity rich community because, remember it was built with the anticipation that it would be a financial loser.
To make the situation better, the new units show how they have reduced crime because they screen out those with criminal backgrounds. They have a backlog of applications, because they are providing middle class living arrangements for little or no cost.
Taking money out of your pocket to knowing fund a losing proposition should piss you off like it does me. Taking money out of your pocket now to decrease the value of your portfolio over the long-term should get your blood boiling.
If I was offered this opportunity with only fair credit, no reliable job history and a handful of other personal issues, I am sure I would move out of my $500 a month unit and into this type of community I would jump all over it.
, if only we had a free market lobbying group that was a loud as those groups that spend all their time getting these types of projects moved through.. We tend to be busy actually trying to make some money and grow our businesses !!
I can understand why it would be appealing to at least the rent subsidy and direct pay residents. For the first time in their lives they are being afforded the opportunity to live in a brand new community, including granite counter tops, dishwashers, washer and dryers, community parks, and other facilities.
Moral of the story, we as a community of real estate investors do not need to support these types of projects. These are primarily the ways to move a community forward, and these types of projects accomplish none of that.
We tend to be busy actually trying to make some money and grow our businesses !!
Keep your eyes open, make good investments, and eventually it will become clear the free ride solution just doesn’t work.