[spex x]

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Spex,

One of the things that is freaking me out is the increasing vacancy rates in PHX. I am worried about all these failed flips being dumped on the rental market and forcing rents lower. Are you renting units right now and if so do rents look like they are softening to you?

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Yes, I'm renting units now, both apartments, single family homes, and mobile homes. Its really hard for me to say if rents are softening. I focus exclusively on very low-end properties, catering to Section 8 tenants and young families. In short, I rent to poor people, and there always seems to be enough to fill my rentals.

While I focus on poor people, I also provide the BEST low income housing in my area by far. I'm not cheap and I keep the properties in nice condition. So I tend to attract the best quality tenants in the market segment I'm after.

Basically what I'm saying is that other landlords might be experiencing higher vacancy rates than I am and I'm not aware of it. On the other hand, I'm pretty plugged into the RE investor community around here and I haven't as of yet heard much complaining.

I think that the wait vs. buy now debate depends a lot on the situation of the person buying and the market in which they're looking. If you want to buy for your own personal use, maybe you could wait a year or whatever and see what happens.

You could also maybe get into a favorable lease/option situation from a motivated seller where a significant portion of the rent goes toward the purchase price. If when the time comes, the option is in the money, you buy. If not, you allow the option to expire and you're not out anything more than the rent you would've paid anyway plus whatever option money was paid (usually 3% of the purchase price).

IMO, a good deal will alleviate all your worries about potential problems with a property. If you're worried about high vacancy, just factor that into the value of the property and don't offer as much. For EVERY property there is a price at which that property is a good deal. Its up to us to decide our price given the market that we're shopping in. If you look hard enough for long enough, sooner or later you'll find a property that fits your general criteria.

Edit: I'll add that the increased vacancy rates might not necessarily add up to difficulty renting your specific property. It depends on the market segment that you're after. I don't know the PHX market, but my guess is that the vast majority of the foreclosures are in the higher end homes as that seems to be where lots of the speculation has been taking place.

Obviously, high end homes rent for lots of money. Most people who can spend lots of money on housing would rather buy than rent unless they have a compelling reason to rent. The people who rent their housing do not, as a rule, have lots of money.

At the same time, there are lots of people getting foreclosed on. Of couse, given their financial situation they can't afford high rents either. So they have to downgrade and rent a house that is more affordable.

In my estimation you've got all the lower/middle income renters from before the housing crisis PLUS all the potential renters that are losing homes. They're all competing for the lower/middle rent-level homes and apartments.

In sum, there might be a significant undersupply of lower/middle income rentals even while the vacancy rate is increasing. All the high-end homes are getting turing into rentals but there aren't many why can afford them, so they sit unrented and all the time more and more and more are becoming available.