Rentals Surge Up North Should you buy in?
REGION – Given the current economic troubles, it comes as no surprise to see a plethora of "House For Sale" signs throughout the Traverse City region. What may be surprising: the increasing number of signs advertising "House For Rent." Currently, there are more than 90 rental properties listed on the Traverse Area Association of Realtors (TAAR) website-65 percent of them in Traverse City alone. And that doesn't take into account homes for rent by the owner. What's behind this growing trend? And what does it mean for the already struggling real estate business-and the woes of today's homeowners?
Realtor Jack Lane credits the surge in rental homes to what he calls the recent "foreclosure frenzy." It's a ripe time for people with enough cash to snap up foreclosed homes at rock-bottom prices and turn them into money-generating rental properties, he says. Claudia Wicksall, an agent with Century 21 Pearson-Cook in Traverse City, agrees: "If I had the money to invest, now would be the time to buy-this is when millionaires are made." But, she cautions, "You have to be prepared to bear the carrying costs and weather the economic climate. It can be a big gamble."
The property ownership gamble has proven to be a costly one for many in our community, and it's another reason for the surge in home rentals. For many people, whether they want-or need-to sell, it's become nearly impossible to get an acceptable price for their homes.
In desperation they often turn to the idea of renting, says Teri Rogers of Schmidt-Rogers Management & Leasing. Rogers says she receives calls on a daily basis from frustrated owners who either can't sell their home or are adopting a wait-and-see attitude in regards to the market, praying for improvement. She estimates that her rental properties are up at least 25 percent from two years ago.
The glut of rental homes creates its own set of problems. Too many houses mean more competition, which leads to lower rents. Complicating matters more? Zoning regulations. Depending on where your property is located, you may find your hands tied. Case in point: In Traverse City, only long-term rentals-30 days or more-are permissible, which prevents homeowners from cashing in on the summer tourist season, a time when many visitors are looking to rent a place close to the action.
Away from the Traverse City limits, rules are more lenient-even in the somewhat populous towns of Suttons Bay, Leland and Elk Rapids. And those rental markets are more than holding their own against the economic downturn, says Ken Weaver of Real Estate One and Cottages North. He declares 2009 to have been a banner year for his rental property business. "I handle mostly waterfront vacation rentals," he says, "and as far as my business goes, this year was significantly better than 2007." Of course, waterfront property-an easy lock on real estate's cardinal rule: location, location, location-may be naturally immune to the economy's crush.
Regardless of location, the numbers are clear: the rental trend is on and going strong. Question is, is that good news or bad? The answer, it seems, depends what side of the contract you're on. While a boost in rental home availability will offer more options and lower rent for people who, due to foreclosure, are now unable to find financing; for landlords, it also could translate to more competition for renters and lower profits-a distinct sign that, as tough as times have been for those in real estate, things may get even tougher. BN