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The Credit Crisis and Its Impact on Rental Housing

Posted on 02. Jul, 2009 by Marc Courtenay in Best Of, Real Estate

“When it comes to property management and the credit crisis, things are changing all the time…this is unprecedented in our 40 years of experience.”

This is a quote from an interview I conducted with a partner of a prominent Southern California residential property management company. She is also an owner of both single family and multi-family residential rental properties.

The consensus around the U.S. right now is that credit continues to be very tight, and when it comes to borrowing money to buy residential income properties or to refinance existing loans, “these are the most challenging of times” according to several reliable sources I’ve spoken to recently.

In Southern California lenders are sticking to a “Ten Mortgage Maximum” rule that includes the property manager’s or owner’s own home mortgage.

So if you or an owner or client of yours needs to refinance a building and there are currently more than ten mortgages in your name (or tax ID #) you are going to be turned down. That is precisely what even the people with the highest credit scores are being told.

Lenders are a bit “paranoid” at the present time, as anyone who is keeping up with the rate of defaults and foreclosures would anticipate. The qualifications for loans are the most stringent they have been in decade.

The difficulty in qualifying for a loan used to depend on the relationship that the buyer/owner had with the lending institutions that they were “shopping” at. Not any longer. Although it still helps to know the right people and have “connections”, the biggest criteria now is how much you can put down (loan-to-value ratios) and how much outstanding debt you already have.

That is one of the predominant reasons that so many single and multi-family rental buildings are on the market all over the country. My interviewee told me that she has never seen so many unsold rental homes and apartment buildings in her 40 years of being a property manager and owner.

“It’s a ‘buyer’s market’, even in multi-family residential properties”, she said with emphasis. “It’s a very bad time to be a seller.”

As far as we know this is true in every region of the United States. Will these conditions change soon? We don’t think so, but for property managers, this actually can be good news. Encourage owners to purchase additional properties and expand their portfolio, look for the sellers who can’t sell their properties and manage their properties. These challenges are upside for smart property managers looking to grow their business.

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Challenges and Solutions for Residential Property Managers – Part 1
Apartment Vacancies Hit 30-Year High and That Can Be Good News

Tags: business, investing, Real Estate