Is there a rental bubble building? Episode #355

Todd explains if there is a rental bubble building in Las Vegas.

Hello. Welcome to Todd Miller TV. Today’s video is called Is There a Rental Bubble Building? So as many of you are aware, the low prices in Las Vegas in the real estate market have caused a lot of investors to come in.

They buy these properties and they’re renting them out. So you have more people, investors, buying traditionally you have had over the last three or four years than normally; where it’s normally 78, 80 percent owner occupants. It’s now over 50 percent investors.

So the question is, “Does that mean if there’s too many rental properties, that there’s not enough tenants and that rents will go down?” So the first thing to sort of look at is the overall market. So if you’re buying a house, you’re either buying it to live in it. Is it owner occupant or an investment property?

So the question is – in Las Vegas you have to live somewhere. You’re either going to buy a house or you’re going to invest. So, one of two things are going to happen. Either you’re not going to be able to buy because you’re not qualified. You just had a short sale, a bankruptcy or a foreclosure. Now you’re a tenant, or if you’re not able to buy because it’s too competitive. You can’t get an offer accepted, whatever. You can’t get a loan approved for the amount that you want to buy a house for. So you end up being a renter.

So the idea here is that there’s not a static pool of renters that are looking for the same houses, meaning there are people today in rent who five years ago were owners but they can’t own because they’ve had a hardship of some kind financially and now they can’t get a loan. So they’ve turned into a renter. So actually, you can think of it this way. If you have this many owner occupants and this many renters, is the number of owner occupants drop, renters go up and vice versa.

So naturally, that’s what’s happening. The investors are not buying all the houses because they just have decided to buy all the houses. It’s because there aren’t enough owner occupants to buy. Home prices fell and now they’re cheap and the ROI is better as well.

So this idea that there’s sort of a zero sum game with rentals, I don’t believe it. If that was the case, when the market tanked, rents would have skyrocketed because remember, all those people – the rental market exploded because all these people now were not able to buy a house. They would have moved in that market and it has been steady. The rental market has been pretty steady.

So it’s kind of nice that that’s an even balance because if you think about it, 100 percent of all houses are either an owner occupant or a renter for the most part. They’re all either that. So it just got balance of shifting. It’s never static. It changes. In this market, it has changed more than other markets. So I don’t think that there’s a rental bubble building. I don’t think that there’s going to be too many houses available especially with the increasing prices because now what’s happening is renters are coming to me and coming here to this company going, “I now want to be an owner. I want to buy a house.”

So they’re leaving the rental market so that’s good and then we have other people at the same time doing short sales being foreclosed that are saying, “Hey, I have to rent. We sold the house. Now I need to go find a rental.”

So I think the market takes a very good – does a very good job at fixing that and so anyway, I thought I would share that with you. That is my update for today and hope to see you on another video. Thanks.