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Rental Housing News

September 1996

Page Three

Surprises

In Real Estate Rental Ownership & Financing

A recent review of the U.S. Census Bureau's 1991 Residential Finance Survey
yielded an analysis by John L. Goodman, Jr. and Michael R. Group
published in the winter 1995 issue of Real Estate Finance.

  • Individual ownership dominates the rental housing market.
  • 61% of rental units are single family homes.
  • 50% of institutional investor-owned properties are also single family homes.
  • Partnerships did not gain market share in the 80s. In 1981, general and limited partnerships owned 5% of all rental properties; in 1991, it was just 3%.
  • Projects with government assistance, like the HUD Section Eight rent subsidy program, have above-average rents. Among apartments with five or more units, average rents for assisted units was $551; while the unassisted average was $438.
  • Savings and loans in 1991 remained the largest single source for rental housing mortgage financing.
  • Individual investors in single family rental properties are more likely to purchase properties entirely with cash, than owner- occupants.
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  • More than one-third of all rental properties have negative cash flows.
  • Among properties with one to four units, 54% have negative cash flow, compared with 26% with five-plus units and only 11% of properties with 200-plus units.
  • Many rental properties have mortgages with interest rates that are substantially higher than current market rates.
  • Property taxes are highest in the Midwest. Even in small, non-metropolitan Midwestern communities, rental properties are taxed at a rate approaching that of large urban centers.
  • Investors in rental housing can lose money in any location. Properties that declined in value after their purchase are widely distributed throughout the country, with generally only one-half to two-thirds in any region registering a capital gain.

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