Busted housing market no boon for many renters in Central Florida

One group that has not benefited from Orlando's precipitous drop in housing prices is renters.

In the past six years, existing-home prices have been slashed in half in the metro area, yet monthly rental rates have actually increased slightly.

With demand for rentals high in an area laden with foreclosures, rents have edged up even though landlords are paying far less than they did in the past to buy rental properties.

Orlando resident Carlos Ortiz said the relatively high rents that landlords are charging tenants to live in low-cost homes recently inspired him to leave his rental near Orlando International Airport and buy a Kissimmee-area house that, although almost double the size, costs just a few hundred dollars extra a month.

"Renting just didn't make sense any longer," said Ortiz, who moved into his new house last week.

The median rent for Metro Orlando was $833 in October, up a bit from $822 six years ago, according to a recent report by ALN Apartment Data Inc. Existing-home prices in Orange and Seminole counties, meanwhile, are $112,500 ? down sharply from a median price of $214,000 six years ago. And while property insurance has increased, property taxes have fallen.

"This is one of the most profitable times for landlords," said Tom Long, founder of the Osceola County Landlord Association. "Prices will stabilize and there will be a huge increase in foreclosures but, at the end of the day, if I can buy a property and can get it for a very good price, I can rent lower and still make a profit on my investment."

Two years ago, only 87 percent of the local market's rental homes and apartments were filled. Today, occupancy rates are running at 92 percent and have been heading in the direction of the heated years of 2005 and 2006, when developers were fast converting apartment complexes into condominiums and 96 percent of the remaining rentals were occupied, ALN reported.

With more prospective tenants vying for leases, rental deals are disappearing. The amount of free rent and the number of waived deposits being offered by apartment owners and others have dropped by half since mid-2009. And the number of apartment and rental-home owners offering such breaks has dropped from 53 percent two years ago to 39 percent as of October, according to ALN.

Anxious to tap this market, developers are now building apartment complexes, particularly in or near downtown Orlando. Anthony Crocco, who oversees Central and North Florida for the real estate research firm Metrostudy Inc., recently cautioned that the rental market should closely watch the addition of multifamily units to ensure the supply doesn't outrun demand.

Brian Phillipson, who owns about a half-dozen rental properties in the Maitland and Winter Park areas, said landlords used to have to wait about three years to start making money on a newly purchased property. But now, he said, the profits are almost immediate.

"Now the likelihood is double that you can have a positive cash flow," he said, "and there's been no problem renting."

The main obstacle for landlords looking to expand their holdings is that investors still have few financing alternatives and so are forced to pay cash. If banks would loosen their lending guidelines for investor-owners with strong credit histories, Phillipson said, those buyers would have more money available to acquire and improve foreclosed properties, which would help boost values in the neighborhood overall.

Phillipson also questioned Fannie Mae's policy of giving families and other occupant-owners first crack at buying foreclosed properties, ahead of investors. He conceded that neighborhoods may tend to flourish more with occupant-owners instead of transient renters but said anything is better than letting repossessed houses sit empty and rot.

During the housing boom, investors purchased single-family homes, condominiums and apartments with an eye toward flipping the properties for a quick resale and profit, said Stan Smith, a University of Central Florida finance professor. Today there is little appreciation but, with other investment earnings so meager, there is also a lowered expectation for returns, he said. In addition, he added, the rental income can be attractive.

"If you can get the same rents [as six years ago] and cut the purchase price [in half], you don't need the appreciation, especially for well-located properties," Smith said.

mshanklin@tribune.com or 407-420-5538

Source: http://feedproxy.google.com/~r/orlandosentinel/news/~3/IOagrfsT2uI/os-rents-prices-20120109,0,1653013.story

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