No Boom For Landlords
The SFGate is reporting that the home price boom is putting the hurt on landlords. "Rental property is usually valued using the cap rate, which is the property's annual operating income divided by its price."
"In the fourth quarter of 1997, when investors would rather own dot-coms than duplexes, the average cap rate was 9.2 percent. 'I can't say it's crazy low or a bubble, but 6.3 percent is pretty low,'" says Alex Peters. With almost 50% of the profit is gone, why would anyone pay more for that?
This might be a clue. "Another source of demand is small-time investors who are getting into real estate. One way they're doing so is through real estate investment clubs. Sherwood always looks at the property before he buys it but says some club members 'just look at a picture on the Internet and invest.'"