Buyers who bought at the bottom of the market in 2009 got a bargain. Then came years of opportunity to refinance into record-low interest rates. That means many owners can rent out their home for more than it costs them each month, even with taxes and other ownership costs figured in.
With the tenant covering the note, they can build equity — especially if home prices continue to rise.
“It’s a market-based decision,” Henson said. “They know they can get really high rents right now. If I’m locked in on a 30-year fixed [mortgage] at 4%, and if home values are going up, it can make a lot of sense.”
It did for Brian Darcy. The 36-year-old and his wife recently moved to North Carolina to be closer to her family. Instead of listing their three-bedroom in Manhattan Beach for sale, they signed with First Light and put it up for rent. Within a week they had a tenant and a lease that paid more than enough to cover the mortgage, Darcy said.
“The confluence of events kind of blew my mind,” he said.
Darcy and his wife bought the house in 2010 and always planned to move to something bigger. With two growing children and regular visits from relatives, it was getting to be that time. But the houses they were eyeing in Manhattan Beach were going up in price just as fast as theirs was.
They had enough savings for a down payment in North Carolina, and he could work from there as easily as in California. So off they went. They’re looking for houses now and finding that their money will go a lot farther in their new home.
The timing, Darcy said, couldn’t have been better. He estimates that his house in Manhattan Beach is worth one-third more than he paid for it four years ago, and he refinanced into lower interest rates. Now rents are rising.
“We bought at a good time,” Darcy said. “That’s what makes the mechanics work.”
Many of the new landlords are affluent and financially savvy, Haberle said. They’re not necessarily in it for the long haul, but they see a chance to profit right now.
“These amateur landlords aren’t people who are doing this for a living,” she said. “They just kind of happened into this opportunity.”
If this trend holds, it could mean even fewer homes for sale in an already tight market.
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