Big 5 Ways Real Estate Investing Has Changed Just This Year

The phone is ringing it is the tenant again, the toilet has flooded the bathroom and they want you to come out and fix it. They are not paying their rent and have family living with them that are not supposed to be there. To top it off the tenant has 2 dogs and they have not cut the grass in 4 weeks. If you do not address the grass right away you will receive a fine from the local municipality, if you do not collect the rent you will not make any money. If you do not fix the flooded bathroom additional damage may happen and the tenant will definitely not pay rent and probably move out and if you do no address the dogs further property damage is likely. This is the daily life of a property manager/ real estate investor. If you can put your emotions on hold, address the issues, and handle this worst case scenario you are probably able to make some money in real estate investing. Some things in real estate investing never change.  One local landlord estimates that it takes 15 to 20 hours of work a week to manage his four properties (Bryant, 2013). While there are many different things that new investors have to consider when investing in rental property in St. Louis, Missouri, seasoned investors are facing a number of changes in technology, financing, prices, laws, and economics.

Trend Change 1: Technology

One thing is certain technology will always change business and successful investors are aware of current advances in technology. Much of the change in real estate investing comes from 2 different trends and they are higher usage of websites and property management software productivity tools.

There are a growing number of trends in real estate websites, new marketing sites, changes in the rules to craigslist postings, buyers/renters conducting research on-line, and online communities. There are a number of tools that people now have at their fingertips and the trend is strong that there will be further increases in website usage and development. The following is a list of websites impacting real estate investing in St. Louis, Mo.

www.Zillow.com  - Marketing, Pricing, and Real Estate info

www.Rentometer.com  - Quick accurate way to check and compare rental rates

www.postlits.com – Landlords marketing tool helping to post vacancies to multiple websites

www.propertymanager.com – Resource of information and list of improvement ideas

In addition to the utilization of the Internet for research technology has allowed a firm to operate from  remote locations. "It states that the technology has given efficient ways to deliver what the renter requests and the software tools permit firms to give their residents the freedom to request maintenance work online” (KUNES (2013). The web is a growing trend, real estate investors must be more savvy with utilizing this resource. 

Trend Change 2 Financing

There have been a number of changes in investors ability to raise capital and the financing of investment properties. The banks are loosening credit policies, the Jump Stat act allows general solicitation and hard money lenders have become institutionalized.  In addition to the listed trend changes “Further, firms increase reporting quality in response to decreases in financing capacity” (BALAKRISHNAN, 2014). Lenders financing real estate investors require better reporting.  

The recent end to an 80-year-old ban on "general solicitation" advertising of private securities offerings lets real estate sponsors market money-raising efforts to the public via the Internet, television, newspapers, billboards and other means. The Jumpstart Our Business Startups Act of 2012 directed the Securities and Exchange Commission to end the ban, and the change marks a significant departure from the past. It used to be that private placement issuers could only quietly offer their securities to potential investors already familiar or affiliated with the company — or hire investment banks to find buyers (JOE, 2013).

Trend Change 3 Prices

Recently there has been a shift occurring from owner-occupied to tenant-occupied housing. This shift has increased rent prices across many of the major cities. "The increased rental prices and the expectation of future capital gains have encouraged investors to purchase single-family homes in the low and middle tiers and generated a new housing boom. (Lawrence, 2014)."We've gone from no homes to rent to almost a glut," Clark said. "As more people buy rental property, there's a glut, and rents decrease and vacancies increase. It's a cycle” (Lawrence, 2014). As rents decrease prices of property is back on the rise. Obviously we are not reaching the prices that homes were in 2006 but they are starting to climb back upward. This squeezes investors margins and truly skilled investors are forced to make better purchasing decisions.

Not only do investors have to be aware of the prices of real estate, and rental rates, they must be aware of the changes in pricing with labor, parts, and gas. Everything is going up. It seems what could be completed for $100 in 2006 now takes $220.00 to get completed. This trend not only effects the Real Estate investor but also effects the tenants. Damage charges are higher, Laclede gas bills are more, and the Housing Assistance programs are squeezing their assistance program budgets.  

Trend Change 4 Laws

“A provision that would mandate the licensing of St. Louis County landlords moved closer to enactment Tuesday in a County Council vote that split along party lines. The bill, sponsored by Democratic Councilman Mike O'Mara, will likely gain final approval next week. The ordinance is meant to help the county monitor problem rental properties more effectively. O'Mara called the ordinance a "proactive way to maintain and stabilize neighborhoods." "We're finding a lot of landlords from out of state are hard to track down for property violations and they put people in the rentals without occupancy permits or bringing the property up to code," the councilman said. The bill, O'Mara added, is aimed primarily at the rental of single-family homes. Landlords will not pay a licensing fee but will be assessed fines for non-compliance. The amount of the fines have not been determined. Councilman Greg Quinn joined fellow Republican Colleen Wasinger in opposing the bill. Quinn called the measure "another layer of bureaucracy" that duplicates existing ordinances requiring the attainment of occupancy permits. O'Mara however said it can take the county up to three months to address the problems in rentals lacking occupancy permits. Rental licensing, he hopes, will give county inspectors the opportunity to identify and rectify potential problems prior to a move-in date” (Giegerich, 2014).

Follow-up : May 07--CLAYTON -- A controversial proposal to license St. Louis County landlords has been placed on indefinite hold by its sponsor, who claims critics misunderstand the intent of the measure.

Ordinance requiring rental licensing in St. Louis County moves ahead

“The problem, Keiser said, is that municipalities are permitted under the law to make the requirements more stringent than the state requires, which in turn would make compliance more difficult” Kelly, 2014).

“St. Louis Mayor Francis Slay signed a bill Wednesday that requires lenders to allow homeowners to enter into mediation in an effort to stave off foreclosure proceedings” (Donna, 2013). The local legislators in St. Louis seem to be utilizing this opportunity with rental home investors to make more revenue. Legislators locally have tightened up building codes, forced down occupancy, and increased taxation on landlords. While St. Louis county has not implemented this law yet, this is the type of laws Real Estate investors battle on a daily bases.  In additional to local law, national policy is effecting Real Estate Investors “We believe that as monetary policy tightens, interest rates will rise. What we've already observed is that spreads that were at the high end of historical ranges just 12 to 15 months ago, are now narrowing” (Real Estate Investing Roundtable, 2014).  

Trend Change 5 Economics

 While the American Economy continues to evolve, the economy of the 1970's, 1980's 1990's 2000's do not exist in 2014. The economy in 2014 is strange. The New York Stock Exchange and Dow Jones continue to sore while millions of Americans are out of work. Automation has eliminated a number of jobs. Inflation runs rampant and regulations are tighter that hey have ever been. “Today, real estate is an accepted part of many pension and other institutional investor portfolios -- and not just large asset pools. Thanks to the continuing development of the public real estate markets and the formation of pooled funds on the private side, institutional investors of all sizes can take advantage of the relatively high risk-adjusted returns that the asset class offers” (Real Estate Investing Roundtable, 2014).

The boom of real estate has come from a number of large institutional buyers and cash is king because banks do not provide the same high leveraged loans they used to in the past. Private money is funding this real estate economy.  “Real estate investing is booming, and even considered a safe-haven investment, five years after the housing market bust, Reuters reported. Figures from Lipper show assets under management in property funds around the world increased by $29.8 billion in the first nine months of this year to $452.6 billion, a rise of 7 percent. Japan ($6.53 billion) has seen the biggest increase, followed by Europe ($5.15 billion), the United States ($4.87 billion) and Britain ($3.41 billion)” (Real Estate Investing Booming Again, 2013).  As you can see this boom is not just in the USA.

People had this idea that the price of a house could only go up. Today, people don’t want to rush such an important decision, perhaps because of the fear of a decline in prices. Young households, in particular, are more reluctant to get into housing (Garriga, 2014).

In conclusion, things are changing. It is how you prepare and how your sail boat sets it sails that will ultimately propel you as a real estate investor in these choppy waters in St. Louis, Mo. As you can understand the technology, financing, prices, laws and economy effect this business. If you want to succeed it is important to make business decisions that allow you to take advantage of the changes

If you would like a great website with FREE podcasts you can visit: (EpicRealEstateInvesting.com).  The interview on March 10, 2014 was with the popular investor Barbara Corcoran for the hit T.V show Shark Tank. She took a $1000 investment and turned it into a multimillion dollar real estate empire. "More than 100 podcasts are available on many aspects of successful real estate investing” (PRN, 2014).

Real Estate Investing. (2014). Pensions & Investments, 42(10), 24.

Real Estate Investing Booming Again. (2013). Money Management Letter, 81.

JOE, GOSE. 2013. "New Rules Shake Up Real Estate Investing." Investors Business Daily, November 08. A10.Business Source Complete, EBSCOhost (accessed July 4, 2014).

PR, N. (2014, March 6). Shark Tank's Barbara Corcoran Will Appear on "Epic Real Estate Investing" Podcast with Matt Theriault of EpicRealEstate.com. PR Newswire US.

Kelly, D. (2014, March 9). Rules for carbon monoxide detectors cause concern for Berks landlords. Reading Eagle (PA).

KUNES, N. (2013). The Only Constant is Change: How Technology is Redefining the Property Management Workplace. Journal Of Property Management, 78(4), 58

BALAKRISHNAN, K., CORE, J. E., & VERDI, R. S. (2014). The Relation Between Reporting Quality and Financing and Investment: Evidence from Changes in Financing Capacity. Journal Of Accounting Research, 52(1), 1-36. doi:10.1111/1475-679X.12031

Donna, W. (n.d). St. Louis Mayor Francis Slay signs foreclosure mediation bill. Missouri Lawyers Media,

Garriga, C. (2014). ASK AN ECONOMIST. Regional Economist, 22(1), 23.

Giegerich, S. (2014, April 23). Ordinance requiring rental licensing in St. Louis County moves ahead. St. Louis Post-Dispatch (MO).

Lawrence, K. (2014, January 27). Investors turn to rental properties. Messenger-Inquirer (Owensboro, KY).

Bryant, T. (2013, June 9). Pros and cons of the landlord business. St. Louis Post-Dispatch (MO).