a rent to own real estate forecast in california

7/21/2019 A Rent to Own Real Estate Forecast in California

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A CALIFORNIA RENT-TO-OWN FORECAST 2015

The California Rent-to-Own Forecast for 2015 is a document that lists the top ten counties in

California with the best real estate opportunities for Rent-to-Own based on expertly chosen

metrics designed to diagnose each region’s potential. This forecast document provides buyers

with everything they need to determine where the best opportunities in their region lie.

by Nicholas Brown



JustRentToOwn.com is a Rent-To-Own Properties search engine and the

primary source for everything Rent-To-Own. We provide easily searchablenationwide Lease-Option property listings to benet buyers and sellers alike.

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California is, above all, a giant state. Home to the largest population and economy of any state in the nation, theGolden State oers an incredible range of dierent real estate environments, from the hottest markets in the nationto bankrupt cities still struggling to recover from the housing crisis. In this way, California acts as a great microcosmof our national environment. Californians were hit particularly hard by the foreclosure crisis: more foreclosuresoccurred in California during the crash than in any other state, particularly in ex-urban and rural enclaves. While thedamage done in urban centers like San Francisco, Los Angeles, and San Diego reversed quickly, many parts of thestate are still experiencing widespread short selling. As the market stabilizes, this rate will continue to fall, but the

momentary opportunity for Rent-to-Own buyers to establish agreements with open-minded sellers is presently veryavailable.

Due partly to the grassroots nature of Rent-to-Own real estate dealings, assembling workable data hinders mosttypes of comprehensive study on this niche market. In the hopes of getting a better understanding of whatbest suits Rent-to-Own buyers, this analysis employed a wealth of real estate data to develop a framework thatencompasses the best environment for RTO sales. Thanks to a comprehensive 2015 forecast from the CaliforniaAssociation of Realtors and recent Census data, our forecast in California’s market teases out some of the secretspots where Rent-to-Own buyers will thrive.

WHAT IS RENT-TO-OWN?

Rent-to-Own, also know as RTO, is a unique type of contract arrangement that puts potential buyers into theirfuture homes by allowing them to lease the property before making the sale. In conjunction with thoughtfulpreparation and/or credit rehabilitation, Rent-to-Own oers a way into the housing market for people who arenot yet able to secure a mortgage loan. It is especially benecial for young families with minimal savings as well aspeople with a history of credit issues they are in the process of xing.

A Rent-to-Own agreement shares many common features of a standard lease, plus a purchase option clause thatestablishes the terms of the nal sale. Most contracts also include an option fee, which is a small, non-refundabledeposit put down as collateral that can be used as part of the nal sale. Lease-option contracts involve a rentalperiod, usually one to three years, during which the tenant-buyer repairs their credit or saves a down payment withthe end goal of securing a mortgage at the end of the term. Once the mortgage is secured and the term ends, theseller transfers the property to the buyer in a traditional sale. The buyer also has the option to walk away from theproperty, forfeiting the option fee and any rent credit accrued during the lease term.

WHAT MAKES RTO DIFFERENT THAN OTHER MARKETS?

Finding the right home seller is key to establishing a Rent-to-Own agreement. Many sellers, particularly incompetitive markets, are not interested in maintaining a rental property for one to three years before nalizing thesale. Understanding the motivations of a seller will help to glean whether or not they will be open to a lease-optiondeal. Sellers who are having diculty nding mortgage-qualied buyers for properties are frequently open to RTOagreements.

HOW DOES RTO LOOK IN 2015?

A lot of factors make Rent-to-Own prospects look good for Californians in 2015. After a hot housing market in 2013,this past year has tended towards a cooling period. The California Association of Realtors notes in their marketforecast that fewer homes sold above asking in 2014 than the year before and predicts that price gains are slowingin the next year. Slower sales means homes will spend more time on the market, giving Rent-to-Own buyers abetter chance with a long-term, vacant seller.

http://calreinvest.org/crc-issues/california-foreclosure-crisis


http://www.car.org/marketdata/marketforecast/








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Loosening of mortgage regulations plays well for potential RTO buyers. Buyers who are interested in Rent-to-Ownbecause of credit issues will have a better chance to secure a mortgage at the end of their lease term. Others whowant to accumulate a down payment will now need to accrue less in savings before executing the purchase option.

METHODOLOGY

This study employs a custom RTO Opportunity Index developed around key indicators in real estate markets thatwill make Rent-to-Own appealing to sellers. The primary factors include:

- High rates of distressed selling/short selling: Rent-to-Own oers distressed sellers a way to hold onto more ofthe value of their sale.

- Solid appreciation in value: buying a home should be an investment and getting one in a healthy market is cruciato getting the most out of your purchase. Including appreciation in our rubric tempers the rate of distressedselling to help prevent buyers from purchasing in troubled markets.

- Surplus housing: vacancy rates are an indicator of how much surplus housing is available in a county. Vacancyrates include for sale homes, vacant rentals, and various other properties that could aord Rent-to-Own buyersan opportunity.

The RTO Opportunity Index adds each percentage from these three factors to get a nal number. To highlight thefriendliest markets for Rent-to-Own, a base rate of 10% or higher distressed sales in this past year was used. Thelogic behind this decision is that distressed sales rates indicate where the opportunity for alternative nancing liesbetter than other factors. Sellers who live in markets where their neighbors are selling short on their homes arelikely to be more welcoming than in competitive markets where some buyers are paying more than asking priceto purchase homes. Cutting markets where the majority of sellers are selling at or above market value levels theplaying eld, especially when considering other factors that can be weighted by the size or urbanity of the county,such as appreciation.

While these factors are only the tip of the iceberg, regional trends like these indicate where the strongest prospectsfor both nding an RTO seller, and where the hopes for developing a successful investment lie.





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RESULTS

TOP TEN COUNTIES IN CALIFORNIA:

CONCLUSION

Crunching the available data provides a top ten list that is diverse in both region and economic strata. The topten list includes everything from the budget-friendly (Lake: $178,330 or Tulare: $184,440) to more luxurious pricepoints (Monterey: $492,500), and features counties from each part of the state. This result suggests good news forpeople who are interested in Rent-to-Own buying as it aords a wide range of opportunities for potential propertieswithout limited results to a certain region or price range.

LAKE1MONTEREY2RIVERSIDE3MERCED4MADERA5KERN

6SOLANO7SAN BERNADINO8TULARE9SACRAMENTO10





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APPENDIX: RAW DATA

County Distress % Trough-Current% Vacancy % Opportunity Index

Lake 28 171.8 35.2 235

Siskiyou 18 50.5 approx 15(2000)

83

Shasta 14 49.5 11 74.5

Yuba 13 21.4 10 44.4

Humbolt 10 16.7 16.5 43.2

Solano 13 83.4 7.9 104.3

Madera 19 80.2 11.26 110.46

Glenn 19 9.5 11.51 40.1

Tulare 19 65.3 8.1 92.4

Fresno 15 55.5 9.29 79.79

Kings 15 60.4 6.4 81.8

San Joaquin 14 19.7 9 42.7

Merced 14 93.1 7.9 115

Sacramento 12 68.1 7.3 87.4

Stanislaus 12 49.5 7.3 68.8

Kern 10 83.4 12.13 105.53

Monterey 10 142 11 163

SLO 7.9 44.5 12.9 65.3

Santa Cruz 7 73.1 11.3 91.4

San Bernadino 14 73.7 16.4 104.1

Riverside 11 87.2 16.9 115.1

Los Angeles 7.6 90.7 6.6 104.9

San Diego 6.2 56.3 7.6 70.1

NORCAL

BAY AREA

CENTRAL

VALLEY

CENTRAL

COAST

SOCAL

Reigon

Sources:



http://www.calreinvest.org/crc-issues/california-foreclosure-crisis



http://www.calreinvest.org/crc-issues/california-foreclosure-crisis

a rent to own real estate forecast in california

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