How Local Laws Have Made Life Harder For Mom-and-Pop Investors—And What to Do About It
Summary
This article discusses how stricter short-term rental regulations in cities like Denver, Seattle, and Los Angeles are impacting small real estate investors and favoring owner-occupants. It also highlights the importance of choosing a solid strategy, using digital tools, and focusing on underserved niches to succeed in the current market.
Key Insights
- •The article references a list of the least landlord-friendly cities in 2024 (Portland, New York, Washington, D.C., Baltimore, Detroit) and best cities to be a landlord (Columbus, Phoenix, Nashville, Charlotte, Salt Lake City).
- •Stringent short-term rental laws in cities like Denver, Seattle, and Los Angeles have made it tough for investors to buy, giving homeowners an advantage. For example, owner-occupants accounted for 84% of starter home purchases in Denver, and investors just 16%.
- •In contrast to cities with strict STR laws, Miami sees investors account for 57% of starter home purchases, and first-time buyers 43%.
- •Many cities are increasing restrictions with rental registries, rent control, and no-cause eviction bans, squeezing landlords' profit margins.
Action Items
- ✓Define your investment strategy based on your liquidity, time, and risk tolerance, especially if you plan to leverage. Owning rentals requires reserves, and if you don’t have them, consider partnering with someone who does.Effort: mediumImpact: high
- ✓Focus on niches or underserved segments like affordable homes in smaller cities, older homes requiring moderate rehab, or units catering to renters who dislike corporate landlords.Effort: mediumImpact: medium
- ✓House hack smaller multifamilies of two to four units to qualify as an owner-occupant, thus avoiding stricter regulations on investors in some areas.Effort: mediumImpact: high
Tools & Resources
- →Neighbors Bank survey: The survey found that first-time homebuyers accounted for 69% of mortgages on starter homes in 2024, while investors made up 31%.
- →LandlordStudio & SparkRental: The article mentions management platform LandlordStudio and co-investing platform SparkRental.
Watch Out For
- ⚠The article warns that in the current housing environment, now is not the time to accrue a slew of doors unless you are extremely deep-pocketed. Rather, focus on making each purchase count, yielding the most cash flow possible by focusing on price, repairs, location, and rental demand.
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