Article By: Jim Porter – April 7, 2023
Holy cow! I did some research and found some surprising data on the number of single-family homes and condos in Solano County that are currently rental properties. There are approximately 120,000 homes in Solano County and more than 40,000 are not owner-occupied. No wonder we have an inventory problem in our market, with only 410 homes for sale in the county.
Sadly, 5,000 to 10,000 of these properties have landlords that don’t read this section of the paper because they are huge Wall Street hedge fund investors like Black Rock and Starwood Capital. The good news is that more than 30,000 of these rental properties are owned by good, old-fashioned, hard-working mom-and-pop folks that decided to make real estate part of their diversified investment portfolio, and this is my target audience. My goal is to help my Realtors and our huge number of pre-approved buyers find a house and achieve the American Dream.
After the crash in 2008, it became a buyer’s market and the only Realtors that made big money from 2008 to 2011 were the Realtors that were blessed to be real estate owned listing agents representing the mortgage companies that had to get rid of thousands of repossessed homes. This 2023 market challenge is the opposite. Home prices remain stable, very few people are in foreclosure and almost all the current homeowners have equity and a low-rate affordable mortgage.
It’s kind of funny and ironic, the government kept their mouth shut from 2003 to 2008 while Wall Street-backed investors and mortgage companies did trillions of dollars worth of bad mortgages, which artificially inflated the market. This time the government did too much spending on the pandemic and supported zero-percent interest rates for way too long.
I am not complaining about the 2.375% fixed-rate mortgage I nabbed in 2021 or the huge amount of profit all my friends and I in the mortgage industry made from 2020 to early 2022, but, yikes, this shortage of homes for sale is painful for us in the business and the thousands of first-time homebuyers ready to buy now.
Solano County has historically had five to 600 home sales per month, and this year we are averaging less than 300 and almost nobody is refinancing.
Attention landlords, if you were ever thinking about selling your rental home and taking the gain or exchanging your investment property via a tax-deferred 1031 exchange, now is the time to do it. It is a seller’s market on homes between $400,000 and $900,000 because there are five ready and willing buyers for every house on the market today.
Mortgage rates have come down and the California Dream for All is the greatest down payment assistance program in history. If you are a homeowner that converted your departing residence into a rental from 2020 to 2023 and have occupied that house two of the past five years, you may be able to sell the house now without any capital-gains tax if you are already sick and tired of being a landlord.
If you do face capital gains, you may want to sell one or two of your rental homes and do a 1031 tax-deferred exchange into a beautiful large one-story home for you to move into for retirement in four or five years or maybe a vacation rental in Scottsdale or Lake Tahoe.
You might consider an Airbnb, where if you have the right management, you can double your cash flow from your current long-term high-maintenance rental. If you love your tenant, you might want to sell the home to them now that most first-time homebuyers with 680 FICO scores can buy a house with nothing out of pocket. The market is so red hot today, you can sell your rental home on a 60- to 90-day escrow, giving your tenant time to move to a new home.
Keep in mind, landlords, many of your tenants will be moving out soon to buy a house so this may be the perfect time to call your trusted Realtor or mortgage adviser for a free consultation to see all your options.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
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