What is going on with that vacant house down the street?
Have you ever noticed a vacant or scantly used property in your neighborhood? Just a few houses down the street from me there are two properties that are worth at least $900,000 each that has been vacant for at least five years. Once I became more in tune to this phenomenon, I have started to notice these types of properties all over town. In Burbank, CA I personally know of 33 vacant or underutilized units. I can’t help but to be alarmed by the lost opportunity that these properties represent. In the example above, at a very conservative 5% return in a government bond fund this capital would have returned $225,000!
These vacant or underutilized properties have a negative lost opportunity for household finances, the real estate market, and society at large. The negative impacts are significant and far reaching.
The Scale of the Problem
There are conservatively 5 M vacant or under-utilized residential units in America. In the third quarter of 2020 according to the US Census Bureau, 6.4% of rental properties are vacant and homeowner vacancy is about 0.9% of properties.
The Private Impact of the Problem
Lost Rental Income – for Burbank with an average rental rate of $2,075 for a 1-BR and $2,505 for a 2-BR even very short periods of non-use can really add up to a significant loss for the owner.
Cost of upkeep on vacant properties – Vacant properties still require recurring expenses such as property taxes, property insurance, yard upkeep and obsolescence. One rule of thumb is 2% of home value on a yearly basis, therefore a $600,000 home would cost you $12,000 to maintain or about $1,000 per month.
The Public Impact of the Problem
Negative impact on home values – there is a direct connection between the percentage of properties vacant and housing prices, crime and poverty.
Cost of maintaining public services – municipalities provide public services and facilities for the use and enjoyment of real property owners and occupants. Underutilization of these facilities are a waste of taxpayer money.
Cost of Homelessness – the personal impact of homelessness on the individual are incalculable. The additional societal burden is substantial with increased utilization of Emergency and Police services. Some studies have estimated the cost to taxpayers is $44,400 per homeless person per year.
Solutions – private vs. public
Left unresolved by the private market, we run the risk of government lead solutions. Government solutions could include fines on vacant property or the exercise of eminent domain resulting in inefficiency and lost private citizen opportunity.
It is a moral imperative that private individuals and companies work and solve these issues for the own benefit and the benefit of society. Market solutions include:
Liquidate
By selling a property we can re-align the built-in equity to meet the goals of involved parties. Sellers can move on to properties that are more appropriate for their personal needs or invest the equity in stocks, bonds of other investment vehicles. A BOND Realty we are a direct purchaser of Real Estate and have conventional and fast close options available.
Lease
By leasing out the property (ideally using a property management company) the lessor can procure a steady stream of income while absolving themselves of the heavy maintenance and rehab work. Using technology and experienced leasing professionals, we can significantly reduce the time and effort involved in getting a property rented.
In both cases, liquidate or lease, the buyer, lessor, and neighbors all benefit from a well-maintained and highly utilized property.
Do you own a vacant or underutilized property? Is there a “ghost home” near you? Call BOND Realty to today. (818) 653-2481. We are prepared to assist in implementing a solution that best meets your personal and investing needs. Together we can transform vacant properties into productive assets that serve individuals and our community at large.