BRET BAUMGART

Value of Landlord Houses and Rentals

Hypothesis

Landlords live in homes with higher property values than the rentals they own.

Research Methods

I used the Eau Claire city assessment website to find the values of the rentals in an area with a high concentration of student housing. Then I looked up the owners address listed with the rental to find the value of the owner’s home. Ten rentals had higher values than their owner’s homes possibly due to the rentals having multiple units likely being larger structures and therefore increasing the value of the rental. These instances are not included in the graphs.

No landlord is used more then once in this project. If I were to do this project again I would also use landlords who owned multiple homes in the area more than once to strengthen the project with another research aspect.

Data

The scatter plot shows the ratios between the values of the owners homes and their rentals. The equation indicates around 21% of the findings fit a pattern.

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f(x) = 0.278012590817596 x + 56963.2268191876R² = 0.218395232392048

Assessed Value Rental

Owner Home Value

Rent

al V

alue

Data

Most owners did not have more than a $100,000 difference between the homes they lived in and their rentals. However, there were a few exceptions.

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Landlord Home Values and the Value Differences

Between Homes and Rentals

Additional Research

An Article on the Real Estate Bloggers website titled “Student Housing: A Great Niche Real Estate Investment” claims that the quality of student housing does not have to be great to keep rent prices high with only the additional upkeep expenses for students being higher than normal. This way landlords can make money off the property while keeping property values relatively low.

Landlords can also receive property tax breaks due to “depreciation” which is a tax break that takes into account wear on a structure due to age. This helps Landlords maintain positive profit margins on their rentals.

Additional research

Around 80 million people are expected to turn 18 over the next decade. Also more young people are deciding to go to college. These factors create a high demand for student housing making it a popular way for landlords to make money.

Conclusion

The research did support the hypothesis that landlords own homes of greater value than the property they rent out. The exceptions to the hypothesis are mostly structures with multiple units making the building more expensive but also making it able to create greater revenue.

Sources

City of Eau Claire assessment data basehttp://www.therealestateblogger.com/%20/ho

using-general/student-housing-a-great-niche-realestate-investment “Student Housing: A Great Niche Real Estate Investment. Tom Royce, February 4, 2007

http://realestate.about.com/od/knowthemath/at/rent_depreciate.htm “Know the Math” James Kimmons

http://realtytimes.com/rtpages/20060703_housingshortage.htm “Student Housing Shortage Creates Opportunities for Real Estate Investor”, Phoebe Chonchua