A noticeable trend since the last quarter of 2015, with 2017 now on the visible horizon, are the ever rising rents throughout the United States, making this an ideal time to be an investor landlord if you are not already one.
Many markers abound, especially in the secondary market cities throughout the U.S., that rental housing continues to be a hot ticket investment. Many of these secondary cities, in no particular order, include Salt Lake City, UT, Austin and San Antonio, TX, Denver and Colorado Springs, CO, Portland, Or, Nashville, TN, Raleigh and Charlotte NC. Seattle, WA tops the national list of where rents are the highest rising, where the rentals are soaring some four times the national average. Many real estate investors are consistently generating better than decent returns by buying and holding their single family residential rentals.
The numbers are truly astounding. Starter home inventory is being squeezed out. Rental occupancy is at its highest level in a score of years. Monthly rentals are already at record highs, growing some 3.5% annually. Since the housing collapse, more than 25 billion have been invested in rentals and investors are still buying. Rental housing remains in very high demand. Single family rentals now make up 13% of the entire housing market, up from 9%, and continue to rise. It is expected that in the next decade, over one half of all the new households will be renters not home buyers. In the past five years, by the government’s measure of consumer prices, prices have risen 10% annually. This pales in comparison to rising rents, rising upwards of 14% annually with no end in sight. The rise is more than the higher cost of food, clothing, and other necessaries. More Americans are struggling to pay their rent each month and with a dearth of affordable rentals, it is a two-way squeeze, harder to even find a place to rent, as it gets harder to pay rent each month. Many tenants are forcing themselves to keep up with the rising rents and by the numbers those same tenants are earning more, with more and more of any disposable income being gobbled up by those higher rents. It is the investor landlords who are making the most of all this. Adding to this dilemma for many tenants, particularly in those areas with tighter inventory to begin with, investor landlords are raising their rents because they can.
In fact, as rental costs soar to record highs, buying is now more affordable than rentals in almost 60% of the US. The trend is expected to continue as rents rise faster than wages in juxtaposition with current home prices.
There are cautions to consider before investors get too giddy. For one thing, with so many investor landlords already in the marketplace, many of the distressed priced housing are now long gone. The big gains have already been made and the better deals are harder to find. Although there are still many neighborhoods, especially in those secondary city markets, where rents are rising much faster than the median home prices are, a sure sign that rental demand trumps buying for now, the more competitive marketplace makes it less certain than ever that investing numbers will continue to add up favorably. Not all deals are good deals, not all properties get rented. Underestimating the true costs of owning a rental can be devastating to your bottom line. The ownership challenges of being a landlord can be overwhelming.
For many savvy investors, it is a glorious time to be an investor landlord.