Rental Property Investing

January 22, 2020

Buying Rental Property

The real estate market has yet to hit its peak. And the rental property market may have even better underlying fundamentals — supporting rising home prices and higher rent prices for tenants.

Those Fundamentals Are:

very high home/apartment prices
high employment rates
higher wages
better jobs coming
low mortgage rates
young buyers shut out of purchasing a home
millennials into their home buying years
housing supply lowest ever
construction labor shortage

Renters Facing Higher Rent Prices

Those 9 factors above almost ensure higher real estate asset prices and rent prices going forward. The 30+% rental property ROI days may be hard to recapture, yet there are still properties to buy in economically improving regions. There you might find low cost housing stock which may be ideal investments for equity and income.

The supply of homes has reached a new low in the US, despite new construction starts of late. That’s pushing prices ever higher.

Housing Shortages

This graphic comes from NAR’s new housing shortage tracker app. Cross reference this data with regions with fastest rising jobs and income, and you can identify regions with strong macro level potential.

Housing Shortage Tracker — Screenshot courtesy of National Association of Realtors.

Your Move to Real Property

Owning real property has proven to be a sound investment for most. Look at some of the best cities to buy rental property, the strength of the rental market, which rental properties to buy, and how to get more revenue from rentals.

Best Cities to Buy Property

Not all housing markets will soar, however NAR believes these metros will outperform in 2020:

Charleston, South Carolina
Charlotte, North Carolina
Colorado Springs, Colorado
Columbus, Ohio
Dallas-Fort Worth, Texas
Fort Collins, Colorado
Las Vegas, Nevada
Ogden, Utah
Raleigh-Durham-Chapel Hill, North Carolina
Tampa-St. Petersburg, Florida

South Carolina and Colorado are hot states for real estate.

“Some markets are clearly positioned for exceptional longer-term performance due to their relative housing affordability combined with solid local economic expansion,” said NAR’s Chief Economist Lawrence Yun.

As long as there are high performing housing markets to invest in, this might be a rare opportunity in real property assets — particularly rental income property. One inescapable fact about real property is that even if the market tumbles, you still own it. And in today’s climate, demand for rentals is strong.

Rentable Property Numbers Rising

New home construction numbers were up 3.2% from 1.32 million starts to 1.37 million starts in November. And in December, they hit their highest pace in 13 years, jumping 16.9% to a rate of 1.608 million units. That’s up 40% from last year. Economists missed December’s forecast numbers by 230,000 starts.

And new build to rent properties may offer many more benefits in terms of lifestyle for tenants, and added revenue generating digital services for landlords. And young renters are keenly interested in new digital features.

Which Rental Types are Most Promising?

The Urban Land Institute produces a report called Emerging Trends in Real Estate® and it offers up a detailed look at the rental markets in Canada and the US. As you can see the graphics below, UBI offers a buy recommendation for senior’s housing, and apartments for those with moderate income.

Review our rental property market outlook report, and our report on apartment rent prices. We have reports on major housing markets including rental markets in California, San Francisco, Oakland, Los Angeles, San Diego, Denver, and Chicago.

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Contact a Realtor with Rental Property Experience

While there are a range of passive real estate income investment products you might consider from ETFs to Reits, owning or managing real property may provide a higher up side. From flipping houses to owning a block of apartments, real property has many additional tax advantages.

There is work in the active sector, however a good property management software and a little advice can help you manage it cost effectively. For a large portfolio investor, hiring a property manager is a possibility.

Realtors are keen on the potential of rental real estate as a steady income source and for future commissions on sales. At some point, your equity could be so strong that you’ll want to cash out. Another investor will take over the rental property and manage it.

To invest smartly in real property, find a Realtor with experience in rental property. They’ll assist with finding the right rental properties for you, understand the rental property tax advantages, work out the ROI, growth in equity, conduct the transaction, and help set the right rent price . You can manage your rental property and tenants using the best property management solution available — ManageCasa.

What’s especially nice about property management today, is the use of automation. You can manage your financial transactions, accounting, leases, rent payments, and tenant communications online via the all in one ManageCasa app.