It’s no secret to real estate investors that numerous markets across the U.S. will continue to experience strong rental growth in 2017. 2016’s historically low interest rates have allowed investors to purchase cash-flowing properties with leverage in major metros throughout most of the country. This in conjunction with a high amount of new households still preferring to rent vs. buy make this the perfect time to consider investing in this property type.
Still not convinced? Here are the top two reasons to consider investing in single-family rentals if the thought hadn’t yet crossed your mind.
Millennials Need Housing
Last year, 11.2% of adults lived at home with their parents, the highest rate since 1994. (HomeUnion 2017 National Single-Family Rental Research Report) Of that percentage, a large portion of those adults are Millennials, individuals that are bogged down by student debt and unable to even consider homeownership after college. However, the promise of strong job growth in 2017 is making it more tempting for this demographic to consider moving out. That’s not to say that Millennials won’t consider homeownership but increasing home prices, limited inventory and rising interest rates will certainly limit the amount that are able to make that a reality.
Also, when it comes down to it, most Millennials don’t want to own a home right now. While you may think this choice is due to a fear of the housing market caused by growing up during the real estate crisis, it turns out that is not what they are afraid of. The truth is, Millennials are more worried about being tied down at a young age. They desire a more flexible and mobile lifestyle. Meaning Millennials will create increased demand for rental housing in the coming year.
Purchasing a rental property can certainly seem daunting at first. On top of finding the right property in the right market, an investor has to consider the mortgage, the operating costs, how to attract the right tenants and numerous other factors to ensure that they have found a worthy investment. There are a lot of risks associated with investing in a single-family rental. However, in the case of single-family rentals, there is truth in the phrase “the bigger the risk, the bigger the reward”.
In 2016, the average gross yield for rental investors was 9.4%. (NREIOnline.com) Now to put that in perspective, the average annual return on the Dow Jones over the last 10 years has been 4.8%. (5YearCharts.com) One could argue that owning a rental property is dicier than investing in the stock market but also keep in mind that you have direct influence over your investment property which is not the case with the stock market.
For example, making improvements to your investment property increases your ability to charge higher monthly rents. You are also able to screen and select the best tenants for your property. With a single-family rental, you are in control of the outcome of your investment. Whereas with the stock market, you’re stuck riding the wave.
Single-Family Rental Opportunities
Individuals that choose to invest in the single-family rental space in 2017 will be able to find profitable opportunities in most parts of the country. While returns will depend on the market they choose to invest in there is no doubt that there is money waiting to be made in this space.
For investors that are looking to purchase single-family rentals with leverage, consider working with a private lender like RCN Capital. RCN Capital now offers long-term rental loans for SFR investors with terms up to 36 months and rates starting at 8.49%. Call us today to discuss financing options for your ventures in single-family rental investing.