As home prices continue to rise in many markets, the dream of homeownership may be out of reach for some would-be home buyers. Suburbs on the outskirts of booming cities represent a key investment opportunity for rental property. Millennials remain the strongest demographic of renters, and Gen Z, born after 1995 are now making the rental market to the rental market. Baby boomers entering their senior years are expected to create strong demand for senior housing.
1. Renting Over Buying
Renting is more affordable than buying a home in some major population centers in the US. In fact, a whopping 64% of the nation’s population lives in markets where it is more affordable to rent than to buy, according to housingwire.com. It is now more affordable to rent in the top 14 most populated counties, including Los Angeles and San Diego in California; Cook County in the Chicago metropolitan area; Harris County in the Houston metropolitan area; and Maricopa County in the Phoenix metropolitan area. And that trend is growing.
2. Demand for Affordability
Affordable rental units continue to face solid demand from millennials, although some in that demographic are beginning to settle down and buy a home. Emerging Trends in Real Estate 2018 notes that in recent years the rental market has been focused on luxury units at the high end, resulting in increased demand for affordable rental units in markets nationwide. There are outstanding investment opportunities in mid-rise rental apartments in the core, as well as housing integrated with transit services for an easy commute.
3. Income over Appreciation
Cap rates are leveling off and rents have recovered in many markets across multiple property types. Emerging Trends predicts that appreciation will likely be muted and investors may be better off with properties offering a steady cash flow into the midterm future. Speculation is not encouraged under the current late-cycle conditions as conservation of capital takes precedence over yield. In the value-add space, investors are encouraged to assess the need for improvements carefully.
4. Changes in Senior Housing
In anticipation of demand by aging baby boomers, those born roughly between 1945 and 1964, senior housing is rebooting. Some skilled nursing facilities (nursing homes) are being repurposed into assisted living and memory care units to provide a continuum of care on campus-style developments. Restaurant quality dining is a motivating factor for move-ins, and as tech-savvy boomers look at independent living options, connected seniors demand an infrastructure that supports their devices. Creative options designed for affordability include roommate units with bedrooms and a common space. Senior housing investors are finding more distressed properties with attractive turnaround potential, and new operating companies led by senior living industry veterans are increasing.
Tips for Taking Advantage of Current Real Estate Trends
Atlanta tops the list of the top places to invest in a rental property and is Orlando not far behind. In Seattle alone, rent increases are expected to rise 7.2 percent. Some areas where you may find outstanding investment opportunities for rental properties include:
1. Atlanta
2. Orlando
3. Seattle
4. Las Vegas
5. Chicago
6. San Diego
7. Oakland
8. Detroit
9. Dallas-Fort Worth
10. Memphis
Real estate is a popular investment choice because it can offer a stable asset that produces an immediate cash flow. You can leverage the capital investment to build wealth faster…
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