Real estate investors benefit from the increase in the number of people renting in metro areas, which is, in part, a result of more people moving to live in metro areas.
Several factors have contributed to the rise in the number of people renting, which began prior to the 2007 housing crash, and accelerated as people were displaced as homeowners.
Since the housing crash, demand for rentals continues to increase: “The demand for renting continues to climb, and building rental units has become easier,” stated Ingrid Gould Ellen faculty director of the NYU Furman Center. In 2006, 32% of renters lived in the largest metro areas in single-family homes, but that number rose to 37% in 2014.
The data collected from New York University’s Furman Center and Capitol One shows that renting has become more popular in the last decade. Furthermore, over half the country’s rental population is at least 40 years old, which can also explain the demand for a quieter home environment.
Rising Real Estate Prices
Rising real estate prices in metro markets have resulted in many people renting a home, reflected in falling homeownership rates from the peak of 2005.
Since 2005, homeownership rates have dropped from 69% to less than 63.7%. Rising real estate prices have led people to rent rather than buy, resulting in cities with higher real estate prices having higher rental rates. Thus, affordable housing is becoming increasingly out of reach for many low-income and moderate-income residents in the nation’s largest metro areas.
Many people who are renting are former homeowners. Foreclosures and damaged credit reports have forced people to rent, because they cannot qualify for a mortgage.
Tightened credit standards have also been a factor. Though programs have been created to encourage buying homes, they have not been utilized as predicted.
Other Factors for Renting
There are other reasons people prefer to rent, besides rising real estate prices in metro areas. Renting allows flexibility for people who want to move, and offers liquidity to invest in other assets such as stocks.
Also, many people fear another housing market collapse, which makes renting a good option for them.
Real Estate Investors
Whenever there is a growing demand to rent rather than buy, real estate investors have an opportunity to benefit.
As long as the rental demand continues, real estate investors can supply the demand by buying homes, rehabbing them, and renting them to tenants. Then if the demand changes in the future, and more people want to buy homes than rent, real estate investors can profit by liquidating some of their inventory to fill the demand.
Graystone Investment Group
Graystone Investment Group is an experienced Investment Group wholesaling properties in the metro Tampa Bay market.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.