Is Now a Good Time to Buy Rental Property?

This is a great time to buy an investment rental property in the Upstate.  There are many good purchase values available, interest rates remain at historically low levels, the job market is growing stronger, rental demand remains strong and home prices are beginning to rise.

In July of 2010, Barron’s published a cover article about the growth of home rentals stating “the recession and shifting demographics will swell the ranks of people who will rent, not buy, housing over the next five years.”  Barron’s projected an increase in the U.S. rental rate from its current 33% to 36% by 2015.  According to a January 2011 report from CB Richard Ellis, “the U.S. economy and housing market are slowly coming out of a deep slump, and there is a good chance that a combination of improving household growth and a steady or falling  homeownership rate will produce the strongest growth in rental demand since the 1980s.”  An October 2011 Morgan Stanley report titled “Housing 2.0: The New Rental Paradigm” states, “across the country, more Americans are becoming home renters, and fewer Americans are becoming homeowners. The beginning of the rentership society is upon us.  But all renters are not equal – of the roughly 40MM rental housing units in the country (representing roughly $6 trillion in asset value), about half are multi-family and half are single family.”  Demographic trends have tilted to single family home rentals. Simply said, those who return to rental housing from home ownership prefer renting a single family home.

In the most recent 2015 “Investment and Vacation Home Buyers Survey” published by the National Association of Realtors®, sixty-eight percent of investment buyers are likely to buy another property and seventy two percent plan to own the investment for more than three years.

Owning income-producing residential real estate remains a strong and viable investment vehicle.  When considering the purchase of an investment rental, it is important to remember, as with any investment, that there are risks and rewards.  If you are new to residential rental investing, start by consulting a knowledgeable Realtor®, tax advisor and property manager.  The Realtor® will help you find value and guide you through the purchase, the tax advisor will help determine how the investment may work to your after-tax advantage and an experienced property manager will help build value in your investment through the years.  Investing in residential rental property can be financially rewarding, but keep in mind that slow and steady wins the race.

By the Numbers:

19%                Percentage of investment properties purchased in total home sales

$125,000     Median investment property sales price

37%                Percentage of investment properties purchased in the southern US

61%                Percentage of total investment properties purchase that are single family homes

41%                Largest segment of investment properties being purchased by size range (1,001 – 2,000 sq. ft.)

45%                Percentage of investment properties purchased within 50 miles or investor primary residence

72%                Investors who plan to own their rental property more than 3 years

86%                Percentage of investors who believe now is a good time to purchase