Considering ways to diversify your real estate investment portfolio? Then look no further than the single-family rental market. The following is an overview of the inherent value of a single-family rental investment and how it could be the key to optimizing your passive income flow for years to come.
Growth Potential
Data indicates the single-family rental market is the fastest-growing sector of the national housing market. The number of built-to-rent properties, which are single-family houses constructed specifically to be leased, jumped over 30% in the last year alone. That trend is showing no signs of slowing down. The COVID-19 pandemic disrupted the real estate market, driving residents to the suburbs and impacting their preferences when it comes to living, working, and playing. It also spiked interest in built-to-rent housing options, which even prior to the pandemic was growing at an exponential rate. The draw is easy to understand. Most built-to-rent housing developments feature luxury finishes and eliminate the conventional hassles of owning your own home. The common areas are maintained by staff and any repair needs are covered by management. Single family rentals are in increasing demand by adults under 35, according to data from the Census Bureau, which indicates this sector of the population has the lowest homeownership rate of only 37.8%. Credit and student debt, coupled with a competitive market and stagnating earning potential has resulted in Generation X (ages 40 to 55) having an average of four times the assets of America’s younger generations. With the recent surge of remote working options, the single-family rental market has revived the possibility for younger Americans of attaining a suburban lifestyle that they may have long deemed out of reach.
Reliability
Over the past 15 years, and even during the dramatic economic recession of 2008, single-family rentals consistently delivered outstanding returns via appreciation and rental income. The median rent price has increased year-after-year by approximately 3% for the last several years as well–which is a reassuring statistic for potential investors. What are the factors driving this growth? Home ownership has been steadily declining since 2009, over which time the number of homeowners has declined by 3.6 million and the number of renters has grown by 1.9 million. This trend is attributable to increasing home prices, higher lending rates and buyer preferences favoring more flexible living accommodations.
Risk Mitigation
Dollar for dollar, the stock market has produced more favorable returns on investment that the real estate market; however, the real estate market has significantly less inherent volatility. Between 1977 to 2007, around 80% of the overall national real estate return was comprised of rental income return—meaning that it is a substantially more stable investment option than alternatives primarily dependent on value return. Investors considering single-family rentals should also note that while inflation is an inevitable aspect of the U.S. economy, real estate values are rising faster than the inflations rate. This metric enables real estate investors to remain profitable over the long-term.
Flexibility
Advancements in technology now mean that single family real estate investors are no longer confined to buying properties in their own geographic location. By taking advantage of on-site property managers and other resources, real estate investors can no garner sustainable passive income without ever having to travel to their properties in person. This allows both experienced investors with higher budgets to tap into in-demand markets with high earning potential like coastal California and New York City and newer investors living in expensive markets access more budget-friendly investment options in areas with lower costs of living. These technologies also facilitate greater portfolio diversification. Remote investing offers a certain degree of protection from local market fluctuations by allowing investors to own several properties across a broad range of markets.
Get Started Today!
Ready to start your single-family rental investment journey? Rehab Warehouse Inc. can help! We are a nationwide direct private lender that can get you the money you need to accomplish your investment goals in a fraction of the time it takes for conventional lenders. Our team of experts understand the unique challenges real estate investors face. We pride ourselves in delivering effective, intuitive funding solutions that satisfy your individual needs. Contact us today to learn more about the Rehab Warehouse Inc. advantage!