Category: Investing, Real Estate

Are Rental Properties A Good Way To Grow Your Money?

A better way to measure supply and demand is to balance the vacancy rate. A high vacancy rate means that there are more homes available in the short term than are in demand. 

However, in a low vacancy environment, landlords and sellers can lower their prices because they are likely to have many potential buyers and renters competing for the same home. In this environment, landlords have an incentive to lower rents or make other offers to get tenants into the apartments. This change in the composition of rental housing has important affordability implications, as apartments in smaller multifamily buildings tend to rent more affordably than single-family homes and apartments in larger buildings. 

Small rental properties are attractive investments for large landlords, individuals who own a few rental properties, and additional sources of income for small, privately owned family businesses. Large rental properties are often owned by specialized companies called Real Estate Investment Trusts (REITs). These develop, own and manage a wide range of properties for insurance companies and pension funds that hold shares in apartment buildings because they need stable assets with long time horizons to meet their return plans. The concept is to build properties that can be rented out over the long term. 

The same concept of building rental housing is being applied to single-family homes today. Real estate investors know that demand for good rental properties is surging in many markets across the United States. The U.S. Census Bureau reports that homeownership in the United States is declining, resulting in rising vacancy rates and increasing median rents, especially in the midst of the current recession. Savvy real estate investors and developers are taking advantage of the opportunity created by the housing shortage and changing demographics to meet growing demand by building and renting single-family homes. 

A new study shows that builders in the U.S. are on track to complete more new homes in 2020 than in any year since 1980. The lack of meaningful new apartment construction since 2008 has created a supply-demand imbalance that, combined with the arrival of 80 million renters who prefer the flexibility of renter “lifestyles,” is likely to create a monstrous multifamily housing market. Simple economists say investors are in for a sweet ride over the next few years. 

The cyclical nature of housing could prove to be the endgame for the looming housing cost dichotomy and the demise of apartment operators, meaning that as renters leave apartments to buy condos, developers and investors will drive them out by trying to convert rental buildings to condos along the way. The gap between the expected number of buildings and the amount developers must pay to lenders and investors could halt affordable housing development before it even begins, leaving millions of low-income families searching for safe, affordable housing with fewer options. In many places, rents paid by poor families are too low to cover the cost of operating housing, so developers build it for free. 

Here are five reasons why your local developer might be building homes you or your neighbors can’t afford. Fannie Mae reports that the 2017 average was $192 per square foot in multifamily housing. The price of a condo per floor is determined by the actual cost of building new homes. 

The median price for a condo in Yishun is $1231,300, while the median price for a single-family home in the county is $1352,500. Urban infill is a major factor in increasing housing numbers in counties and areas that are considered up-and-coming. 

Simply put, when renters choose standard units, they tend to have more single-family homes and benefit from a well-run, well-appointed community. In the suburbs, 90% of lots are reserved for single-family homes. Large apartment complexes in such single-family areas allow developers to build large, contiguous lots that are cheaper to build per square foot. 

One of the fastest growing developers in this niche, Nexmetro, is marketing its rental brand, Avilla. The professionally managed and well-appointed development offers two-, three- and four-bedroom townhouses or single-family homes with upscale finishes, high ceilings and private courtyards, with each unit one floor higher than a rental home. Unit finishes and fixtures are higher than typical homes, including stainless steel appliances, quartz countertops, washers and dryers, and hardwood floors throughout. 

This is no longer a condo or apartment building where tenants don’t have to worry about maintenance and upkeep. Developers offer many other perks and benefits to individual owners. Owners point out that they have to compete with developers if they want to sell their units.

Affordable financing, combined with multi-generational demand for rental housing, has led to impressive returns on single-family home construction and rentals. A recent Forbes article shows that returns on home construction are higher than those on apartment construction. 

New investors are designing multi-family homes as a mix of single-family homes and condominiums. With mortgage rates at record lows and rental prices on the rise, this offers first-time buyers a number of advantages over multi-family homes. These investments are perfect for investors looking to expand their real estate investment portfolio or take their business to the next level, and offer an option for investors looking to invest in mixed-use apartments down the road. 

More and more condo developers in New York City are becoming landlords in the face of a sluggish sales market and high-priced apartments that go unsold for months or even years. They see rental income as a lifeline to cover project debt and other costs like property taxes. Tenants in such developments include professionals and millennials moving in and out of families, and those whose lives go from divorce to empty nesters. 

Cairo’s new Park 17 apartment building at the intersection of East 17th and Park Avenue has 12 leases. The building’s leasing was helped by state-mandated store closings in the spring and technology that allows interested tenants to take virtual tours. The 35-storey residential tower Kairoi wants to build at Speer Boulevard between Larimer and Market streets is still on hold, according to Kasparek. 

A better way to measure supply and demand is to balance the vacancy rate. A high vacancy rate means that there are more homes available in the short term than are in demand.  However, in a low vacancy environment, landlords and sellers can lower their prices because they are likely…

Leave a Reply

Your email address will not be published. Required fields are marked *