Never, in recent history, has one property type been such an obvious and stellar choice for real estate investors. Demand for rental housing is soaring and driving up rents due to a Perfect Storm of influences. Firstly, a huge number of people have lost their homes and been forced to become renters. Secondly, the protracted slow economy has stalled the development of multi-family housing, which has caused supply to lag behind demand and which will keep vacancy rates very low for several years to come allowing owners to continue to raise rents. Thirdly, a large segment of our younger population, having observed the recent blood-bath in home ownership, have made the decision to be renters, even though they could buy homes. Our two 30-something children are perfect examples. They both have excellent jobs and no desire to buy a home, opting, instead, for the flexibility of renting.
And now for the bad news. Large institutional investors are well aware of the situation and they are starting to buy up many of the best multi-family buildings. As the institutional investors grab more and more of the good properties, the competition for purchasing will quickly become fierce and the prices will go up. Investors who can buy now will be able to expect initial returns of as high as 7-8% with the expectation of increasing profits over the next several years! In the near future, as the institutional buyers gear up, we can expect the initial returns to fall quickly to between 5 and 6%. The other crucial factor is that interest rates are at, or near, all-time lows. A smart investor will realize that these low interest rates cannot last forever. It is important to remember that as long as your rate of return is higher than the interest rate, at which you borrow, then you are making money on the bank’s money. This is called positive leverage and it has a major impact on one’s return on investment. This means that the time to buy is NOW!!
Give me a call or send an e-mail while I can still find you a decent property with a strong cash flow and excellent prospects for both increased cash flow and appreciation.
Robin Brooks / Dale Price
RE/MAX Accord - Danville, CA
Experience You can Count On
(925) 212-2446
robin@agentrobin.com
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