Although a lot of industry insiders are insisting that the time to buy rental properties as investments has come and gone in this housing market cycle, Morgan Stanley analysts say that the buy-to-rent market is still only “a fraction of where it could be” and is poised for “major growth in the coming years”. Today, this sector is worth about $17 billion; in the future, say the analysts, think more like $100 billion. The market is “a sustainable business with a long runway for growth,” they explained in a recent report.
I have to believe that with all of the displaced home owners who are unable to buy again in the near future – due to having lost their home to foreclosure or otherwise sold via short sale, that the rental market will be strong for years to come. I spoke with an owner in Florida today. She has a condo that was worth $300,000 but it is down to $70,000 market value. She has decided to sell. The property rents for $1100-$1200/mo. An investor will surely pounce on that cash flow. Deals like this should be around for a long time.
Despite the fact that the distressed inventory in today’s housing market is shrinking, it is still “sizeable enough to meet investor demand,” Morgan Stanley said in its latest housing research report. The firm’s researchers also cited a declining demand for homeownership and an increased need for high-return investments. With projected returns of 10 percent for institutional investors, buy-to-rent is sounding better all the time, the report said.
It certainly appears that at least Morgan Stanley believes that the buy- to –rent strategy has a lot of growth potential. And hey, we have to listen to the Wall Street folks…they are the ones that expertly orchestrated the housing debacle!! Wall Street fooled regulators, politicians, the public and the bankers….give credit where credit is due!!
Paddy Deighan J.D. Ph.D
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