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Rental Markets Continue to Expand

Real estate trends for 2012 suggest that the demand for rental housing will only increase, supported by improvements in employment rates and economic growth overall. These hopeful signs mean higher rents and expanded opportunities for new investors applying Jason Hartman’s investing “commandment” to diversify assets in as many areas as possible.

According to real estate analysts Zelman Associates, between 2005 and 2010, the number of single-family rentals grew by 21 percent, fueled by the housing collapse that led to large numbers of single-family homes being placed into foreclosure. Those owners became renters, and other kinds of households, hard-hit by unemployment and layoffs, were never able to achieve the financial stability to manage the costs of buying a house, and so have remained renters indefinitely.

Combined with a growing population of younger renters, some in school, others just starting new careers, who aren’t motivated to become homeowners at this point in their lives, these groups create a large pool of potential tenants for investment properties of all kinds. According to the US Census Bureau’s third quarter report, 2012 alone saw a net increase of 1.4 million new rental households.

In addition to the upswing in single-family rentals, the lesser-known market of multifamily rental housing – duplexes, triplexes and quadruplexes – has also shown growth. Since many lenders treat financing for multiple family housing up to four units as equivalent to a single family home, it’s possible to purchase these properties for relatively little more than you’d expect to pay for that single family house. The larger number of tenants in these properties also helps to spread the risk of a collapse; at any given time, there will most likely be at least one renter paying the bills.

Rents, too, have been spiraling upward thanks to a better job outlook that supports a willingness to put down roots and stay, with confidence in the ability to pay those rents. Some major metropolitan areas such as San Francisco are seeing rent growth of 11 to 14 percent, and even some smaller market areas such as Charlotte are experiencing rent growth of nearly 10 percent.

A major factor accounting for a significant portion of the growth in rents in mid-2012 was the rebound of the job market in some cities, as workers moved to new cities as part of their job. The same studies suggest that, on the national average, rents rose by as much as 4 percent in a year as landlords responded to the demand for rental housing.

Jason Hartman’s investment strategies urge investors to be “area agnostics” – willing to buy income properties in a variety of markets. Although those diverse local markets, taken together, create a broad national average, the factors that contribute to an expanding demand for rental housing in different areas of the country create new opportunities for public sector investors to build a retirement cash flow from rental income property.

The Heroic Investing Team


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