The US housing market appears to be on the road to recovery after the recent collapse that put millions of foreclosed homes on the market and turned homeowners across the country into renters. At the same time, home prices are rising and fewer foreclosures are hitting the markets in some areas, leaving potential investors wondering if real estate investing really yields results. But as Jason Hartman says, there’s still never been a better time to invest in rental real estate.
Recent reports on the fallout from the foreclosure crisis suggest that the supply of available foreclosure properties is drying up, with fewer single-family homes making it to the market as distressed properties. While that can be true in certain markets, many more foreclosures are still being processed, as lenders and the courts work to clear a backlog of foreclosure filings.
One major reason for the sluggish clearing of these cases relates to ongoing investigations into the legalities of many filings, with questions raised about proper documentation and the ownership of actual titles. As these cases are resolved, some real estate experts predict periods of heavy activity in distressed property sales, as these “delayed foreclosures” work their way through the system and onto the market.
Another outcome of the housing collapse is the rapidly growing rental market. In some areas of the country, renters outnumber homeowners. Many of these renters are former homeowners, too, who lost their houses to foreclosure. Even though interest rates are low and financing is available, large numbers of people just aren’t financially stable enough to purchase a home, and will remain long-term renters. And, in some areas, large populations of childless professionals or students often opt to rent rather than own a dwelling. The result: a diverse, expanding group of potential tenants.
Along with the expanding demand for rental housing comes higher rents. In major markets around the country, and many smaller ones as well, the cost of rental housing continues to rise, with no downturn in sight. For investors in rental real estate, this means that setting competitive rents creates the potential for a higher return in the current market. Alternatively, pricing your rental at slightly below the current average can ensure that you’ll keep steady tenants, with benefits as well for the long-term profitability of your investment.
Even though some areas are experiencing a temporary lull in the availability of foreclosed single-family homes, other kinds of properties are still available, such as duplexes, triplexes and quadriplexes. Since most lenders treat properties containing up to four units as equivalent to a single family home for the purposes of financing, investing in these kinds of properties can be a profitable alternative to the typical single family home.
Conditions in the housing market are constantly changing. But a strong rental market along with continued availability of low priced properties, makes this a good time to launch an investing career based on Jason Hartman’s strategies for buying and managing rental real estate.
The Heroic Investing Team