Real estate investors always are looking for insights into the growing single-family rental market. For example: What areas of the country are experiencing the best conditions for investing in rentals? And, what areas are showing a stagnating ability to make money from renting?
Among the companies that analyze the data to provide such useful insight is Investability. Recently, Investability’s Chief Revenue Officer, Dennis Cisterna, talked with LendingOne about the current state of the rental market.
Investability is dedicated to providing real estate investors with comprehensive overviews of rental markets across the United States, through access to data, analytics and market trends. The company’s overall goal is to help investors make educated decisions surrounding their next rental investments.
Here are five highlights of Cisterna’s webinar interview with Matt Neisser.
Insight No. 1: The Rental Market is Growing
This is probably the most important piece of insight to take from Cisterna’s presentation. The rental market is experiencing a great upswing that has prompted many investors to turn their attention to investing in buy-and-holds instead of fix-and-flips. He explains this growth is attributed to the lack of inventory in the market because fewer homes are being built, thereby making home prices skyrocket so people cannot afford to purchase and are therefore renting. Also, the chances of getting a mortgage are much more difficult for the average homebuyer, prompting them to pursue renting instead.
Insight No. 2: Rents are Up and Vacancies Rates are Down
Cisterna states that the rents have appreciated 15 percent and the demand for single-family rentals is steadily rising as well. The national vacancy rate is only 7 percent, meaning that 93 percent of single-family rentals are occupied. This is an astonishing figure for real estate investors to consider when looking into the rental market. Again, this rise in rents coupled with the increase in demand from people wishing to rent all are affected by the lack of inventory, high home sale prices and the difficulty today in obtaining a mortgage.
Insight No. 3: More People are Investing OutsideTheir Backyards
Cisterna cites past data showing that 70 percent of investors who own one or two properties will invest in areas within 10 miles of where they live. Why? Because they are more comfortable and familiar with areas they live closest to. Today, however, Cisterna goes on to explain that with the help of technology and websites such as Investability and RentRange, investors have greater access to information about locations across the country, helping them make better decisions regarding investing outside their backyards.
Insight No. 4: Know Your Location Before Investing
When looking to invest in rentals, especially in areas outside of where they live, Cisterna explains that it is important for investors to research these place thoroughly to determine if it is the right investment. For example, areas like Los Angeles have seen a surge in home prices in the past few years, prompting investors to focus more on fixing-and-flipping rather than renting. The reason for this, Cisterna details, is that the houses in Los Angeles are typically older, from the 1940s to the 1970s, so investors are renovating and selling them for higher prices, making the prospect of a long-term rental not as enticing. He compares this to areas like Buffalo, New York, where the housing market wasn’t ever really distressed and has had a steady number of rental properties at more affordable prices, so investors can invest less expensively and yield higher cap rates.
Insight No. 5: National Housing Bubble Concerns
Cisterna addresses the ever-present concerns about another national housing bubble possibly starting. He explains that the data and current trends of today’s market are not in line with what they were back in 2008 when the subprime mortgage crisis occurred. He states that at the peak of the market, there were 620 billion subprime mortgages with many given to people who did not provide any documentation to prove the amount of income they stated. Today, this number of subprime mortgages has decreased to a mere 56 billion. Also, there should be some comfort in the fact that it is harder today to receive a loan than it was in the past. Finally, new home construction is at a historically low 490,000 this year, a number not seen since 1961.
About the Author
Erica Hackmyer is the content writer for LendingOne, a direct private real estate lender that offers short-term loans for non-owner-occupied residential properties, specifically regarding fix-and-flip, buy-and-hold and lines of credit to fund larger projects. With direct access to its own capital, exceptional customer service and a user-friendly online application, LendingOne has streamlined the overall lending process and made it faster and easier for investors to be approved and receive their financing in as little as 10 business days. For more information, visit www.lendingone.com or call 866-412-1574. You can also visit https://calendly.com/lendingone to set up an appointment to speak with a LendingOne loan specialist.