National rental rates increased by two percent in May 2018 over May 2017, the slowest rate of increase since 2010. However, reported RentCafé analysts, rents still rose in 79 percent of the country’s largest metro areas, were unchanged in 17 percent of those areas, and fell in only four percent of those areas. In areas where rents increased the most, economic growth and population migration, both sustainable and reliable indicators for rental market health, drove those increases. This is good news for real estate investors who own or wish to own rental properties.

The report also noted rent prices are rising faster for large unit sizes, such as two- and three-bedroom units, compared to studio and one-bedroom units. In fact, studio and one-bedroom rents rose 1.6 and 1.7 percent, respectively, while two- and three-bedroom unit rents rose by 1.9 and 2.1 percent, respectively. The group also noted that in renter “mega hubs” like Manhattan (NYC) and Austin, Texas, rents might have fallen a little or remained steady, but remain high compared to the rest of the country. In Manhattan, for example, May 2018 average rents were higher than $4,000 a month.

Texas markets were particularly noteworthy. Thanks to oil-industry jobs and immigration from costlier areas of the country like California, renters are positioned to pay higher rents and are willing to do so. For example, in Odessa and Midland, Texas, rent prices rose more than 35 percent year-over-year. In Reno, Nevada, which posted one of the largest job gains over the course of the last 12 months, rents rose 10.7 percent.

Investors active in multifamily development, single-family rentals, and smaller multi-unit investments like duplexes and quadplexes should look carefully at these numbers and markets. Opportunity may emerge as households look outside of traditional apartment living when the costs of multifamily housing and single-family housing are closer together.

Investor Insight:
Look at the reasons for local rental rate trajectories rather than simply assuming every rental strategy will work in every market.

Categories | Article | Market & Trends
  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

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