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Renters are Feeling Rich

Renters are feeling good about their finances, but they are not necessarily feeling like they would like to become homeowners. According to a new consumer study released this month by Freddie Mac, renters are increasingly likely to feel confident about their finances and their current living situation these days. In a consumer poll, only two in five renters said they expect to purchase a home in the relative near future. About a third of renters said that unless their rents rise dramatically, they will not likely move anywhere, much less buy a home, in the next 12 months. Furthermore, when they do move, they are likely to move to  a single-family rental property rather than buying.

Interestingly, although fewer than half of all renters in all types of rental properties (multifamily and single-family) said they “strongly believe” it will be easy to find suitable and affordable rentals in their area, this belief is not spurring them to look into purchasing a home. “Satisfaction with rental experience went down [compared to the 2016 report] for all generations, but it is still strong overall,” Freddie Mac researchers said, noting that although younger renters tend to be less satisfied with their rental experience and community, they tend to be more satisfied than other generations with their overall quality of life. Perhaps not surprisingly, those less-satisfied renters also were far more willing to sacrifice living space for location. Seven in 10 renters said they would give up their living space in order to live in an urban area, and urban renters were less satisfied with their rental experience despite their location providing them with a better quality of life. It is possible that some of this dissatisfaction with a statedly-acceptable tradeoff hinges on urban renters’ tendency to describe themselves as living “payday to payday,” according to the report.

Real estate investors considering purchasing rental properties or expanding their portfolios should certainly feel good about investing in any type of rental property, but they still should place emphasis on understanding the local market cycles and sentiments. Although renters are, overall, feeling as if their rental situations are stable, some markets that have been “hot” for rentals could hold pitfalls now as rents plateau or even decline, and landlords opt to sell at the peak of the cycle. Other markets may not attract a population of renters, so buying rentals in such a market could result in ownership of a property that is difficult to lease without making concessions. Still others may not appear as if they are “prime” areas for rental ownership yet, but are actually poised to attract the steady, reliable renters you seek. Good rental investments require a sound initial investment, responsible market monitoring, and the right type of property management in order to generate wealth long-term.

About the Author

Carole VanSickle Ellis serves as vice president of research and analysis at the Self-Directed Investor Society, helping investors “declare independence from Wall Street.” Contact her at editor@bryanellis.com or visit sdiradio.com.