Why You Should Invest in Single-Family Rentals
After a year marked by stock market volatility, many investors are looking for alternative investments to stocks. Such investors should consider the advantages of investing in single-family rentals.
A low level of homeownership is one reason single-family rentals are in high demand. People are not seeking homeownership at the high rates of the past. Some seek single-family rentals to maintain their freedom to live anywhere. Others are would-be homeowners, but they have large amounts of debt from student loans and credit cards that make it difficult to qualify for or to pay a large mortgage.
With unemployment low and rising wages, strong job growth also is contributing to the high demand for single-family rentals. The country’s healthy labor market also is one factor that is leading the Federal Reserve toward a rise in interest rates, which would result in higher mortgage rates. An increase in mortgage rates would be good for investors in single-family rentals. Some people will continue renting because higher mortgage rates will price them out of homeownership.
Currently, there’s a low inventory of single-family homes. The combination of high demand and low supply means landlords can charge more in rent (see below).
A single-family rental has excellent potential for providing investors with positive monthly cash flow because rents are rising. Rental rates are expected to continue increasing in the near future.
Increasing Asset Value
The value of single-family homes has increased over the past year and is forecast for continued growth in 2019. Long-term investors in single-family homes are likely to see these assets gain value over time.
Asset Volatility Unlikely
Asset volatility is common in the stock market. However, prices in the housing market are not correlated to the stock market. The stability found in the real estate market may be attractive to equity investors.
Cultural shifts and demographic changes have put new faces on tenants who rent a single-family home. Young adults are not putting the cultural value on homeownership that previous generations did. Although many young adults aren’t planning a home purchase, they still want the benefits of a single-family home, such as a yard and additional bedrooms, for their children. Downsizing baby boomers rent because they either cannot afford or don’t want a new mortgage.