In recent years, the overall demand for single-family rentals has experienced an increase. This was initiated prior to the crisis that resulted in massive amounts of foreclosures. In some instances, this stemmed from expansions in credit during the period known as the “housing boom”. Other contributing factors included securitization in debts of mortgages, widespread defaults, and inflation.
For approximately 21 months now, more and more families have been in search of single-family rental units. Continue reading to learn more about this rental market growth and to learn how you – as a real estate investor – can experience massive amounts of success in this type of rental property.
As Rent Prices Decline, the Demand for Rentals Increases
One of the main contributing factors to the demand for single-family rentals is the fact that many property owners and managers are reducing the amount that they charge for rent. The housing market is still experiencing complications, but it is showing signs of immediate recovery.
Rent prices have fallen – so far – up to .5%.
While this may not seem like much, it is a significant savings for families in search of suitable housing. Initially, the bigger cities – such as Denver – will notice this. As time progresses, other areas will start to reduce prices for rental units for families.
Increased Populations Among Millennials
In recent years, we have found that Millennials are creating households very quickly. This, too, has a direct impact on the demand that is occurring for single-family rentals.
Multi-family rentals seem to have lost a bit of their luster. More and more people want their own space. This is especially true since the emergence of COVID-19 and its rapid spread.
People now want to put some distance between themselves.
Unfortunately, there is a shortage of single-family rentals. Screenings and evaluations must increase in order to pick suitable tenants. As an investor, now is the time to purchase single-family units to transition into rentals. You will find that the market is massive.
Increased Interest Rates on Mortgages
Mortgage rates are at an all-time high. As of this writing, the interest rate for a mortgage that is fixed rate and spans over a 30-year period is now at 6.52%. This has lost 11 base points within a week. This is still over 2 points higher than most people are willing to pay.
The market is fluctuating so rapidly that it is turning people off from purchasing a home.
Increased interest rates on top of homeowner’s insurance costs and all the expenses associated with home ownership have people searching in droves for single-family rentals. In addition to this, many individuals in search of housing fear that the market is nearing a peak that will result in another crash.
Rent Prices Frozen
In the past couple of years, a housing crisis and a pandemic had a direct impact on the rental market, and it was highly detrimental. In fact, most have stated that the rental market was completely unaffordable. Now that some time has passed, many areas have placed limits on increases.
There are now more rules, regulations, and laws that help in reducing the price that tenants pay for rentals. Many have even frozen rental rates.
As a result of this, more and more people are seeking out single-family rentals as they are now back to an affordable price. As an added bonus, the Housing Stability and Tenant Protection Act now requires property owners to provide a minimum of a 60-day notice prior to raising rental rates.
Construction is Falling Short
According to statistics, there are approximately four million people who rent within the United States. Despite rental prices dwindling, some areas are still seeing rental prices up by about 40%. This WILL come down in 2023, though. The current construction of new single-family rentals is falling short.
Despite efforts, the construction cannot keep pace to even meet the demand.
In short, this increases the demand even MORE! Unfortunately, the mortgage rates that we just discussed are exceeding the threshold of affordability for most renters. This means – even if they want to buy a home – they will remain in the rental market.
Outside of Major Cities
Since the arrival of COVID-19 in the United States in early 2020, many people are now hesitant to live in highly populated places and in multi-family housing units. Furthermore, they have the desire to live outside of major cities. The vast spread of the disease along with the shutdowns and the risks of being in an overly-populated multi-housing building has more and more tenants looking to move to suburban and rural areas. This allows them to control what comes in and out of the home, takes them away from heavily populated areas, and provides higher levels of privacy.
If you want to rent out single-family homes, go for those outside of major cities. The rent rates may be higher IN the city, but you will make more – over time – because renters are LEAVING the city.
Lack of Additional Expenses
Many families choose to live in single-family rentals because of the fact that there are fewer expenses. Homeowners are responsible for paying their property taxes, they must obtain homeowner’s insurance, they have maintenance expenses, and they have repair bills from time to time. Renters are provided with amenities that do not result in additional costs.
Whatever they must pay each month, etc. for rent is all they have to pay – except for renter’s insurance, cleaning supplies, and other types of expenses – such as utilities.
Given the high costs of – well – just about everything, most prefer single-family rentals to homeownership because regardless of the rent rate, it ends up being cheaper than owning a home – at least in the here and now.
Why are Single-Family Rentals all the Rave?
Tenants enjoy single-family rentals because they offer property space and privacy that typically is not available in condos, apartments, and other types of multi-family housing. For those that have a family with children, this is highly important. In addition to this, single-family rentals have been considered safer than multi-family rentals.
- First, the ventilation system is not shared with other families.
- Second, less people equal less crime and other complications.
- Finally, single-family rentals provide families with a sense of having their own home and their own space – without all of the additional expenses.
If you want to enter a market that will result in high levels of success, single-family rentals are the way to go!
Get Started Today!
Are you a real estate investor looking to monetize on the latest industry opportunity? If you answered “yes”, you should invest in single-family rentals. Now that the housing market prices are starting to come down, review homes for sale in and around the area where you want to specialize. If you need any assistance, we here at Pioneer Property Management can assist you! This is especially true if your search is in the Colorado area. We have access to public listings, private listings, and other insider information that will benefit you immensely!
If you would like to learn more about investing, single-family rentals, or about assistance with the management of your property, we here at Pioneer Property Management are standing by to assist you! We offer a wide array of services that will instantly lend to your overall success in the real estate market! To learn more, to inquire about a property, or to sign up for our services, simply visit our website or call us today!