Despite the development of the COVID-19 pandemic, economic challenges, and slow growth in new construction levels, the general state of the rental industry involving single-family homes is now experiencing the single-highest occupancy rate since the year of 1994.
This is surprising news for investors considering at the start of 2020 many questioned if rent collections would fall short, if the value of such properties would decline, and whether or not urban outmigration would result in increased demands. The truth of the matter is, this rental market is taking a turn – for the better.
The Census Bureau released figures that indicate that the general occupancy rate associated with single-family units is measuring in at just over 95%. This percentage indicates that this is the highest rate since the year of 1994. It is believed that these levels stem from the demand from tenants and the fact that landlords are striving to place retention of their tenants as a top priority.
There is now an immense demand for single-family rentals. It is such a high level of demand that it is far exceeding the current supply of single-family units available. Now is the time for investors to take on this market. By engaging in new construction in these types of rentals, an investor will experience solid returns on investment – and quickly.
In the previous quarter, it was estimated that the renewals of leases ranked in at 2.3%. Previous vacancies have expanded to a total of 6.5%. Prior to the Month of April, these numbers were never able to top a 2.2% range. Prior to this, the demand for single-family rentals occurred mostly within the spring to mid-summer months. Naturally, the spread of COVID-19 resulted in this seasonal-based peak from bottoming out; however, the rate of occupancy reached an all-time high during this period. As a result of this, more and more investors have decided to get into new construction.
While it is true that apartments and other multi-family units were exceptionally more popular than single-family homes prior to the onset of the pandemic, this quickly flipped. One reason is that multi-family rental units are often more expensive because they are in central locations near cities and areas that allowed for quick access to jobs. Once the shut down occurred, many could not pay the rent monies expected by the owners of these units. Secondly, many people became fearful living in close proximity to others because of the deaths occurring with COVID-19.
Due to economic complications, unemployment issues, and virus spreads, many migrated from large cities and from multi-family units to rural areas. This is because of the fact that the rural areas offered a respite from large, crowded areas, were cheaper to live in, and charged less for rent than the multi-family counterparts. While it is true that many families had to travel farther for work and to access the same amenities found in larger cities throughout the country, it resulted in higher levels of safety for their families and it resulted in their living costs dwindling significantly.
Is New Construction Risky?
Investing in new constructions for single-family rentals may be considered risky; however, this is the one area of the rental market that is likely to take off. In that aspect, the risk is very low. The demand for these rental units far exceeds the supply that is left.
If you are a real estate investor, it is much more feasible to take this risk than to indulge in any type of investing in large cities or in multi-family housing units. By creating the supply that meets the demand, you are more likely to accumulate a profit. Best of all, you are more likely to achieve a profit quickly.
In years past, investors specialized in purchasing homes that were in foreclosure or cheaply listed. Now, it is a combination of purchasing individual homes and constructing new types of home developments. Given the state of the economy and all that is currently impacting the economy, real estate management professionals are now expecting the single-family rental units to generate the same degree of profits as multi-family units have – up to this point.
There has been a unique evolution that has involved professionalism, the scale of homes, and overall value. By investing in single-family rentals, investors will see rapid developments, in terms of their investments.
If you are a real estate investor, you should consider the advantages of today’s low interest rates. It is now easier than ever to get credit to develop single-family homes. Best of all, you will experience the lowest interest rates in years. Not only has the general demand for these homes increased, but the pandemic itself has caused this increase level of demand.
Home owners are pulling out of large areas to get in smaller or more spread out areas. As a result, the wisest of investors now have the capability of purchasing low and flipping. For those that don’t have the funds upfront, they can take out credit to do so – without the worry of negatively impacting their profit because of high interest rates.
The all-time lows that are currently surrounding loans, mortgages, and credit cards are sure to offer you many unique opportunities in this housing market.
Forces Driving Demand
According to professionals in the real estate market, there are three unique forces that are uniquely driving the demand for single-family rental units. These are the choice based on general economics, personal lifestyle choices, and the rapid spread and continuation of the COVID-19 pandemic.
City living is no longer considered to be safe or affordable. Many want to live in a single-family dwelling, but are unable to acquire a down payment or lack the employment or credit requirements of taking out a mortgage.
Then, there are many who simply want to downsize and transition from homeownership to renting – such as the baby boomers. The pandemic is resulting in more and more people wanting to spread out and put distance between themselves and large populations.
As an investor, it is time to take advantage of these forces driving the demand and to help produce the supply of single-family rental units.
Surprising Success is Awaiting
In terms of positioned residential-based assets, the single-family sector is sure to offer a surprising level of success to all investors that elect to make a move into the market. Despite the pandemic, it is believed that this sector will experience the single-highest level of growth. When you take into account general demographics and the unique migration that is currently occurring from the larger cities in the country, you can clearly see why this is the market to take on.
Not only will you have low prices, low interest rates, and appealing properties, you will also be able to better retain your tenants, meet the demand that is occurring, and still experience high rent rates.
If you are in the market for balance, profitability, and appreciate the favorable factors that are currently occurring, this is for you. To learn more about the single-family rental unit market or to inquire about current availabilities, you may contact us here at Pioneer Property Management today.
Not only are we capable of sharing the latest trends with you, we can aid in discovering investment properties, we manage current properties, and even offer maintenance and tenant services that will aid in the overall success of your real estate business. Feel free to call us directly at the following number to learn more: 720-839-7482