Housing Market Hot For Buy & Hold Real Estate Investors

photo by scottchan
Rent to own or buy and hold are strong investing strategies in today;s housing market. Photo by scottchan

Smart Investors Have A Strategy For Every Market Situation

Despite the fact that, according to reports, it is more expensive to rent a home these days than it is to buy, the number of people renting is at its highest point in over 50 years. That means it’s a perfect environment for real estate investors who are looking for properties to buy and hold or even rent to own.

The Pew Research Center recently conducted a study of US renters and found some very interesting information. Turns out, of the 75 million households (according to numbers from the latest Census), over 43 million are renting. Since 2006, the number of renters shot up from nearly 35 million to the current 43 million. This climb may not seem that significant until you realize that the number of homeowners has actually dropped from a high of 76 million to 75 million, essentially staying flat over the past 10 or so years.

Pew cites three main reasons for this overall shift:

  • The price of homes is increasing to the level they were at prior to the housing crash
  • A hangover from the dramatic burst of the housing bubble, making people skittish and lenders more stringent with their lending standards
  • Student debt that just doesn’t go away for millions of people after they graduate from college

Two of the three reasons above are particularly applicable to the group voted, “Most Likely To Rent,” millennials. While the housing bubble in 2007-2008 may not as directly impact these potential homeowners, age 35 and younger, but the rising price of houses and lingering student debt certainly does. In many cases, they have not been in the workforce long enough to save up for their down payment. This segment of the population also tends to be more mobile, making renting a more viable alternative. As of June of this year, the median house value is over $200,000, which is a 7% increase in just one year.

I mentioned at the start of this article that it’s more expensive to rent than buy a home. According to Trulia’s managing editor, David Weidner, “In every major US market, it’s cheaper to buy a home than it is to rent over seven years. And it’s really not even close.” He explains that a mortgage is daunting, but after the first few years, incomes are likely to rise, diminishing the monthly hit that comes with a mortgage payment. But as we know, not everyone is able to take the long-term view and is looking at their current financial situation with some concern.

So what does that all mean for us as real estate investors?

The news is all good because there are so many really effective exit strategies and ways to focus your investing business. If you live in a part of the country where the number of renters surpasses the number of buyers, then you need to focus on a buy and hold strategy. Look for properties that you can purchase with the intent to rehab or renovate and then rent, keeping them in your portfolio for long-term cash flow. If you’re in an area where buying still outpaces renting, then focus on strategies like wholesaling, flipping, or retail.

There was one more nugget that came out of the Pew survey that should make every real estate investor take notice. They found that almost 75% of those currently renting want to buy a house in the future. That includes those who are renting by choice and those who are renting because of their current life circumstances. Why is this important? Because you have a solution for these future buyers too, and it’s called rent to own.

What are your thoughts on incorporating rentals into your investing portfolio?

Need help finding the right strategy for your real estate investing business? Are you wondering how you can make the most of any housing market environment?

If you would like more information on how I can help you grow your business, send me an email at ryanthementor@gmail.com. For tips on what to look for in a good mentor, read this article.

Ryan McFarland is a real estate investor, coach, and mentor located in San Diego, CA. He specializes in wholesaling, fix and flip, and turnkey rental properties. Ryan also specializes in new and innovative technology platforms to locate motivated sellers and cash buyers to sell properties fast. Ryan also works with other real estate investors to help with their marketing to locate more properties or more investors through comprehensive digital marketing funnels and driving paid traffic to these funnels. With over 15 years experience in the real estate investing industry, over 500 transactions completed for over $50 million in total volume, Ryan McFarland is an asset to anyone or any organization he works with.