4 Reasons You Can Expect More Demand For Rentals This Year
This may be a tougher year for house flippers, but multifamily real estate investors can expect their rental units to be in even greater demand.
In addition to the great appetite for multifamily investment properties from new funds and those which are shifting their capital to new markets, rental demand is only rising too. That’s great for landlords who are looking for new quality tenants and supporting rental rate increases and net income.
Here of some of these drivers of this action this year.
- The Presidential Election
While many have already been trying to tune out to all the media hype and fake news for months, we probably haven’t even seen the tip of the iceberg yet. This is likely to be one of the most polarizing elections this country has ever experienced.
While the outcome is unlikely to impact the need to rent or property appreciation over the long term, many home buyers and single-family investors are going to be in a holding pattern. They want to wait and see how things shake out. They want to see who wins the vote, what that does to the markets in the short term, and how they roll out new laws and taxes in their first 100 days in office. Obviously, this is about the worst possible investment philosophy ever. This group will miss all the opportunities. Still, the bottom line is that instead of buying homes, more people will choose to rent this year.
- Declining SFR Values
The above is not going to help single-family home values at all. Lower demand means nervous sellers and Realtors. We’ve already been seeing 20% to 30% of active home sellers cutting their listing prices every month. Expect that to continue.
While national average and even state and city average statistics may not be that scary yet, when individual homeowners look up their own home’s property value and see it tanking in front of their eyes, it really hits home. When you see that you just lost $6,000 or $60,000 in the last couple of months, that is personal. That wealth could have been preserved with a home equity loan, or cashed out in a sale. Now, if they drag their feet longer, those losses could be far more for single-family in the weeks ahead.
If you’re in that situation, you don’t cash out of one home and buy another down the street. People are typically going to go rent for a year and wait for the dust to settle. That’s more renters in the market, with cash to rent.
- New & Returning Renters
Generation Z is moving out of the house. They are looking to rent their first or second apartments this year. At the same time, a huge silver tsunami of boomers is coming back to the rental market. They are wise to cash out their equity now. Many need to downsize and move closer to family or healthcare. Again, another boom of highly qualified renters who are flush with cash.
- Buying A Home Is Still Too Risky
It’s not owning the home that is really risky. It is the process of buying a home or condo and trying to get a mortgage, which is risky, unpleasant and too much work. Banks are still a nightmare for getting a mortgage. People would rather pay more in rent than go through the stress or risk a down payment. It’s just not worth it. Until lenders figure this out this isn’t going to change. More and more residents are just going to opt-out of the home buying experience.
ABOUT THE AUTHOR
Bill Zahller is the Managing Partner of Park Capital Partners, LLC and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Partners, LLC in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalPartnersLLC.com for more information.