The Emerging Single Family Rental Market
For the past several years, there has been a sharp decline in homeownership across the nation. Decreased home values, lost jobs, stricter mortgage loan requirements and a foreclosure epidemic have all contributed to this trend. Millennials make up the largest generation our country has ever seen, while also being the least likely to enter into the world of homeownership. Is it because they are taking longer to settle down? Is it the lack of jobs? Is it the the horrendous amount of student loan debt pressure they face? Perhaps it’s a combination of all of the above.
For those looking to invest in a rapidly growing market, the Single Family Rental (SFR) market may be just the place to dive in to. When this housing sector entered the scene in 2012, it was mainly dominated by large companies that had massive amounts of funding available. Now, individual investors are gaining access to these opportunities by means of new mortgage loans created specifically for this type of property. Instead of only considering a borrower’s income, lenders are now taking into account the cash flow that a rental property is expected to generate.
According to CoreLogic’s July 2015 MarketPulse, current vacancy rates are staying extremely low while construction is on the rise. Detached single family homes, built specifically to be rented, are steadily increasing in popularity with development companies. Furthermore, the number of renters is expected to continue to increase as the millennial generation forms new households, but shies away from ownership. The strong demand for housing will keep rents and occupancy rates high, especially in metro areas such as Los Angeles, San Francisco, and Seattle.
There is, of course, some doubt that this is a lucrative investment opportunity. Some feel that these decreased home values may actually be luring individuals towards purchasing a home at a more affordable price…assuming that they can qualify for a mortgage loan, which is becoming increasingly difficult for both young adults who haven’t had time to establish their credit yet, or those whose credit has been damaged in the recession.
Currently, the Single Family Rental market appears to be very promising as hundreds of thousands of new rental homes are being constructed each year, while hundreds of thousands of new renting households are being formed. It’s safe to say that in today’s real estate market, properly investing in the SFR market will be an excellent choice for those looking to grow their wealth!
Lyon | Stahl specializes in investment property throughout the Los Angeles area. Visit our website today for more helpful information on real estate investing!