People are moving. Single-family houses in the suburbs are opportunities real estate investors should consider.
According to an article in Mansion Global, apartment living in densely populated urban areas is already losing its appeal to Americans as they process their experiences during the coronavirus pandemic. Many people are eyeing options for relocating to the suburbs and a single-family home after facing the challenges of coming into contact with infected individuals in apartment building common areas and restrictions on their use of outdoor spaces like pools and game rooms.
Buyers crave —ROOM— living space, outdoor space, privacy, flexibility, and safety.
When you are researching a purchase of a rental property, evaluate:
Is there room for an office in the house?
Does the house have a good-sized yard?
Is there a pool in the backyard?
Is there a deck or porch that offers a sheltered option to living indoors?
Is the neighborhood safe to walk around in at night?
Is there a neighborhood association and is it restrictive?
Did local authorities try to restrict people’s use of their yard during the pandemic?
Consider taxes. People are richer in states where taxes are lower.
Big or tiny, single family homes in suburbs near major cities offer good opportunities for people to escape living in densely populated apartment buildings where entrances and recreation space is shared and access is restricted. If you need funding, apply now. I am working online with the rest of you.
Even in the coronavirus pandemic crisis investing in rental apartment property can still be a good way to add thousands of dollars to your income in the long term. If you buy apartment real estate that is in a good location with growth potential, but that is not too expensive, this real estate investment will likely recover after the crisis passes according to (Brad Hunter, Forbes.com). However, the investment takes funds and commitment over the long haul.
There are two way to make money from rental real estate. The first, appreciation, is a rise in value over time. This profit can only be realized by reselling the property after some time has passed or after you have made upgrades that add to the value. Generally, real estate appreciates in value over time if you are in the right location. Be sure to study employment and home buying trends in your local area before purchasing rental property.
Cash Flow & Coronavirus
You can also make money in the form of cash flow by collecting rents as income. The coronavirus pandemic is affecting the apartment rental real estate industry because many people, more people than we have ever seen before, have lost their income in only a few weeks, unemployment claims are up all over America, and tenants may not be able to pay their rents for the next couple of months. This will impact the ability of landlords to make money. Either the landlord forgives the rent and eats the loss for a while to keep the tenant, or the renter is evicted, and the property becomes vacant. In either case, the landlord is not receiving income on the property and may have to seek forbearance from their own lenders.
If a landlord has paid off his or her own mortgage on the property or if he or she has established an emergency fund as Dave Ramsey suggest (daveramsey.com), they will be able to weather the storm caused by the jobs lost in the pandemic shutdown.
Jobs and Renting
Either the jobs come back after the danger from the virus is past and businesses reopen, and the renters stay, or a new set of renters materialize because those people who are no longer able to afford their own homes move to apartments and construction of new homes slows because of coronavirus-driven delays caused by labor shortages, and supply shortages. More people may need to rent. In this case. It is likely the landlord’s income will return after some shaky months.
Because the income potential should rebound, rental apartment property should not lose its value overtime as an asset. If the building itself remains sound, there is no reason why the property value will not increase as other investments tank and real estate once again looks solid and reliable compared to stocks. Also, if interest rates remain low, investors will be willing to take on more debt and are not restrained from purchasing property at higher prices. This will help investors who plan to sell their rental properties make a profit.
Investments in single-family rental homes may also benefit in the long run as more people work from home and need more room than apartments afford. Brad Hunter also suggests in his article on Forbes.com that the single-family-built-to rent-industry may benefit as people need that specially designed home office space with its own door and bathroom.
Investment in rental real estate should remain attractive but be sure to do your due diligence.
Study everything from location, jobs, virus hotspots, distancing trends, supply chains, virus rebounds as they occur, and what the kids are doing now.
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The single-family rental is the fastest growing segment of the housing market according to research done by the Urban Institute. This is a very interesting area of opportunity for private lenders and it pays to keep up-to-date on the market so that no opportunity is missed.
Single-family rentals have outpaced single-family ownership and multi-family housing in recent years. This is partly due to millennials that are forming households and entering the single-family housing market, moving up from multi-family living to single-family rentals to gain additional space for a growing family. Renting still works for them because they need the ability to be transient and move if their jobs require them to, and many cannot afford single-family ownership because they are carrying massive student loan debt, have not been able to save for a down payment, and are faced with stricter lending terms. Downsizing baby boomers are also attracted to single-family rentals for some of the same reasons, including no down payment, maintenance services, and the ability to move if they choose.
According to an article on Builderonline.com
by Lauren Shanesy, the demand for single-family rentals has allowed builders to
increase sales by selling to rental operators on a wholesale basis and has prompted
a number of developers to tap into the market with a new product, the cohesive
single-family rental community filled by niche renters with lifestyle needs
that are unlike those of apartment renters.
AHV Communities is one community builder
that is building in Texas, offering resort-style amenities, energy efficient
homes, maintenance-free living, and professional management with the freedom and
flexibility of a lease. One of these communities is Pradera, luxury rental homes in San Antonio.
Another is Creekside
Ranch in New Braunfels. Both offer club house, pool, green space,
maintenance services, and sophisticated floor plans.
Shanesy continues, “Many individual
investors who bought distressed or foreclosed single-family rental homes have
been priced out of the market by competition from institutional investors in
recent years.” However, these individual
rental homes are spread out and not located in communities, so the
institutional lenders have a more difficult time managing them efficiently. Some
investment companies have begun looking to builders to purchase whole
communities of new homes that they can manage. They sell some of the homes and
rent others, allowing the investors the flexibility to sell if homeownership
goes up or rent if homeownership goes down.
A Mature Market
Samantha Goldberg, in the article “Top
Trends to Watch in the Single-Family Market,” at Arbor.com/blog/
reports that panelists at the State of the SFR Industry panel at the IMN’s 7th
Annual Single-Family Rental Investment Forum, held in Hollywood FL say that incoming
capital, new private lenders and institutional lenders, and technological
innovations helpful for management are the top trends to watch in the
single-family rental market over the next few years.
According to the same article, the single-family
rental market sector achieved 3% year-over-year rent growth in 2018 and 2%
year-over-year rent growth so far in 2019. The West Coast and the South East
had the biggest rent gains in the last year.
There is still a shortage of housing
for the U.S. workforce and this means that the nonluxury single-family rental market
has room to grow, providing opportunities for private lenders, developers, and
investors to add inventory in the workforce living space.
Resources Long-Term Rental Funding Program
REI Capital Resources is a funding source for
SFR Fix-n-Flip, Fix-to-Rent, build-to-rent, and Refinance projects as well as
larger commercial projects such as office buildings, 5-40 door multi-family
buildings, and many others. These programs vary wide and far throughout
the gamut of lending. Call or e-mail for more information. I’d like your
We offer asset-based and experienced-based long-term
rental program loans on the following terms: at a min FICO of 650, a BPO is required,
up to 85% of purchase price, Max of 80% ARV, Interest rates starting at 6.5%,
and points as low as 2.25%.
Resources Residential Construction Loan Program
offer asset-based and experience based loans for residential construction on
the following terms: Min FOCI 650, appraisal required, up to 90% of cost of lot
+ build, Up to 100% of construction costs if lot is free and clear, Max of 70%
ARV, interest rates starting at 8.25%,and points as low as 3.5%.