The US Rental Property Investment Market 2018

The US Rental Property Investment Market 2018

US Rental Housing Market

Millions of excited and hopeful investors are looking for good, high return investment opportunities from Florida to California. And the rental property market is where the ROI is good.

Investors aren’t seeing the same value in the stock market, gold and commodities markets, and the bond markets, and bank savings products are offering meager returns as well.

Fortunately, real property that can be purchased outright or through financial leverage to be rented or leased, continues to shine as America’s favorite investment vehicle.

Seeking Big Returns – Equity and Cash Flow

Large investors and small see rental housing as a winning investment.

The popularity of real estate TV shows emphasizes how investment property and home improvement is this country’s new pastime time from New York to Texas to California.

The US real estate market in 2018 is a small but growing chunk of the now estimated $127 Trillion global real estate market which accounts for 60% of all mainstream assets.

And the rental property market is less than half of the $36+ Trillion US Real estate market yet for small property investors it’s a fertile paradise. This update and forecast of the 2018 rental housing market may help you decide which are the best cities to buy rental properties and which types of properties have the best potential.

What drives the 2018 rental housing market and why is the time to invest? It’s primarily due to a  growing economy still recovering from the last recession, repatriation of jobs and businesses back to the US, higher housing purchasing costs, increased immigration, and growing demand from Millennials and Babyboomers.

Lots of positive signals, and we’ll explore the 15 Key Factors below.

America: Rental Nation

If you haven’t heard the news, America is a now a rental nation. More people rent than own for the first time ever and that’s a dramatic shift in American’s mindset about their ideal life. Renting is losing its stigma and renters are seeing the personal and financial freedoms apartment or condo renting offers.

The rental property market is soaring in size and returns due to demographic trends, an improving economy, personal financial situations, and migration of workers to states that are creating the most jobs and offering good wages.

Property investment is now almost a sport, enjoyed by investors of all ages and its drawing increasing amounts of investment dollars. You’ll be sharing the market with millionaires and billionaires. Real property has character and its profit performance will improve if you know how to manage your investment.

Please bookmark this page which will be updated with much extensive rental market data.

And share this with your property investment connections on Linkedin. New opportunities for everyone!

 

2018 looks like a great year for buying rental income investment property and perhaps becoming a property manager.

In this epic post, let’s take a look at the size and makeup of the rental housing market and which trends you might want to watch. Rent prices across the country are just one factor among many others which may be more important to you as you consider a move this year.

The Right Property Management Software for You

Are you a multiunit property investor or rental property manager? Check out ManageCasa online property management software for its low cost, ease of learning and simple management modules. ManageCasa makes property management easy and more profitable. It’s the best solution for small portfolio property managers.

Getting Granular with US Rental Housing Data

While many industry people examine median national housing stats across all 50 states, the real property investment opportunity is more local. It may not even be enough to have expertise and insight on a particular state and metro region.

To find the best rental property investments, you may need to analyze down to neighborhoods and streets, home types, age, class, and size, as well as the demographic groups that inhabit that particular area.

Texas is a Land of Diversity

For instance, the massive state of Texas has reasonable overall economic performance stats yet the range of growth in prices, resident wages, employment, and future outlook for each Texas city varies widely.

Large metros such as Dallas and Austin may offer better ROI and long term, sustainable returns that El Paso or Brownsville. And cities such as Lubbock TX saw rent drops of 6.3% in January and McAllen TX a 2.2 % drop, yet Odessa TX had a 35% increase, and Midland TX had a rise of 12% in rent prices.

The low crime, cozy neighborhood of Old West Austin, in Austin TX, with a population of 6,000, is attractive to millennials and retiring babyboomers. The median rent is $1320 and 71% of its highly educated residents rent.

The price to rent ratio may not be favorable however. Yet the median income in Old West Austin is $73,000 and renters may be willing and able to pay much more rent for apartments or condos that you choose to upgrade.

There’s opportunity and there’s danger. Price growth in Dallas, Denver and Houston for instance is sparking fears of a housing crash. That fear however, leads to a growth in renters.

Ensure you study the top performing cities, not because you are going to buy there, but rather to learn what’s driving growth rates, and how you can use that insight for your chosen selection in rental properties and raise your rental income.

See the post on the best cities to buy rental property to see which have the best forecast including rent price growth and capital appreciation.

Rental Property Types

There’s no shortage of rental property types. From student housing and seniors housing to fix and rent single family, to beachfront vacation rentals, and from studio apartments to luxury condos.

Bedroom Type Average Rent Change M-o-M Change Y-o-Y
Studio $1,259 0.20% 2.50%
1 Bed $1,225 0.10% 3.40%
2 Beds $1,408 0.10% 3.50%
3 Beds $1,644 0.20% 3.20%

National Data Courtesy of Rentcafe.com

Rental investing comes with extra perks in taxation and income benefits. As you’ll note in this chart, they’re all on a growth curve and come highly recommended.

The National Rental Housing Picture

Quick Facts about 2017:

  • growth in renters was 23.7 million
  • growth in homeowners 700,000
  • renter growth outpaced homeowners in 97 of 100 top US cities
  • rentership grew 53% in Gilbert AZ, 40% in Plano Texas, 40% in St Petes Florida, and 39% in North Las Vegas
  • cities with largest share of renters: Newark NJ 74%, Jersey City 70%, and Miami FL 68%

In 2017, 43% of movers reported moving for a housing-related reason. In comparison, 27.9 % said they moved for a family-related reason, 18.5% said they moved for an employment-related reason, and 10.6% said they moved for some other reason – census.gov

USA Cities with the Highest Rents

Rents are rising, and in some cities, very high and still rising. Good opportunity or a risky bet?

City State Average Rent
Manhattan NY $4,079
San Francisco CA $3,448
Boston MA $3,243
San Mateo CA $3,064
Cambridge MA $3,023
Jersey City NJ $2,855
Sunnyvale CA $2,764
Santa Clara CA $2,718
Brooklyn NY $2,692
San Jose CA $2,627

Rent data courtesy of Rentcafe.com

Key Positives for Property Investors: High Price and Low Availability

For prospective renters, homes, condos, homes and multifamily housing are not only pricey, they’re hard to find. The explosion of apartment rental websites including Rentcafe, Apartentlist.com and Padmapper attest to that. Despite rising construction numbers, housing shortages are the plague of the times.

That may explain why 2017 saw the lowest number of people moving to a new home which may be good news for property investors, landlords, and property managers.  Your renters are likely to stay put and pay the rent which helps you reduce the risk and operating costs of property investment.

Based on 43 percent of the total rental demand being satisfied with traditional 5+ multifamily units, we will need an average of 328,000 units per year from now through 2030 and cumulatively 4.6 million units of 5+ unit housing — ULI’s Emerging Trends in Real Estate 2018 report

US Housing Starts Still Rising. Chart courtesy of Statista.

US Housing Construction Forecast

The housing construction market is brisk and expected to continue rising. Single family detached and low rise condominiums are the most desired properties. The housing market needs 1.4 million new homes each year and this could increase due to immigration.

And construction of new apartments is rising fast through 2017. Numbers might be down for 2018, however are still brisk. Chart courtesy of Realpage.

The broad consensus supports a coherent climb in most of housing’s key performance indicators through 2019, with total starts stepping up from 1.26 million in 2017, to 1.36 million in 2018, to 1.44 million in 2019—jumps of almost 8 percent and 6 percent, respectively. Single-family starts, most forecasts assert, represent about three out of four total housing starts during that period — from Trends in Real Estate 2018 report from Urban Land Insitute.

A recent report from RentCafe suggests that multiunit construction is up 60,000 more units in January.

Chart below shows the falling rental vacancy rate nationwide. 

 

Renter Population Growth

Immigrants are a big component of rental demand and the US rental market is expected to focus more on immigrant buyers in the next 12 years.

Chart Courtesy of Weareapartments.com

 

You can enjoy variety of new rental properties, low mortgage rates, and maximize your rental property returns through intelligent investment and management strategy and tactics.

15 Top Drivers of the Rental Property Market

These 14 factors may influence the rental housing market most and of which cities will be best to invest in.

  1. buyer market is young and unable to finance the purchase of a home
  2. not enough single detached homes available to buy
  3. risks in buying are high with high prices, rising mortgage rates and housing marketin uncertainty
  4. millennials are career minded and not necessarily willing to buy
  5. bank of mom and dad may be running out of money
  6. home and condo prices too high to purchase
  7. buyers won’t buy due to mortgage finance restrictions and long term worries over a recession/market crash
  8. cost of living rising
  9. millennial preference for older urban neighborhoods with walkability
  10. rents rising too fast compared to cost of buying a home
  11. cap rates not good enough compared to other investment options
  12. immigration into US is still strong
  13. retiring babyboomers having tough time places to move to
  14. more good condos and apartments available because regulations are decreasing and construction techniques are better
  15. The number and share of cost-burdened renters – those paying more than 30 percent of their income fell 2 per cent in 2017 — meaning renting is more affordable

If rental properties are even a quarter of the $36 Trillion US real estate market, we can say with confidence that it has major economic impact. The growth in rental apartment, rental condos, and home rentals is creating a lot of jobs including property managers, landlords, and the kind of passive income many investors need.

The US Rental Housing Sector Still has Legs

Please share this report on the US rental market investment market. High rental prices and low availability will continue to influence profitability, and new construction will add to the profit potential of your property management business and for investors ROI.

If you’re considering rental property investment in 2018/2019, see our posts on the best cities to buy property, how to start a full time Property Management Business, and how to improve your property investment ROI.

The US property rental market is a wonderful opportunity to earn passive income or ramp up earnings with active property management. Make sure you are utilizing the best property management software to ease you workload and create efficiencies and create sustainable cash flow.

Property management success isn’t only about selection of the best properties in the best cities.
Take a test drive of ManageCasa the best property management solution for landlords, property investors and property management companies. You’ll understand why a simple, online, cloud-based property software solution is the way to go.

See also: Property Management Companies | Property Manager Software | Best Apps | Florida Housing Market | California Housing Market |California Solar Homes | Apartment Rental PricesApartments for RentRenters Insurance |Insurance for Landlords2018 Rental Housing Market | Best Cities to buy Rental Property | Invest in Texas Rental PropertyReduce Tenant Turnover | Property Management Solution | Tenant Screening | Raise Rent to Improve Property Revenue | Improve Property Cash Flow | Property Management Issues | Tax Savings for Property Managers | Real Estate Portfolio Tips | Starting a Property Management Business | How to Use Property Software | ManageCasa Cloud Based Property Software