Leverage location for greater profits with single-family rentals
Single family rentals are fast becoming popular investment vehicles. They provide investors cash flow and potential appreciation. While changes in demographics and consumer preferences have made renting more popular, changes in the tax code have made renting financially more attractive for both renters and landlords.
Advances in financial technologies have opened up this $3 trillion asset class to a wider audience. Websites such as Entera, Home Union, Renters Warehouse, and Roofstock make it easy and convenient for both “mom and pop” and institutional investors to participate in this burgeoning market.
Evaluating opportunities among the over 16 million single-family rental properties in the US is challenging. Calculating the cap rate, net operating cash flow, and annualized return is a starting point. However, much as with stocks and bonds, profits can be improved by incorporating additional information. Insights about price trends, demographics, and the local economy can provide investors the edge in articulating an investment thesis, selecting the right properties, constructing a portfolio, and improving profits.
HousingIQ™ provides investors that edge. With the Housing Market Vitality Indicators, investors can compare local markets, see where they are headed, and determine how they will perform in the future based on the economic conditions prevailing in the local market. Armed with in-depth coverage of over 400 metro markets, investors can explore across demographics and local economies to identify markets that meet their investment criteria, support their portfolio needs, and suit their preferences.
Based on data through Q1 2019, investors might identify situations such as:
- Of the 164 markets that are forecasted to perform better than the national market, in 37 markets house prices have performed worse than the national market in the last twelve months. In three of these underperforming markets, the local economies are specialized in the information and health care sectors. These markets – Ithaca, NY, Manhattan, KS, and Rochester, MN – will likely have superior house price appreciation and generate better returns at lower risk.
- Consider Bridgeport-Stamford-Norwalk, CT, Hartford-West Hartford-East Hartford, CT, and Montgomery County-Bucks County-Chester County, PA metro markets. The local economy is specialized in the financial services sector; they have a better educated and higher earning demographic; and house prices are forecasted to underperform the national market. Investors would be well advised to focus on cash flow, neighborhood, and other unique property characteristics to identify opportunities in these cooling markets.
- Want millennial renters? Look for a diverse, better educated demographic and couple that with higher paying, plentiful jobs such as in Baltimore-Columbia-Towson, MD, Boston, MA, Newark, NJ-PA, and San Jose-Sunnyvale-Santa Clara, CA.
To explore how HousingIQ can power your profitable single-family rental decisions with local market knowledge, contact us.