- INDUSTRY NEWS -
Is it a smart move to invest in rental
real estate?
OTHERS TO LAG BEHIND THE
NATIONAL TREND?
Let’s take a look at some trends and
then decide.
The answer’s simple.
Here’s what we do know:
In order to have the perfect storm you
have to have both. You can’t have one
without the other and still have a hot
rental market.
RENTS HAVE INCREASED
NATIONWIDE FOR THE LAST 5
YEARS STR AIGHT.
What does that mean?
Well, for starters, the national
historical norm has been 3% growth
per year. However, current rental
rates have been steadily appreciating
at 4.5%.
Some areas are doing better than
that. Here in Northern California and
Nevada, we’re seeing a steady 5-7%
appreciation.
That doesn’t include areas like San
Francisco, the second most expensive
rental market in the nation, which
has a rental appreciation of 18.9%.
However, some San Francisco
districts are up as much as 35%!
Just because areas are showing rental
appreciation, and it doesn’t look like
they’re going to slow down, doesn’t
mean that you should head out to buy
your first rental.
There are a few things to understand
before making such a decision.
WHAT CAUSES SOME RENTAL
MARKETS TO TAKE OFF AND
Jobs and affordable housing.
Let’s look at each one separately.
Where there are jobs, there is growth
and income. There are people
flocking to the area. This creates
demand.
HOW DOES AFFORDABILITY
PLAY A PART IN THIS?
If housing is affordable, then demand
for rentals will be down. There’ll be a
higher vacancy rate.
However, if the converse is true and
housing is unaffordable, especially
in urban areas where they’re
not building as much, then the
rental market will see increases in
proportion to the jobs created in the
area.
This is precisely why rental markets
in metro centers like San Francisco
and San Jose have double-digit
appreciation.
HOW DO YOU PROFIT FROM
THIS?
All you have to do is look at where
jobs are currently being created and
SELECT LIVING
- 27 -
2016 EDITION - ISSUE 1