Good News for Investors: More People are Renting in Urban Areas

August 9, 2018
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Investment homes have long been a popular way to create passive income while having the option to sell a large asset in the mid or late stages of retirement. The latest data shows that renting rates are at a ten-year high, with some of the largest cities experiencing significant growth.

Why is Renting Increasing in Popularity?

Some could look at the number of renters and assume that it’s purely due to an overpriced home market.

While high home prices are a factor, there are other reasons for people choosing to rent. In many cases it is due to lifestyle. Young people today are more likely to delay marriage and starting a family. People relating to this demographic are more likely to rent because it is more convenient or economically feasible.

Some families that could afford to buy are instead renting as they wait for house price growth to ease, hoping for bargain prices within the next five years.

The Best Areas in the United States to Own Rental Properties

Regardless of the reasons, rising renter rates are great news for investment home owners. The following cities have experienced significant growth in the last decade.

  • Los Angeles, California has a renter rate that has increased 5% in the last ten years. The current rate is 64.1% of the total market.
  • Columbus, Ohio renter rates have increased from 49% to just over 56% in the last ten years.
  • Cleveland, Ohio rates have gone from 50.5% to 58.2% in the last ten years.
  • Nashville, Tennessee has seen rented homes go from 22.1% of the housing market in 2000, to 47% when the last reliable figures were reported at the end of 2016.
  • Honolulu, Hawaii renter rates have increased by almost 10% in ten years, with a rate of 58.3% today. This shows that the trend exists outside of the contiguous United States.

What it Means for Investors

For investment property owners, high renter rates mean that occupancy will be high, with a steady stream of income and less downtime between tenants. A strong renter market presents a compelling reason to buy, even with house prices trending upwards.

A family home is still one of the most important investments that Americans can make, but the growing trend of renters indicates that an investment home could be a feasible alternative to a portfolio that is heavy in bonds and stocks.

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