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The Growing U.S. Rental Industry & How You Can Profit

happy family“Owning a home is a keystone of wealth–both financial affluence and emotional security.” ~ Suze Orman

Owning a home has always been a part of the American Dream, and the same has been depicted in the latest Trulia report, Housing in 2016: Hesitant Households, Costly Coasts, and the Bargain Belt, with 75% of the all U.S. adults making it a part of their personal American Dream.

However, the odds are not in their favor, with many challenges starting with declining home ownership, increasing credit requirements, and soaring home prices.

Declining Home Ownership

  • According to a report from the Joint Center for Housing Studies, Harvard University, home ownership was close to its 20-year lows, at 63.7% during the first quarter of 2015.
  • The same report suggest a declining home ownership trend across all the age groups, with Generation X taking the worst hit from the 2008 housing crisis.

Growing U.S. Rental Industry

  • As per the report from the Harvard Joint Center for Housing Studies, declining home ownership has catalyzed the American rental industry, with the average renter household growth reaching 770,000 annually. The increasing demand of rental accommodation has pushed national vacancy rates to 20-year lows.
  • According to the National Multifamily Housing Council, 37% of the total U.S. Households were living in rental establishments, with the renting rates highest among the under-30 age group, contributing to 51% of the renting population.
  • A Zillow report puts the national rental spending to $535 billion in 2015, 3.7% higher than the overall spending in 2014, with the highest rental spending among New York and Los Angeles renters.
  • As per the latest Zillow local market overviews, the median rent stood at $1,381 in Dec. 2015, rising 3.3% during the last one year. On the other hand, the latest annual inflation rate for the U.S. was 0.7% on January 20, 2016, as reported by the Bureau of Labor Statistics.

Major Challenges in Home Ownership

According to Trulia’s report for 2016:

  • 54% renters found saving for down payment as their biggest challenge
  • 35% renters were worried about a poor credit history
  • 31% considered qualifying for mortgage as their top challenge
  • 29% were concerned about their existing debt levels

Cash-in on the Current Rental Growth

With all of these facts on the table, it might be safe to say that this is the perfect time for real estate investors to get their hands on rental properties.

  • Growing rental property demand: According to a survey conducted by Rent.com, a property rental website, nearly 45% of rental managers recorded more Millennials seeking tenancy, whereas 54% of rental managers witnessed an increase in previous homeowners looking to rent.
  • Rising rents: According to Rent.com’s survey, property managers using their rental property portal forecasted an annual increase of up to 8% in rents against 6% in 2014.
  • Dropping vacancy rates: During the second quarter of 2015, vacancy rates for rental housing stayed at 6.8%, near 20-year low, against the previous year rates of 7.5%, during the same quarter, as per the record of the Census Bureau.

Beginner real estate investors might just find these circumstances comfortable to start investing in real estate.

401k

If you’re a novice real estate investor falling short of the necessary funding, you can use your Solo 401k or IRA LLC  to fund a real estate investment.

Solo 401k offers the option for non-recourse financing for the property, under which the property serves as the collateral, cutting your overall credit risk exposure.

Alternatively, you can even take a participant loan from your Solo 401k account, and use it for making a down payment.

One of the key components of real estate investing success is to capitalize on opportunities like this.

“Nothing is more expensive than a missed opportunity” ~ H. Jackson Brown. Jr.

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About the Author...

Dmitriy Fomichenko is the president and founder of Sense Financial Services, LLC, a leading provider of retirement accounts with "Checkbook" Control: the Solo 401k and the Checkbook IRA. Over the years he's instructed dozens of investment & financial planning seminars and mentored hundreds of investors.

To learn more about the Solo 401k plan, visit sensefinancial.com and read Dmitriy's full bio here: http://www.sensefinancial.com/dmitriy/

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