2013 was the year of the house flipper, but a number of significant changes to the housing market will make 2014 more amenable to buy and hold investors. While rehabbers will still be able to enjoy excellent profits, these five factors will make rental real estate investment the superior choice in 2014.
1. Home prices are going up, but at a slow rate.
Last year saw home prices go up as much as 20% in some markets, leading to a frenzy of buying and selling. The number of foreclosures on the market gave fix and flip investors ample opportunities to make excellent returns on their investments. However, in 2014 the number of foreclosures available will dwindle significantly. Construction of new homes will rise, and overall demand will go down. That said, both Redfin and Zillow predict that home prices will rise between 3% and 5% this year, according to Forbes. This is because demand is still steady, and the overall economy is improving.
2. Home affordability is going down.
As home prices go up, the ability of the average person to afford them goes down. Matters are made worse by the fact that inflation is going up faster than most people’s salaries. Many experts predict that the Home Affordability Index will reach its lowest point in nearly two decades this year. Mortgage rates are also expected to go up, which will make it harder for many people to afford new homes, particularly people who had their credit damaged by the recent housing crisis.
3. More people are choosing to rent.
The people most likely to be burned in the recent housing crisis were the first millennials, people who are currently between the ages of 30 and 35. These young professionals have more student debt than their parents ever had, and they were most likely to fall victim to foreclosure when the housing market fell apart in 2007 than anyone else. Because so many people had bad experiences, renting is losing its stigma, and more young professionals are choosing the flexibility of renting houses over. And because more people are choosing to rent, rent prices are also going up. Zillow predicts that rents will increase 2.5% this year alone.
4. Higher home prices plus higher rents equals an ideal situation for buy and hold investors.
The above three factors combine to create a perfect storm for rental real estate investment. With this sort of investment you can purchase a rental property, cover your costs and earn monthly profit from your renters, then resell the home for an additional profit a few years down the line.
5. The right rental real estate loans can take your investments further.
With our loans for rental properties, you can leverage your assets to invest in multiple rental properties at once, providing yourself with substantial monthly income and the benefit of long-term value increases. At ZINC Financial, we currently offer buy and hold loans at rates as low as 7.49%. Call 559.326.2509 today to learn more about our available loans and rates.