The LA Times has shared new data out of RealtyTrac which shows that it’s now cheaper to rent than own a home in many of California’s largest metropolitan areas. Only 29 large counties across the nation are in a situation in which renting is cheaper than owning, but that list includes Los Angeles, Orange, Ventura, Santa Clara, Alameda, and San Francisco Counties.
The study looked at medium priced three bedroom homes. In the last quarter of 2013, the monthly payment on such a home was nearly $2,000, about $100 more expensive than the rent on a similar property. Just one year earlier, the house payment would’ve been $500 a month cheaper than rent on a comparable home.
Experts believe that this unique situation has been primarily caused by the recent surge in home prices. In California, home prices regularly went up more than 10% last year, and those figures are still on the rise. Rent prices are also going up to help keep pace with the growing demand for rental properties, but for many residents of California, rent is still cheaper than house payments. As a result, it’s likely that California will see an increasing number of potential homeowners choose to rent rather than buy.
Opportunity Beckons Buy and Hold Real Estate Investors
This situation presents a great opportunity for buy and hold real estate investors in California. The current housing market is showing great signs of stability as home prices continue to steadily rise. The fear of another housing market bubble has virtually evaporated due to an increase in new home construction, steadier prices, and fewer foreclosures. As a result, an investor can purchase a rental property in California now and have an excellent chance of making double-digit ROI over the next few years. Plus, with rental prices expected to increase 2% this year alone, rental real estate offers great opportunities to supplement investor’s monthly income with rent collected from midrange and high-end renters.
At ZINC Financial, we recently revamped our buy and hold loan programs to offer incredible rates as low as 7.49% to serious investors. If you have additional questions about these programs or the market, email our VP of Business Development, Amber Castro, at [email protected] today.
