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The New Rental Paradigm

Morgan Stanley Research released its latest property report, “Housing 2.0: The New Rental Paradigm” to provide market revelations to stockholders. It’s interesting to know that the research team observes how more US citizens became renters instead of householders, attributing to different factors in the economy.

The report states:

“Across the country, more USA citizens are becoming home renters, and fewer North Americans are becoming owners. The start of the rentership society is on us. But all renters are not equal “of the approximately 40MM rental housing units in the country (representing approximately $6 trillion in asset worth), about half are multi-family and half are single- family.”

And this is good news for real estate investors like you! With such robust demand coming from renters and bargain prices available on homes, there’s just about no way that you might lose out on the real estate market today.

Chris Mayer, editor of Agora Financial, supports these observations. He states, “…rental rates have been rising. In 12 of the 27 largest metropolitan markets in the U.S, it is less expensive to buy than to rent.”

“In some markets, the spread is pretty wide (e.g. Atlanta, where monthly rental rates average $840). A home mortgage payment? Principal, interest, taxes and insurance add up to a virtually paltry $539. So there is a great chance there for investors,” Mayer notes.

The Morgan Stanley report concludes that if you need to defy the current market malaise, it might be more moneymaking to speculate in single-family properties you can use as rentals. Such property can counter the effects of the housing bubble and further plunge in property values. More so , single-family rentals are also good for both equity and debt investors according to the report.

Though single-family houses may cost a little more than some other kinds of properties, more investors in real estate prefer having greater privacy in the properties that they invest in. Single-family homes could also be expanded and most of them belong to communities with a householder's association.

Best of all, single-family homes permit a real estate investor to hedge better. When it’s a buyer’s market, rents surge and one’s cash flow also increases. On the other hand, when it is a seller’s market, the property’s value rises. This leaves the investor with the ability to sell the property for a (massive) profit or refinance the property to take some equity out and/or get a better mortgage IR.

With reports like this, it’s blindingly obvious that one can gain an advantage with rental real estate.

Marco Santarelli is a speculator, author, and founder behind Norada Real-estate Investments – a national real estate investment firm offering turnkey investment property in growth markets across the nation. He is also the original writer of The New Rental Real Estate Paradigm.

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