deFaria Realty

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Investors

Cashing in on Rental Property

Most of the news lately about real estate has been dismal: Home prices are swooning, foreclosures ballooning.

There is, however, one bright spot: the rental market, where demand is up and rents are rising. That's partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.

As with many investments, the best time to get in is when most others are sitting on the sidelines. To figure out whether you can benefit by investing in rental property, here's what you need to know.

THE CASE FOR BUYING NOW

Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more. Hotpads.com, a real estate research firm, reports that rents nationwide jumped 11.6% in 2010, to $1,320 a month.

You'll need that rental income to tide you over until home prices bounce back; in fact, the typical investor today plans to hold for 10 years, according to a survey by the National Association of Realtors.

Source: MONEY Magazine | September 2, 2011

Investors Bank on Rentals and Abandon Flipping

Investors are renting out about half of the homes they purchase instead of renovating or flipping the properties, according to a new survey.

The latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, which surveyed about 2,500 real estate professionals, found that investors are struggling to resell properties so they are leaning toward renting the homes out instead. The survey estimated that investors will rent out nearly 50 percent of the properties they acquired in July. In July 2010, investors would have rented out only 28 percent of their properties.

The survey also found:

  • More first-time home buyers are emerging: The survey found that first-time home buyers increased to 36.9 percent in July compared to 35.4 percent the prior month.
  • Many real estate professionals says that Congress’ debate over the U.S. debt ceiling negatively impacted home buyer activity in July. The debate made many buyers uneasy about purchasing due to economic concerns, survey respondents reported.

Source: “Investors Who Can’t Resell, Rent,” RISMedia | Aug. 23, 2011