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Posts Tagged ‘Rental demand’

Increase in Renters Seeking Single Family Homes vs. Apartments

Oaklahoma City

In a blog on RentCafe, by Nadia Balint, from April 2018, this is some of the information shared:

“The U.S. housing market has gone through nothing short of a transformation in the last decade. The number of people renting their abode has increased significantly, in some cities surpassing the number of homeowners. The housing market quickly responded to this shift by adding millions of rental units in just a few years, with many U.S. cities witnessing a frenzy of apartment construction.

The most interesting part of this transformation, however, was the fact that the rental market expanded even faster horizontally than it did vertically. For the better part of the decade ending in 2016, single-family homes for rent were the fastest growing type of rental in the U.S., outpacing the formidable apartment boom seen throughout the country.

According to U.S. Census estimates, the number of single-family rentals (SFR) in the U.S. grew by 31% in the ten year period immediately following the housing crisis (2007 to 2016), while multifamily rentals (MFR) grew by 14%. In net numbers, single-family rentals in the U.S. increased by 3.6 million units in ten years, more than rental apartments, which increased by 3.2 million units. As of 2016, the U.S. Census counted a total of over 15 million single-family homes for rent in the United States and a total of over 26 million apartments for rent.”

10-year increase in single-family vs. multi-family home rentals in U.S.

Oklahoma City leads the 10 Top Metros with the largest share of Single Family Home Rentals:

This is very likely helped by the tendency of many Millennials to rent instead of buy. Millennials have not been valuing home ownership as much as previous generations. Many of them value flexibility and the ability to move. Nevertheless, many Millennials are getting into the family-formation phase of their lives, and thus prefer single-family homes with a yard for the kids, dog etc.

All this dovetails perfectly into our investment philosophy: buy single-family homes in good areas in good large metropolitan areas, finance them with 30-year fixed rate loans (which never keep up with inflation) whenever possible, and hold. That will vastly change and improve your financial future.

We will discuss this and a lot more at our ICG Quarterly 1-Day Expo on Saturday 5/19/2018 near the San Francisco Airport. I will be teaching and holding extensive Q & A sessions. We will have expert speakers on Asset Protection, 1031 Exchanges, and Financial Planning overall. There will be lenders present, 5-star networking, and presentations from market teams from the most relevant markets in the U.S. You can attend free, with a guest by emailing us at info@icgre.com, and mentioning this blog. Looking forward to seeing you!

#real estate, #real estate investing, #interest rates, #single-family homes, #rentals, #retirement, #college costs, #wealth

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Rental Demand for Single Family Homes is Very Strong

In a Wall Street Journal article from 1/6/2017 by Chris Kirkham, titled “ Millennials Fuel House Rental Boom”, the phenomenon of rent vs. own is discussed.  Millennials in particular but also other demographic groups have started leaning more towards renting as opposed to owning houses.

This is not really new. There has always been a sizable group preferring renting to owning. Some of the many reasons include flexibility to move at will (especially for jobs), less hassle of maintenance, possibly lower monthly expenses (depending on geography), not having to qualify for an ever-more-difficult-to-obtain loan, not having the perceived “burden” of a mortgage, and other reasons.

 

As real estate investors, we love having 30-year fixed mortgages, especially at today’s low rates (Trump bump notwithstanding), and the phenomenon of an ever-increasing rental demand only bodes well for us as real estate investors.  This is a very “sweet” window in which many factors co-exist that is favorable: low (still) interest rates, 30-year fixed loans still available, strong rental demand and low prices in several key markets. This year – 2017 should be a banner year for the savvy investor.
We will discuss this and many other issues at our quarterly 1-Day Expo on Saturday, March 4, 2017, near the San Francisco Airport.  Mention this blog and you can attend for free, with guests. Please contact us at info@icgre.com or call 415-927-7504 to reserve your seats. If you are reaching out via email, in the subject line say, “Read your article on AdielGorel.com blog” and in the body, give your first and last name, and email so we can confirm.  Please also list any guests you would like to bring.

Enclosed is the WSJ article:

 

·         REAL ESTATE

Developers Build on Home Rental Success With Whole Communities

Property firms see continued demand for single-family homes from millennials, aging boomers who don’t want to buy

By 
CHRIS KIRKHAM
Updated Jan. 6, 2017 9:38 a.m. ET
Property developers are pouncing on sustained demand for stand-alone home rentals by taking a big step: Building entire single-family neighborhoods designed for renters.
When the housing market crashed, investors took advantage by buying low-price homes in foreclosure in order to rent them out to tenants. That demand has proven brisk.
The new rental communities look identical to for-sale projects, with pools, fitness centers and walking trails. But they are operated like apartment complexes, with management handling maintenance, lawn care and leasing.
Developers cite growing demand from younger millennials and aging baby boomers who want the additional space and traditional setting of a new single-family neighborhood—without the long-term commitment.
“It used to be that if you were an adult and didn’t own your own home, you were kind of a bum,” said George Casey, a former home builder who is chief executive of Stockbridge Associates, an industry consulting firm. That stigma has now “been blown into a million pieces,” he said.
The number of renter households increased by 9 million between 2005 and 2015, marking the largest increase over any 10-year period on record, according to the Harvard Joint Center for Housing Studies. In all, about 5% of all new single-family construction was built for rent in 2016, up from a historical average of less than 3%. Experts say that could expand in coming years if homeownership remains depressed and as older Americans consider downsizing.
Developers building single-family communities for rent said they are transforming what began as a distressed-asset play into a completely new market somewhere between apartment living and homeownership.
“We basically looked at the institutional market and said ‘Would Blackstone, would all of these people be pumping tens of billions of dollars into this space if it wasn’t a good opportunity?’” said Mark Wolf, chief executive of AHV Communities, a California-based single-family rental developer that operates around San Antonio and Austin, Texas, and is looking to expand to North Carolina. “Then we said ‘Looking at what they do, how can we do it better?’”
Amenities packages and proximity to quality school districts are crucial to the business model. By offering perks similar to higher-end apartment complexes, the goal is to attract young families who want good schools but may struggle to buy in certain districts because of insufficient savings or high levels of student debt.

The model doesn’t work in all markets. In areas such as California, for example, where land is expensive, developers would likely have to charge rents that would be too high to justify the cost of construction. Markets such as Arizona, Texas and North Carolina make more sense because land is plentiful and demand is high.
“It’s about figuring out what places have the growth, but also have the highest rents possible for the lowest price of the home,” said Shaun McCutcheon, a senior manager who studies the single-family rental market at Meyers Research, a housing consultancy.

National home builder Lennar Corp. has tried the model in one of its master-planned communities outside Reno, Nev. RSI Communities, a home builder in California and Texas, is testing out two fully leased new communities outside San Antonio and is considering expanding the model to other markets.

 

John Bohnen, RSI’s chief operating officer, said the for-rent approach allows the company to build homes at a faster and more efficient pace than its traditional for-sale operation. That is because builders don’t have to wait to start construction until a sale is completed, giving construction crews that are in high demand more certainty about the number of homes they will build in a given time-frame, thus providing more of a guaranteed pay schedule.
And by exposing tenants to their homes, Mr. Bohnen believes the company could eventually generate demand on the for-sale side.

Matt Blank was a former hedge-fund investor who moved to Phoenix in 2011 to start snapping up distressed properties. He was soon crowded out when major investors like Blackstone Group LP entered the market and prices shot up. He instead turned his attention to buying empty lots and building affordable homes that adults could rent.

 

His company, BB Living, has since built about 350 rental homes across the Phoenix area, some in stand-alone communities and others alongside owner-occupied homes in large master plans. All six projects he has completed initially sparked controversy from neighbors worried their property values could be impacted by inadequately maintained rentals. But he said he got buy-in after assuring them the properties would be professionally managed and look no different from the surroundings.
“This is a new concept that hasn’t really been done before,” Mr. Blank said. “Once you get around that first hurdle, the pitchforks come down quite a bit.”
Write to Chris Kirkham at chris.kirkham@wsj.com
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