Basically, whether you're a buyer or an investor, you've got the same play. As Jim Cramer from tv's Mad Money would say: BUY BUY BUY. As an investor, it is your best bet right now to get in on the hot rental market, buy and hold for the long term and realize both consistent (hopefully positive) cash flow, along with expected long term appreciation. As a buyer, there has been no better time to buy a home: rates are near 4%, prices have dropped, and the supply of available homes are abundant. Have you heard me mention all of this before? Do I sound like a broken record? Probably. I'm not hopping up on my soapbox for my benefit, I want you to get off the fence, you'll be happy you did.
So let's talk about why you're reading this in the first place...you want to know why the rental market is so hot right now. If you can think back to (or vaguely remember) your high school economics class, the only thing you'll ever need to remember is the concept of Supply and Demand. Vacancy rates are near their lowest points both regionally and nationally. We are seeing some of the highest demand in history for rentals; from large apartment/condo/townhome complexes, all the way to investor owned single family homes, duplexes and the like. Let me break down the reasons for all the demand.
- Foreclosures, Short Sales and Distressed Properties, oh my! - These are just part of the game these days...If someone is foreclosed on, or if they need to sell their home for less than what they owe on the mortgage, these people are typically not able to buy a home for at least 18 months, and in most cases, 3 years or more. When you can't buy a home, the only other option is to rent.
- Job Losses - After the financial meltdown, a lot of people lost their jobs, did you hear about it? It was on the news one time, I think. Well, some of those folks were lucky enough and had the financial capability to sell their homes and go to the safe harbor of the rental market which offers typically lower payments, and flexibility. While renting, these folks were able to search for jobs away from home base, and have the relative flexibility to move when a job was found.
- Tighter Lending Climate - Along with the financial meltdown, lending practices were restricted. No longer could Joe Somebody go in to Banks-R-Us and get a zero-down mortgage or interest only mortgage. All the folks who could have gotten loans to buy homes they couldn't afford can't now, simply because the restrictions have made it tougher for people to get into bad situations, which is a good thing.
- Fear, Indecision, and Downright Ignorance - From what I've seen in the market, fear, indecision and ignorance is keeping the rental market hot. There are some very well qualified people who might just be either ill-informed about what's happening out there right now, or they might just be sitting on the fence to wait for things to "calm down". Whatever the reason, people aren't buying homes right now, and they are flooding the rental market because it's "safe".