7 Reasons Why You Should Be Investing In Rental Property

1. Rents Are Climbing & Vacancy Rates Are Shrinking: Portland is experiencing some of the highest rental rate increases in the country right now. Latest figures show that rents have jumped 6.4% over the last year, putting Portland in the top 5 for rent increases. Rents are climbing, vacancies are down and even more importantly, this is just the beginning (Read the Harvard Study on Rental Rates). Also read this excellent article on the future of the national rental market.
2. Very Little New Home & Apartment Construction Locally: Rental rates are driven by two things 1) Supply 2) Demand. Demand for rentals is strong, but the lack of available units is what is helping to drive up the rental rates and will continue to in the short term. Local housing construction has slowed to a near standstill with new apartment projects only trickling onto the market and the construction of new single family homes is almost non-existent. There isn’t enough rental properties to meet the demand.  Just ask those who are out there trying to find a rental, it’s difficult.  Much of the apartment supply that the Portland-Metro area saw in the early 2000′s was sapped up by developers converting apartments to condos. In fact, some banks are even turning their foreclosures into rentals because they know rents are high and home prices are low.
3. Loan Requirements Make Home Buying Difficult For Some, Leads To Renting: If you have purchased a home in the last couple years, you know the hoops and hurdles that the banks put you through to get a loan. Unlike the recent years of easy money, bank loan requirements have become stringent forcing some would-be home buyers into renting for the next few years until their finances improve or loan requirements loosen.  Besides, these would-be buyers, what do you think happened to all the home owners who had to lose their home to foreclosure or short sale? They rent, and will be until their credit improves.
4. Investor Loan Options Are Out There: It used to be rather difficult to buy investment properties and still does requires a capital investment, but there are loans out there that make it a manageable investment. Banks and federal agencies, Fannie Mae in particular, have started to provide incentives to investor purchases as that is seen as a method to help clear the inventory of distressed homes on the market. Fannie Mae has a loan product called the HomePath Loan which allows investors to put down 10% rather than the typical 20-25%. In addition, they offer a renovation loan where a buyer can wrap their after purchase remodel costs into their mortgage at origination. It still takes good credit and a typical loan will require between 20-30% down, but if you have the cash, the deals are available. As of July 21, 2011, a 30 year fixed rate was less than 5% (with good credit and at least 20% down). 
5. Investors Are Jumping Back Into the Real Estate Market – 1/3 of Home Purchases Are Purchased With Cash: Home buyers using all cash (no loan) to purchase homes make up 1/3 of all home purchases being made in the US. That is a remarkable number and illustrates the increase speculation from investors that the market has reached a bottom and that real estate is now an attractive buy.
6. Investment Properties Are CHEAP! : Home prices in the Portland-Metro area have reached a level that is comparable to 2004. Foreclosures and Short Sales have driven down prices and they continue to flood the market. Single family homes are on the market for as low at $50,000 and condos as low as $35,000. Multifamily homes (duplexes, tri-plexes, 4-plexes) have also dropped to early 2000′s price levels and show up as bank owned properties or short sales as well. Duplexes can be found for as little as $115,000, tri-plexes for $180,000 and 4-plexes for $250,000.
7. Home Prices Are Bottoming – Will Cycle Back Up: Historically, real estate prices have steadily climbed over time, but when you look closely you will find that real estate prices always follow a simple up-and-down cycle that moves up over time. Looking at price graphs you will see that the Portland-Metro market is creating a pricing bottom, which means the next cycle is up. With an improving local economy, steady job growth and prices reaching a bottom, the average home price is likely to increase.

Whether you desire to invest in a single family home and rent it out or purchase a multi-family property and dive into property management, there are a lot of options out there for you to make a strong investment for the future. Contact Ritchie Metzler @ 503.740.2043 or ritchie@urbanpacificrealestate.com to learn more about how to invest in rental property.

If you’d like to see what is available try a few of these searches that I have set up for easy investment hunting.

Foreclosed Properties

Short Sale Properties

Multifamily Homes

Homes That Qualify For HomePath Loans

If you are a renter looking for a new rental property to move into, here are some tips from the pros on how to find an apartment in this difficult renter’s market.