The economy may still be recovering for the current year, and people are doing their best to put 2020 behind them. The real estate industry is just among the many that were unprepared last year. It may seem like the industry may stay down. On the contrary, sellers could still sell homes because homeowners are simply moving away to sustainable locations. But, can the same thing be said for landlords?
1. Rentals Are A Passive Income
A good enough reason why rentals still do a profitable business is the effort you need to make money. As a passive income, renting out needs no action on your part because you’ll only need to wait for monthly dues. It’s one of those businesses that may need for you to have enough money in order to purchase a rental, spruce it up a little, sign a deal with a renter, and you’re good to go. While you may need to check the state of your property from time to time, you don’t have to do it every day. No manual labor is involved daily to maintain your property.
If you have various businesses to manage or want to focus on building a venture, you can enlist the help of a property management service, such as Teton Valley Property Management, that offers management solutions on investment properties and more.
2. City Migration
Last year, the whole world saw that businesses needed to cope by asking employees to work from home. It’s not a new trend, but the pandemic pushed what was inevitable from the beginning, as more employees are switching to work from home opportunities to get more quality time with their families.
The exact change of environment, however, prompted the regular working person to move towards more urbanized locations. People still want to be near large infrastructures and companies that offer premium services, such as the Internet and healthcare. And, while there are also people going against that direction, such as moving to affordable housing in other locations, people will still want to move where the jobs are found.
3. Mortgage Rates
Mortgage reduction is another benefit of owning rentals as a business. The pandemic significantly impacted mortgage rates last year when it dropped 2.67% for 30-year fixed rates and 2.7% for 15-year terms. While this is good news to families who are renting homes, it’s a different story for those who own rental properties because it’s about how much money landlords can get out of them.
This year, those looking to buy rental properties can still look for a potential rise in mortgage rates since some believe that they can still go up between 3.2% to 4.25%. It could happen any time before the end of 2021, so it’s still an excellent time to buy rental properties while the rates are still on a historic low.
4. Increase In Inventory
If you’re waiting for more inventory to turn up, it could happen sooner than you think because there’ll be an increase in properties that you can buy. Available homes will be in various locations other than rural ones this second half of 2021. It’s due to homeowners who are selling their houses and moving to other sustainable places. There’s also a likelihood that the national recession will eventually catch up to the real estate industry.
5. Showcases Continue
Rental properties are still hot in the market, showing no signs of slowing down despite the economic recession that the nation is facing.
Real estate agents report that the market is still active despite the recession. Despite people choosing to return to old neighborhoods, many are still looking into renting dwellings. While the pandemic has stopped the physical showcasing of properties, there are still open houses online.
Virtual tours have become the alternative in the real estate market for both buyers and sellers. There’s also the possibility that virtual tours can become the new normal since they allow potential buyers from afar to preview properties before buying or renting them. In the state of Washington, in-person showcases are permitted as long as the property is vacant.
It just goes to show that the demand for rentals is still very much alive.
6. Investing For The Long-Term
Rental properties aren’t a get-rich-quick scheme wherein, despite being an option for passive income, it can make you a considerable sum of money overnight. Apart from the costs it takes to buy the property, you need to accept that you’ll be putting down more money for its maintenance, insurance, and tax payments.
The market is still active, and there’s the promise of appreciation in the long run as the economy continues to recover from last year’s turmoil. Short-term fluctuations happen, and the real estate market is just as volatile. Realize that if you decide to be a landlord, you must prepare for the worst, similar to last year, and hold on to your property for the next 10 to 20 years.
7. Vacation Rentals Are Still Popular
Renting out to families isn’t the only profitable option. Vacation rentals are a great way to diversify your portfolio. Typically, landlords only offer seasonal deals on their properties, which limits the earning potential of such properties. But, before starting to invest in vacation rentals, consider first the best areas to choose, the type of property to buy, and other pros and cons.
But, because of the sudden pandemic, they’d be wise to choose to make it an all-year-round business when anyone can rent the property for a few days to a year. It’s a potentially profitable business decision, whatever the economic conditions are. Also, vacation rentals are still competitive as they tend to be more affordable than hotel rates.
Currently, the demand is stable on vacation rentals, especially now that more and more people want to travel because of the months-long lockdowns that people had to endure last year. The recession is at hand, but people still want to go out and take long vacations, which enables the industry to stay afloat.
8. Increasing Population
The growing population in the nation is also one of the reasons, while the real estate industry is still holding onto better days to come. On the other hand, if an area is experiencing a decrease in population, more houses become vacant, and the value depreciates. An excellent example of this is Detroit that used to carry 1.8 million, and currently, only less than half remain on the site. Homes continue to lose in value as a result.
Three factors affect a population: birth rates, death rates, and immigration. The country’s population is still on the rise, which means that housing will rise in number. It’s highly likely that by 2030, people would have grown to 400 million, surpassing the expected natural growth. The real estate market will still be in demand, and housing is expected to meet that demand.
9. Homeownership Is Decreasing
The United States is currently at the bottom 20% of countries that have low homeownership. In some countries, like China and India, they’re faring well in homeownership since the real estate market is more affordable. The government is tied with France at 63%. Britain is at 56%, and Germany at 53%.
Decreasing homeownership and growing population may affect the market for rentals. Rents will rise because there are no affordable, apartment-style rentals that are similar to China’s. Nothing in sight also shows the possibility of erecting cheap apartments to keep up with the rising population. People will likely choose to, still, rent to allow themselves the freedom and option to move somewhere else in the future.
10. Take Advantage Of Fix-To-Rent
While the real estate market isn’t experiencing the same housing collapse in 2008, investors could still benefit from deals that they could find today. Any property could end up listed in their portfolios. That being said, if the inventory consists of more homes that need moderate renovations other than a few minor touch-ups, they’ll atill need to reconsider.
This year, there’s potential for managing a moderate reconstruction using the right contractors for the job. Suburb living highlights the housing market today, with city people who were previously commuting in the big city now finding themselves working from home. They’re choosing to leave the high-rises for more sustainable housing in quiet communities.
So, it’d be best to scout your community for a fixer-upper that you can buy and eventually rent out to those interested. They may or may not accept the house, but renting it still offers them more options, like returning to the city life if things become financially stable again.
Rental properties still present themselves as profitable businesses despite the status of the economy today. With more people selling their homes for more sustainable options, homes are still being sold, and there’s now an open market where you can choose the rental home you want. Low percentages on mortgage rates will also allow landlords to purchase more properties as well. It’s essential for property owners to be patient to reap the rewards they want this year.