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The Rise of the Rental Industry: Meltdown of Mortgage

Posted in Home Ownership
February 7th 2013 by
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Guest Blogger: Brentt Taylor

The rental industry has become more lucrative than ever. Not only are fewer people buying homes, but more people are actively seeking to rent than ever before. Vacancies in rental properties are down by about three percent over three years, while the average rental fee has risen by almost the same amount. The change has not come due to rentals becoming more attractive, though – instead, it has relied mostly on the meltdown of traditional home ownership. See a visual here: http://www.appfolio.com/blog/wp-content/uploads/2012/09/appfolio_mortgag…

End of an Era

Owning a home was once the American dream. Like all dreams, though, it seems that this one has come to an end. The recent credit crisis and bursting of the real estate bubble has not only left fewer individuals owning homes, but has left fewer individuals willing to take the leap to home ownership. While the story has always gone that renting is little more than “throwing money away”, the idea of owning a home only for it to get foreclosed upon is incredibly frightening to many. In fact, the majority of individuals under thirty-five are no longer homeowners. These individuals have decided that renting is a safer, if not necessarily more attractive, option.

Mortgage Rates and Investing

Today’s mortgage rates, simply put, are low. Far lower, in fact, than you would think for a climate that seems so terribly ill-suited for home ownership. With a “great” rate falling somewhere between three and a quarter and four percent, the cost of home ownership is far lower than it has been in recent history. This is great news for anyone who wants to buy a home, of course, but even better news for anyone who wants to invest in property. Lower interest rates means higher profits and it greatly reduces the overall cost of holding on to a property. If you are in a position to invest in property, it seems that there has been no better time to do so – at least, not from an investment standpoint.

The Rental Edge

Rentals are flourishing today for much the same reason as any other product or service flourishes in the modern economy – it provides investors with a safe payout. Mortgage rates may not be as high as they were in the past, but taking out a mortgage and hoping for a sale is incredibly risk. With few loans other than FHA loans going out to eager first-time buyers, the profit that was in the market has slowly fallen away. Even worse, the destroyed credit scores of would-be buyers have sharply reduced the number of potential customers. Those who rent out homes, though, can set their own criteria for their tenants, allowing them to accrue profits quickly. Some tenants may not work out, but losing a single month’s profit is preferable to holding on to a property for several empty months. Click here for a visual: http://www.ira123.com/images/infographic-real-estate-investing

Investors are flocking towards rental properties, and for good reason. It is cheaper to own than ever, and easier to rent out a property than in years past. Whether they need a retirement investment or a good way to make an old property profitable, rental seems to be the way to go. Check out this infographic created by IRA about what you should know about investing for rental property.

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