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Strong Future Market Indicators for Rental Investment Financing

More Renters Plan to Remain Long-Term Tenants

market indicators rental investmentsMany renters are planning to continue renting for a long-term as they aren't ready for the ownership responsibilities. According to a recent survey from Freddie Mac more than 60 percent of the current renters in the US plan to live on rent for a longer period. This wasn't the case a few decades back. Nowadays, renters see both positive and negative aspects of their living arrangements. And this trend is here to stay.

Freddie Mac commissioned Harris Poll to survey more than 2,000 adults to understand what tenants think about renting. The data provides significant insights into the thoughts, plans and financial situation of the tenants. This can help single-family rental investors in planning out their future strategies as well wit respect to the rent vs owning debate.

Many renters are not considering buying their own houses as they are not able to afford the down payment or mortgage or have a poor credit history. But, there also is a segment of renters who doesn't want to take responsibility for owning a home. They just want to pay the rent and treat the property like their own, but don't want the various headaches, including repair and maintenance, associated with home ownership.

Some Highlights of the Survey

A large number of renters surveyed cited six favorable aspects of renting. (The percentage next to each statement shows the percentage of renters who agreed to the factor):

  1. Renting means zero home maintenance responsibilities. You live like it's your own property but aren't liable to undertake any home repair or maintenance. (78%)
  2. Renting allows you to have more flexibility over where you live. (68%)
  3. Renting provides protection against real estate market fluctuations – rise or fall in home prices. (66%)
  4. Renting a home is less stressful than being a landlord. (65%)
  5. Renting allows you to live closer to a major city and the ''action'' there. (57%)
  6. Renting a home is far more cost-effective than owning a home. (55%)

Investors should be aware that renters do not have only positive perceptions about renting, there are negative ones too. The main negative perception about renting, that 80% renters feel, is that they are subject to the whim of their landlord. The other that renters feel like is that they are just wasting their money. Investors need to consider eliminating or reducing these negative perceptions by offering a stable and high-value living environment to renters.

FINANCIAL STRUGGLES

Around 38% of the surveyed renters have extra money from each paycheck to spend on themselves, but 45% live a cyclic paycheck-to-paycheck life with just enough to survive. Moreover, around 7% of them sometimes even lack resources to pay for their basic needs such as food and housing.

On the contrary, homeowners tend to live a good quality of life with stable financial conditions and 62% of extra money to spend from each paycheck, 31% live paycheck to paycheck and only 7% struggle for their basic needs.

FUTURE PLANS

Overall, around 39% of all the renters surveyed are planning to purchase their own home in the next three years, while 61% will continue to rent. Younger renters are more likely to purchase their homes sooner than old renters. For example, 47% of renters from 25-34 years of age and 58% of renters in the age bracket of 35-44 years of age said that they will purchase their own home in the next three years, compared to 27% of renters aged 45-64. The figure is even lower at 21% of those 65 or older.

Those who are expecting to continue renting beyond three years are more concerned about affording a down payment and the cost of monthly mortgage payments or bad credit history, but there is also a segment of renters who still prefer renting as they don't want the responsibilities of owning a home. (39%)

Rental Home Financing guides investors on how they can invest smarter and make the best out of their investment property. Landlords need to prevent the negative perceptions about renting to attract more potential renters to their property.

Avail blanket portfolio loans at up to 75% LTV with an amortization period of 30 years. DSCR loans are also available with no ratio to personal income required. Use them to finance single-family rental homes, multifamily home financing, duplex loansfour-plex mortgages, and even apartment building loans.

 

Call us at 888-375-7977 to learn more about our services or visit our rental loan products page.

 

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