Rentals in the Heartland

Destination Heartland!!!   That is where savvy investors should be heading according to the latest rankings for best real estate markets for investing in single family homes as rental properites.  

Many of the smaller cities have low unemployment rates, well below the national averag,e and they also have strong job growth.  Here in Amarillo we have high rental numbers because of Bell Helicopter bringing in new graduates, so almost all rentals rent quickly.  I have a realtor friend who has over 220 rental houses and he says he rarely has to advertise for more than a week.  Another landlord told me she didn't want to send me her "empties" because she usually fills them the week she gets the 30-day notice they will empty, so why bother sending them to a realtor.  In other words, it is easy sneezy to get rentals rented in Amarillo, Texas. 

Housing prices have bottomed out, also in some areas.  Here in Amarillo, actually our house prices increased last year, but compared to other parts of the country, our prices remain low, with the average being in the $150,000's.

The smaller markets are great places to rent out single-family homes because strong economic growth can quickly absorb the existing housing options.  Here in Amarillo there is a shortage of lots for new homes, so there are fewer homes to buy, so rentals are really hot!!

The lower the risk premiums of the smaller markets make them a saffer investment.  I'm not sure what this means exactly, but it was in an article I just read.

The interest rates are low, demand is high, so investing in rentals in Amarillo, Texas, just makes sense.

Single Family Rentals--Investment Explosion

The explosion of single family rental houses bought by real estate investors and rented to a single tenant is creating a new category of property management companies to serve them.
Last year, 1.2 million U.S. properties were acquired for investment purposes, up from 749,000 in 2010, according to RealtyTrac. This year, the investment boom has continued, with investors accounting for about 20 percent of all home sales. With the vast majority of investors following a “buy and hold” strategy rather than flipping, millions of properties have entered the rental inventory. Two months ago, a study by CoreLogic found that single family rentals have outpaced multifamily, accounting for 54 percent of all rental units in the nation.

Why Owning Rentals Makes Sense

Contributing Factors

Rental properties have four primary factors that contribute to a return on investment. Based on market conditions and investor strategies, the individual motivating factor can change for property owners.
There was a time when the benefit of tax savings to offset income from other sources was considered important to some investors. However, in today's environment, they are more likely valued as incidental benefits.
Some investors expect appreciation to deliver the satisfactory results which can be reasonable over time if a reliable appreciation rate is used. Savvy investors today are using conservative estimates for long-term holding periods.
Leverage occurs when borrowed funds are used to control a larger asset. Positive leverage can actually increase the yield on an investment.
The fourth component that contributes to a property's yield is the cash flow. When the rents are greater than the expenses of operating the property and servicing the debt, there is a positive cash flow. A property with a good cash flow doesn't have to go up in value to justify the investment.
The combination of lower prices, incredibly low mortgage rates and rising rents are attracting investors to rental properties that include single-family homes in predominantly owner-occupied neighborhoods.
Even if you were to ignore the benefits of tax savings, potential appreciation and leverage, the attractive cash flows make rental property a very smart investment alternative. If you're curious, contact me for more information