“I Want To Be A Landlord When I Grow Up”

Whether you played the Game of Life and chose the doctor path (come on – who didn’t?!) or put your career pick in a time capsule and buried it in your grandmother’s backyard – chances are your professional aspirations started before you even turned double digits. Astronauts, pro sports players, doctors and teachers are usually the top contenders for what we all envisioned in the innocence of our youth. But have you ever heard anyone say “I want to be a landlord when I grow up!”.

Not really! Maybe it’s because it’s not glamorous, maybe it’s because it’s not a stop of the spin in the Game of Life – but maybe it's because it takes the wisdom we don’t have in our youth to make it a desirable, viable and profitable decision. On that note, this week’s blog is designed to give you an overview of the latest investment trends, insights and stats available today.

With the price of real estate on an upward climb, you may be wondering where real estate investment trends are headed today. According to the National Association of Realtors NAR)®, investment home sales rose 4.5% in 2016. In fact, investment home purchases made by individual investors reached their highest levels since 2012 – largely due to record low rates and the demand for rentals as first-time home buyers struggled to enter the market.

PricewaterhouseCoopers (PwC) reinforced this finding in their “Emerging Trends in Real Estate®:The Outlook for 2017” report, stating that single-family homes and rentals are “strong sectors and fundamentally undersupplied”. Generational stats reveal that 21 million Americans will be entering their 30’s in the next five-years, making real estate investments more attractive given the likelihood of a growing buyer pool in the years to come.

Exactly how high the returns are depend upon where you live. Real estate data firm ATTOM reports that across the nation, investment returns range from 2% to upwards of 20%, averaging 9% profitability nationwide. While the outlook sounds promising, how can you determine if an investment property purchase makes sense for you?

We all know it isn’t easy to budget for mortgage, taxes, insurance, repairs, HOA dues (if applicable), etc. on a primary residence – much less on a future rental. The good news is that technology is aiding in these calculations, as data-driven purchasing behavior is made possible by new applications. For example, Revestor is a specialty property search engine that gathers and analyzes property costs with a few clicks online, helping streamline the review and evaluation process of a potential purchase.

If all of this makes you consider “Do I really want to be a landlord when I grow -up?” – there are still a multitude of items to consider. Are you comfortable purchasing a property in close proximity to where you live…or willing to consider one farther away? Do you plan to employ the services of a property manager, and have you calculated those costs into your analysis? How do you feel about having to make quick decisions in terms of “buy, sell, hold” as the market changes?

The decision becomes even more important as you select the property; Realtor.com® reveals that these 4 signs make a house worthy of becoming your next rental: 1) It makes money for you immediately (not after a sizable and costly renovation), 2) Dwindling days on market (the neighborhood might be heating up!), 3) Gourmet Grocery stores are nearby – it’s true that properties are more rentable if near Whole Foods or Starbucks, and 4) The inheritance of a squeaky clean tenant (why not start with a winner?!).

If the direction of real estate investments is a path you are about to embark on, or one you’ve been riding and plan to continue, we are always happy to help you in our Homes of Silicon Valley commitment to helping homeowners “Buy. Sell. Invest.” With decades of living, working and investing in the Bay Area ourselves, we are dedicated to making sure you don’t just love where you live, but are financially fulfilled with where you invest too.

Resources Used:

Affordability, Tight Supply Cause Vacation Home Sales to Plummet in 2016; Investment Sales Climb 4.5%

4 Signs a Property Is Worth Buying and Renting Out

Emerging Trends in Real Estate®: The outlook for 2017

3 Tech Trends Helping to Bring New Investors to Real Estate

Cheers,

Mark & Jason