Financing rates are higher and more volatile than any time...
Many of the rental market trends in 2021, as well as those expected in 2022, have been molded by the uncertain circumstances brought on by the COVID-19 pandemic.
From the time that the pandemic took hold in early 2020, governments took actions at federal and local levels to ensure that renters were protected in these unprecedented times. These actions included eviction moratoriums, rent freezes, and low interest rates. Landlords and real estate investors have had to factor in government actions into their investment strategies.
As the pandemic compelled most Americans to work remotely, it also gave many the choice to decide where they want to call home. Many renters, along with their families on lockdown, fled the big cities in exchange for more spacious and affordable rental options in suburban areas and smaller towns. This resulted in creating a seller’s market and a boom in rentals in areas including Phoenix, Austin, Salt Lake City, Charlotte, Portland, and others.
It seems likely that some of the pandemic-induced effects on the rental property market will continue well into 2022.
Currently, the high demand for properties is being met by a low inventory for investors to choose from, which is creating competition between buyers, resulting in higher selling prices. These higher selling prices have the potential to cut into an investor’s returns.
As previously mentioned, the COVID-19 pandemic has created wide-ranging uncertainty due to government regulations surrounding moratoriums on evictions and rent freezes. However, at some point, outstanding rental and mortgage payments will need to be satisfied. This can lead to roadblocks for investors who need to deal with eviction proceedings for possible property investments.
The shift to working from home emerged in the pandemic and has given more people the freedom to move out of urban cities in exchange for more spacious suburban life. The result has strengthened the housing market in suburban areas as the new demand has dovetailed with very low interest rates.
While it’s unclear if we might see a wave of foreclosures in the near future, investors are still preparing for a large influx of foreclosed properties. Zeroing in on the right property quickly may be challenging, but home buyers willing to invest in renovations and repairs for a fixer-upper may see the best returns, especially in high-demand areas such as the suburbs.
Low inventory has also driven up the demand for new construction as well as the cost of labor and materials.
Owning rental properties has traditionally been an excellent way to generate residual income for property owners. However, the pandemic has caused many renters to fall behind in their payments which have in turn caused property owners to miss mortgage payments, property taxes, and other related costs. Government stimulus has provided some economic relief, but the future of such assistance remains in question.
Even in the fourth quarter of 2021, when this article was written, many offices continue to let employees work remotely. This trend is likely to continue well into 2022. Many renters working from home and seeking more space have decided to leave the high cost of living in urban areas for the suburbs and smaller towns, increasing the demand for residential rental properties in those locations.
Haus Lending offers a full suite of products for all rental property financing needs. Our rental property loan products are flexible to meet the needs of different rental property investors, allowing you to access long-term financing at a fixed rate for one property or many. With the widest selection of property types, extensive financing options, nationwide funding (including multi-state portfolios), and a wide range of rental property loan programs, we look at the full picture. Call us at 1-877-GO-4-HAUS or apply for a loan now.
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