How single-family rentals are showing resilience in a choppy real estate market.
A confluence of trends in the real estate industry, including rising interest rates and limited inventory, have created strong headwinds, but also opportunities, with single family rentals (or SFRs).
Here are three of the biggest drivers for resiliency and profitability of SFRs.
More buyers are headed to the suburbs. With the pandemic came a shift in where Americans wanted to live. A survey by Pew Research Center found a drastic jump from 4% to 46% of adults preferred to live in the suburbs post-pandemic where SFRs are the norm.
Rising rates and low inventory drove interest in rentals. As the Fed raised interest rates to combat inflation, mortgage rates more than doubled. The effect on would-be buyers was chilling. With purchasing power zapped, but a strong desire for yards and home offices, would-be buyers turned to single-family rentals.
A surge in rents followed with SFRs up 6% from the same period last year and 20% from the same period in 2021. For single-family landlords and savvy investors, it’s become a golden goose. According to research by ATTOM, the annual gross yield for rentals is 7.5% – up from 6.7% last year.
With profitability on the rise, homeowners are choosing to rent their properties instead of sell them. Michael Zuber, author of One Rental at a Time, recently told Fortune that a home with a low-interest, 30-year fixed mortgage is one of the best assets someone can have. “They shouldn’t sell, they should rent it out” said Zuber to Fortune, noting that the potential yields from such a leveraged asset can be excellent.
With the only constant in real estate being change, it’s crucial for investors to have a seasoned partner by their side. At HomeServices Property Management, our best-in-class systems and top-notch service are designed to help investors seize opportunities and sustain their portfolios. If you’re looking to start your investing journey, or take it to the next level, contact us today.