Buying real estate and renting it out has proven to be a lucrative investment in the past couple years. But is it too good to be true? During the Great Recession in 2007 the housing market plummeted and investors quickly made their move by buying distressed or foreclosed properties. Private equity funds like Blackstone invested billions of dollars buying up single-family homes.
Are we still seeing the same return after almost 10 years since the crash?
For a couple reasons investors are planning on staying in real estate. The first being property always tends to appreciate. Also rents are still climbing as we see from the Apartment List rental report there has been a 2.7% increase in rent from May 2015 to May 2016.
Real estate investor Brian Davis comments, “Investors who bought up foreclosures in the wake of the Great Recessions have no incentive to sell yet, with the rental market performing so well. Until we start hearing talk of a bubble, I don’t foresee investors unloading properties en masse.”
He includes an important statement; “Stocks have been a volatile mess, while housing markets continue to rise.”
Real estate has proven to pay off its investors compared to other investments. Conditions like the possibility of the United Kingdom leaving the European Union, refugee problems arising in Europe, oil prices, and the Chinese Economy have driven equity markets to label this year as tumultuous.
Granted, investing in property does come with some disadvantages. Your investment should be seen as long-term and it not liquid – cannot be easily or quickly turned into cash.
Don’t let the dissuade you because lawyer Michael Vraa states, “In our metropolitan area (Minneapolis), and many around the country, rents have continued to escalate. Some investors seemed like good bets to get out of the landlord game a couple years ago, but stuck it out, because they realized they could keep raising the rent. Not many investments allow you to increase your income by a steady 10% to 20% each year, but in the last four or five years, many landlords have done just that.”
Here’s a short testimonial from Eric Bowlin, a real estate investor, “Since 2009, I was able to turn a small $20-30,000 investment into nearly half a million in value. My real estate provides more stable returns than the stock market. My income is protected from downswings because the rental market is inversely related to house prices – more foreclosure cause prices to go down and rents go up.”
A couple other real estate advantages to note: tax advantages and financing.
Will the bubble burst? Eventually, yes. However, experts don’t predict that happening anytime soon. There is a possibility of this happening in markets like San Francisco or Manhattan, but overall most U.S. real estate will be steady.
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