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Job Growth Means Investment Options

King Solomon continues to be revered for his wisdom and prudence in all things. During his reign the Israelite kingdom reached unprecedented heights, and he established connections with the rulers of many countries both near and far. By all accounts, the King was a master at diversifying his wealth for great returns, as well as contributing to the economic development of his lands and those of his fellow rulers. His strategies can inspire modern investors in income property, especially in today’s booming rental market.

According to real estate analysts Zelman Associates, between 2005 and 2010, the number of single-family rentals grew by 21 percent, fueled by the housing collapse that led to large numbers of single-family homes being placed into foreclosure. Those owners became renters, and other kinds of households, hard-hit by unemployment and layoffs, were never able to achieve the financial stability to manage the costs of buying a house, and so have remained renters indefinitely.

Combined with a growing population of younger renters, some in school, others just starting new careers, who aren’t motivated to become homeowners at this point in their lives, these groups create a large pool of potential tenants for investment properties of all kinds. According to the US Census Bureau’s third quarter report, 2012 alone saw a net increase of 1.4 million new rental households.

In addition to the upswing in single-family rentals, the lesser-known market of multifamily rental housing – duplexes, triplexes and quadruplexes – has also shown growth. Since many lenders treat financing for multiple family housing up to four units as equivalent to a single family home, it’s possible to purchase these properties for relatively little more than you’d expect to pay for that single family house. The larger number of tenants in these properties also helps to spread the risk of a collapse; at any given time, there will most likely be at least one renter paying the bills.

Rents, too, have been spiraling upward thanks to a better job outlook that supports a willingness to put down roots and stay, with confidence in the ability to pay those rents. Some major metropolitan areas such as San Francisco are seeing rent growth of 11 to 14 percent, and even some smaller market areas such as Charlotte are experiencing rent growth of nearly 10 percent.

A major factor accounting for a significant portion of the growth in rents in mid-2012 was the rebound of the job market in some cities, as workers moved to new cities as part of their job. The same studies suggest that, on the national average, rents rose by as much as 4 percent in a year as landlords responded to the demand for rental housing.

This bodes well for income property investors following Jason Hartman’s recommendations to diversify holdings in a number of markets in order to take advantage of the different kinds of rental properties, and economic conditions, available there. And like King Solomon learned, establishing holdings in different areas creates a basis for building wealth for years to come.

The Solomon Success Team

 

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