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Residential Rental Property – The New Decade’s Best Cash Flow Investment | International Residential Real Estate Investors Association
Tuesday January 23rd 2018

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Residential Rental Property – The New Decade’s Best Cash Flow Investment

Fallout from the global banking crisis is increased investor focus on cash flow. Coupled with focus on cash flow, investors are seeking the best investment options for their cash. In the United States at least and perhaps some of these trends can be assumed to have global inertia, residential real estate investing is among the very highest quality asset choices.

Why is this the case?

  • The explosion of shadow inventory for rental housing is rapidly subsiding as the housing crisis ebbs, the markets for housing recover at least some semblance of health.
  • The long term effects of changes on down payment requirements for consumer homeownership is here for at least a decade and very likely permanently.
  • The increased hurdles for credit qualification is another long term demand dampening factor.
  • Consumers are focused on cash savings and will be working for the foreseeable future cleaning debt off the balance sheet.
  • Consumers are disenchanted with the home as a wealth repository again dampening ownership demand and strengthening rentership.
  • Demographics focusing on the U.S. echo boom, aging baby boomers, and the high percentage of new household formation coming from minority or specifically hispanice consumers all point to a much greater proportion of household renters.
  • Construction capital access has been sharply curtailed, building costs are not falling sharply, and future construction capital will come with tighter conditions. All of these factors point to reduced new inventory of rental housing for the near term (3 to 5 years).

The effect of this by some accounts is that last year rental households increased more than 1,000,000 U.S. wide. This is more than double the historic rate. Further, the next few years are anticipated to see a continuing similar surge of this magnitude. As a result, rental inventory which has pushed up through substitution and weakness in the economy will quickly reverse during 2010 and result in a tight rental market beyond.

As a result, with valuations low because of market issues this is an ideal time for prepared investors to generate strong long term cash flow and asset value gains for themselves.

Blake Ratcliff – The Real  Estate Investor

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