Investors seek rental properties

An increasing number of people are pondering the answer to the rent versus buy question for a variety of reasons including life events such as births, divorce, empty nesters, job relocation or search and health, financial, concerns over the global economy, minimizing risks of stock investments and/or assisting family members. Low interest rates and affordability of homes continue to support the decision for home ownership for many.

Financial companies (i.e. hedge funds, pension funds, sovereign funds and private equity) and university endowments are also looking for real estate opportunities for their clients. They are seeking primarily distressed commercial and residential properties that they can lease and rent.

 

The double-digit returns are the attraction as most bonds and other income investments yields are comparatively less. These businesses plan to rent and lease properties until the real estate market supports higher home prices and then they will sell them.

 

The distressed properties used to be only targeted by individuals and now business entities and foreign investors are making it more competitive. At the end of last month, 3.5 million loans were at least 90 days delinquent or in foreclosure (Source: Barclay’s Capital) while the country’s home ownership rate has fallen to 65.9% in the second quarter of 2011 from its peak of 69.2% in 2004, according to the U.S. Census Bureau. This decrease in home ownership produced millions of new renters and helped push the vacancy rate for rental housing down by about two percentage points to 9.2%.

In Greenwich, appropriately priced rentals in good to excellent condition are receiving multiple bids and rent fast. Having central air remains important to attract a better rent. Landlords are selecting tenants based on their credit and proposed terms for renting.

In the Northeast, 67% of renters plan to purchase a home, according to the Trulia Survey. Typically, homeowners stay in their homes longer than renters and participate more actively in their communities (i.e. belong to PTAs, more likely to vote, more likely to repair and improve their home).

Across the country, real estate markets are recovering at different rates says Zillow Inc. According to the Commerce Department, single-family housing starts increased by 3.2% in May as compared to April while building permits increased 7.9%. Sales of existing-homes in May decreased also, showing an uneven recovery in residential real estate. Buyers of existing properties decreased 1.5% in May, according to the National Association of Realtors.

The overall slight employment gain in May and limited access to credit are putting downward pressure on the housing market. Stocks are still reacting to global economic concerns driving investors to real estate.

As a result of these various interests, forces and developments, there is an increase in real estate investors that are realizing good rate of returns with the increase in the number of renters.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be e-mailed to [email protected] or reach her directly at 203-249-2244.

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