2024's Hottest Investment? Despite Housing Crisis, Experts Explain Why Rental Properties Will Make You Rich
Considering investing in rental properties? Now might be a prime opportunity.
While mortgage rates are higher than usual, the potential for building equity and earning rental income could outweigh those concerns. A recent RentCafe study shows a trend of Gen Z renters who, despite having more money in their 20s than millennials, are still choosing to rent over buying. This suggests a strong rental market; investors who act before it cools could benefit.
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According to Capital Max Chief Marketing Officer Kris Mullins, this demand makes rental properties an attractive investment.
"We are witnessing a massive surge in renters, driven by factors like rising student loan debt delaying homeownership for millennials and a preference for flexibility among Gen Z," Mullins told GoBankingRates. "With a growing renter pool chasing a potentially limited supply of rental units, vacancy rates are likely to stay low, which translates to consistent rental income for property investors."
Suzanne Moore, founder and investment-focused real estate agent at Central Oregon Investor Institute, said that investing in real estate is accessible to anyone and that you don't need a lot of money to get started.
"Real estate is the only asset you can buy with someone else's money — a loan — and then have someone else pay it off for you — the rent you collect," Moore said.
Rental properties can be a smart investment, but careful planning is key. As RentRedi CEO Ryan Barone points out, thorough research is essential to set yourself up for success. This includes calculating your potential return on investment (ROI) to ensure the property aligns with your financial goals.
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"There are many factors that can contribute to a higher ROI, such as the condition of the property, rental trends and vacancy rates in the area," Barone said.
Location is king when it comes to rental properties. Look for properties close to desirable amenities like good schools, shopping and entertainment, parks and public transportation. These attract higher-quality tenants and command higher rents, boosting your potential ROI.
"Look for properties located in high-demand areas with strong economic indicators such as population growth, job opportunities, the presence of universities or business districts and cities that are investing in new developments, revitalization projects, or infrastructure improvements," Barone said.
Investing in properties in different locations will help diversify your portfolio and protect it against fluctuating markets. If you have some money, you can buy a vacation or long-term rental to diversify.
"Buy and hold is a great entry point for people with money but little time," Moore said.
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