Jul 29

3 Ways You Can Profit From Changing Rental Demand

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PostHeaderColorBlueA false assumption exists with many homeowners and prospective landlords that they cannot rent out nicer homes. They think there is little demand for renting more expensive homes. This assumption is based on the belief that anyone who can afford to rent will just buy a house. If that was ever true when you only needed a pen to get a loan and home values always went up, it is definitely not the case now.

Rental demand for larger and nicer homes is high and rising. Rentals are now common even in neighborhoods that traditionally did not have many rentals. While the price range of these homes depends on your market, several factors are driving these long-term changes across the country.

Employment – Many people who could qualify for a loan simply do not want to buy now due to potential employment relocation. Whether it is job uncertainty or a new employment opportunity in the next year or two, they want to keep their options open.

Need – Renting a nice apartment or townhome is not an option for many people. Those with families, pets, or hobbies that require a garage or yard need a single family residence. Others want to live in a certain school district or part of town where there are no high-end apartments or townhomes.

Lending – Many higher income professionals cannot qualify for a loan with current lending rules.

Income – Borrowers must have 2 years of self-employment income to use it for a loan. If they recently switched jobs, they cannot count their bonus income. If they are commissioned, they need to show stable income for 2 years at the same job. Without being able to count all of their income, many cannot get a loan.

Credit Score and Down Payment – Just because you make good money does not mean you have good credit or saved your money for a down payment. Tighter lending standards require higher credit scores and larger down payments, especially for jumbo loans, and these take time to build.

Credit History – Others buyers cannot get a traditional loan due to a recent foreclosure, short-sale, or bankruptcy even if they have great credit and can document their income. Buyers may need to wait 2-7 years before they can apply for a traditional mortgage, depending on their situation.

You can see that buying a home is not an option for some and does not make sense for others. However, renting an apartment or moving to a different area is not a solution. People want to live in the same neighborhood whether buy or rent. Those with higher incomes will rent more expensive homes than the typical renter market offered in the past.

Higher demand for more expensive rentals is a long-term nationwide trend. You can profit from this market shift by renting instead of selling your current residence or buying different rental properties.