Here’s how to capitalize on the single-family rental market

3 tips on where to start

[Update 1: This blog originally referred to Dennis Cisterna as a CEO, he is the CRO.]

In case you have missed the current state of the single-family rental market, it is booming. More and more investors today are taking the step in the buy and hold direction and focusing their investments on rental properties. This can be attributed to how the rental market as a whole has shifted in the past decade.

According to RentRange, a website that compiles data and analytics on rental markets across the United States, the current trends show a rise in rental demand for single family properties and rents increasing up to 6%.

Even with historically low interest rates for buying a home, SFR has increased primarily due to people being unable to obtain mortgages for a variety of reasons: they lost their homes and defaulted on their mortgages in the last recession as well as high college debt levels.

For even further proof of how well the rental market is doing, vacancy rates are only at 7%, according to Dennis Cisterna, CRO of Investability, a sister company of RentRange. Cisterna was a guest speaker on a recent webinar hosted by LendingOne, a direct private real estate lender for investors, where he discussed these statistics, along with a detailed analysis of the SFR market. He also examined different factors affecting the gradual increase in the single-family rental market as a whole.

Here are three tips on where to start when it comes to investing in the SFR market:  

1. Use the market data available out there

With the amount of information available today, it has made it much easier for investors to branch out of their comfort zones to areas beyond where they live. Utilizing data driven sites like RentRange, Investability, and RealtyTrac, are great ways to determine what locations are prime for rentals and which ones are not.

Cisterna reinforced this point during the webinar when he explained how it isn’t just a numbers game but rather investors need to know the local area inside and out before making that decision on whether to invest. They should view reports detailing what the rents are, listing prices, taxes, property fees and more.

He talked about how useful the market data can be for helping investors to invest in areas that they may not have even considered such as Little Rock, Arkansas, which has seen a rent growth of 14% compared to the home prices only increasing 1%.

He attributed this to the strong job growth, not a lot of new homes being built, and people’s inability to qualify for a mortgage in a metro of this size. Again, none of this information would have been accessible years ago, and by using it today, investors are at a greater advantage when looking for new locations and states to grow their rental portfolio.

2. Follow the trends

In order to capitalize on this growing market of opportunities, you’ll need to know where to start investing. Using the technology available today and these detailed reports, investors can make better decisions during their search for new profitable SFR markets.

RentRange recently reported on the 25 markets  with the largest rental rate increases and found that “Florida has more markets than any other state on the list, accounting for nearly 25% of the top spots.”

Mika Pappas, the CEO of Keyes Company, expanded on this point in a quote he gave to RealtyTrac in their annual data report: “The strong South Florida rental market continues to give solid returns to the investors…our limited land with growing population give the investors an additional equity kick in rising prices.”

3. Get your financing in order

Besides locating the right rental property, you’ll also need the financing before you start investing. In a market where obtaining mortgages has become more difficult, investors are turning to alternative forms of financing such as private lenders.

Private lenders can provide loans faster than conventional banks, and may even have the options of a portfolio loan for multiple rental investments or 30-Year Fixed-Rate rental loans for the purchase or refinance of a rental property.

By taking advantage of these flexible financing solutions, investors can capitalize on the growing single family rental market and continue building their wealth through buy and hold investments. 

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