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Why It’s a Good Time to Own Rental Properties


With the U.S. apartment vacancy rate at its lowest level in more than a decade, owners of rental properties are in a good position as rents continue to climb and more people are forced to rent.

From Reuters:

The national apartment vacancy rate fell 0.1 percentage point to 4.2 percent in the third quarter from the second quarter, according to a preliminary report by real estate research firm Reis Inc.

It was the lowest vacancy rate since the third quarter of 2001 when it was 3.9 percent. Some 47 out of 79 markets that Reis tracks posted vacancy decreases. The average asking rent rose 0.9 percent in the third quarter to $1,121.16 per month. The average effective rent was $1,073.29.

The average U.S. effective rent (rent minus costs such as utilities) grew 3% year-over-year, less than expected due to the job market and income woes facing many Americans. But in the past few years, rental properties have benefited as housing became tight. As Reuters notes:

Over the past five years, the apartment sector has been the beneficiary of the U.S. housing bust, the economic recovery, high mortgage requirements, and a constrained supply of new apartments. Those factors have pushed down the vacancy rate and allowed apartment owners, such as Equity ResidentialEssex Property Trust Inc, and AvalonBay Communities Inc to raise rents.

Rising mortgage rates have stalled homeownership for many, forcing longer rental contracts.

Still, new construction coming in the next year may lead to increased vacancies, and keep rents from climbing further.

Article printed from InvestorPlace Media,

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