Rising rents may be driving home purchases. Some recent reports say they are—but according to other experts, this is not necessarily the case. The rising cost of rent has not caused the demand for single-family rental homes to shrink, according to Dennis Cisterna, CRO, Investability Real Estate, Inc.
“It’s no secret that the single-family rental market has experienced serious growth over the past decade, and while we will probably see a stabilizing of the market, there is still strong demand,” Cisterna said. “Today, it’s not about diversification so much as it is about evolving and innovating to improve the investor experience through technology, market intelligence and services.”
Does the high cost of rents mean good news or bad news for investors in these markets?
“It really depends on the objectives of the investor,” Cisterna said. “Most cities with high rents also have high home prices, so while your annual cash flow may be low, the investor balances out the opportunity with an asset that is appreciating over time. That being said, investors should be cautious when investing in a property based on potential appreciation. The proposition of appreciation, regardless of the likelihood, is speculative in nature and carries with it a lesser degree of certainty than a property with strong in-place cash flow. Experienced investors practice identifying properties in stable markets with consistent demand. Variables like schools, crime, and local economies are big factors that impact property demand, values and rents—and can therefore indicate how an investor will bode in specific markets. Market data and property analysis tools have improved dramatically over the past several years, giving buyers better insight and transparency into their purchases.”