A lot has changed in the single-family rental industry over the last few years. It used to be that you could just buy a home, rent it out for a while, and then sell it when prices went up or interest rates decreased.
But with so many changes happening both in real estate markets and regulatory environments, this is no longer possible. Now more than ever before, there are specific steps you need to take if you want to manage your properties successfully.
This article will discuss how these changes have impacted single-family rentals today–including what landlords can do now that they couldn’t do five years ago!
Subprime Mortgages
Subprime mortgages were at one point responsible for much of the growth within the housing market over recent decades.
It was especially attractive for investors because it allowed them to buy homes with as low of a down payment as possible. But then came the 2008 financial crisis, and many subprime borrowers defaulted on their loans–leading us into one of the worst recessions in history. And what’s more? That same recession led banks to tighten their lending standards across all levels, leaving even higher-income renters without options.
The Fallout from the 2008 Financial Crisis
How have these changes impacted single-family rentals today? With tight credit regulations and stricter requirements around cash flow margins, landlords who once could get away with purchasing cheaper properties are now required to put forth larger upfront investments before they can earn any returns back like they used to be able to do. This is why most people renting out single-family homes are well-established, financially stable, and have a track record in real estate.
Protecting Your Investment
What can you do as an investor to protect your investment?
To prevent market uncertainty on rentals, you must make sure that your properties will offset some of the losses when there’s a low demand for housing — like during recessions or natural disasters. You can do this by investing in more than one property at a time or purchasing slightly higher-quality properties with lower upkeep costs (like condos).
You must also be willing to weather the storm with your investments, even if there is a lull in renters. You may not have immediate access to your funds, but you can still earn money by taking on debt or securing an investor loan for the short term. And of course, it’s best that you purchase properties where rents are flexible and don’t depend too heavily on employment rates (think vacation homes).