At 8z, we believe housing is not only a way to enhance one’s quality of life by providing an enjoyable place to live, but also a vehicle to enhance one’s financial situation by providing an attractive investment. This month we will take a closer look at the investment aspect of real estate.
Of course, the most common way to invest in real estate is to purchase a property and live in it. However, once the goal of homeownership has been achieved, the natural next step for many is to purchase a rental property.
This can take on a few different forms:
- single family home or condo leased on a long-term basis of 6 months to a year
- multi-unit apartment building
- the increasingly popular short-term rental property for Airbnb or VRBO
A recent, detailed study of the investment property brought to light some surprising results that contradict long-held perceptions of the rental property market. The key findings of the Real Trends report, the gold standard for research in the real estate industry, include the following:
- The majority of rental property owners are actually small entrepreneurs who own five or fewer units. This statistic equates to 10.8 million investors representing 98 percent of all rental property owners, or 80 percent of all rental properties. This is vastly different from the perception that all property investors are large-scale Wall Street players with hundreds of units in their portfolio.
- Out of the 43.7 million rental households, 15.2 million or 35 percent are single-family residences that represent 43 percent of rental residences. This segment of the rental industry is second only to apartment buildings.
- The first rental property purchase made by investors is typically found with the help of others. Real estate agents are the leading source, followed by friends and real estate investment clubs.
- Two thirds of rental property investments are made in the investor’s local area and 52 percent occur in the investor’s city or town. The role of national investors who have no location preference remains a small segment of the market.
- Half of investors handle all aspects of property management, 22 percent enlist the aid of a third party for some aspects of property management (primarily leasing vacancies), while 28 percent have a professional do all the property management work.
Many Americans have a goal of one day owning investment property. That may mean adding to an existing portfolio this year, or not for another decade until after the purchase of a primary residence, but the goal remains the same.
At 8z, each year we help hundreds of our clients achieve this goal and start generating passive income. Working closely with our fellow 8zers at 8z Rentals allows us to help our clients with every aspect of the process- from financial modeling, to property selection and purchase, tenant screening and leasing, and ongoing property management.
The great news for Colorado investors is that we just happen to live in one of the healthiest housing markets in the U.S., if not the world. Let me know if you’re thinking about making a real estate investment. I’d love to explore the possibilities with you over a latte. The latte is on me. 🙂
A Refreshing Look at the Question “What is my House Worth?”
The year is half over, and the Summer market is in full swing. Let’s take a look at some of the stats for our area to get a better idea of what is going on.
In Adams County for June 2017, the average sales price* was:
- $338,000 for Single Family Homes (up 10.2% from 1 year ago)
- $240,000 for Condos/Townhomes (up 12.1% from 1 year ago).
The graphic above shows that on average a buyer paid 100.5% of what the seller listed the home for last month. Also with low months of inventory, this keeps us solidly in a seller’s market for now until more homeowners decide to list their homes.
I have access to detailed stats across Colorado and can help you find out the worth of your property any time. I can also help you determine what your home is worth even if it’s in a different area. As always, I am here for you. If it’s time for you to buy or sell, let’s talk.
*Median sales price based on a six-month moving average