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Investors Take Note: Is Renting Taking the Place of the American Homeownership Dream?

Americans aren't necessarily losing the desire to own a home, but the younger generations are understanding it's becoming harder to buy a home they want today. The Deloitte Millennial 2018 Survey of 10,445 employed Millennials found that 43% of respondents plan to quit their jobs within the next two years.  Along with that, only 28% of them plan on staying in their current jobs for five years or longer.

Those same Millennials, if they're reading a lot about whether to buy or rent, are getting educated in how long it takes on average to recoup their investment and begin to build equity in a home they buy.  A common number in these articles is five years.  If only 28% of Millennials plan on staying in their jobs for five years or longer, they should seriously be looking for a rental home that meets their needs.

Another factor that is important to many of them is when they plan on starting a family.  If they buy a home they can afford now that meets their current needs, starting a family before five years into the future is going to be a problem.  They're going to have to fit their new family into their current home or move up to a larger home.

There are hundreds of thousands of pages of information out there about the erosion of employee loyalty to their employers.  Whether you agree with the attitude, it's real, and it contributes to the desire to change jobs.  Sure, changing jobs doesn't necessarily mean leaving the area, but it often does.  Also, proximity to work and short work travel times are important, so a job change even in the same city can bring about the need for a residence change.

Buying a home isn't just a lifestyle and employment decision.  It's a financial decision, and many in the younger age group are burdened with student debt and are not even close to having the down payment they need to buy a home.  There is more than a little fear in the prospect of taking on a 30-year mortgage and having those payments.  It's less fearful to lease for six months to a year, as a move then to a lower-cost rent is an option if finances are not as expected.

With all of that in mind, what's the outlook for rental home or multi-family investors and are there opportunities for new rental investors to enter the market?  Opportunity is amazing in most markets, but it will take some education and study of the each local market's demographics.  The rental property investor must understand how homes are valued and the local rental market. 

A common misconception is that a drop in foreclosures is creating a problem for rental investors who do not want to get involved in fix and flip.  This isn't the case, as there are fix and flip investors in every market who are selling mostly to rental investors.  They learn the market, understand the returns rental investors want, and they find the distressed homes that need work, fix them up to rent-able condition, and flip them to rental investors.

The investor who wants to buy a home that's ready for a tenant can still find great opportunities in almost any market.  It's more work, as the investor must seek out motivated sellers who need to sell and have enough equity in their homes to sell at a discount to market value.  The smart rental investor wants to buy at a discount to lock in a profit from the first day of ownership.  The lower purchase price also allows more room to result in positive, profitable cash flow after expenses.

If rental property investing is of interest, there's never been a better time.  Gather the knowledge you need and go out and find your first deal.