Online Trading Academy Real Estate Investment Expert Declared Rental Property a Wise Investment for 2014
Trading and Investing Academy Pro Real Estate Investment Instructor Provided Insights into Wise Real Estate Investment Moves for 2014
Irvine, CA, January 27, 2014 - Diana Hill, the Professional Real Estate Investor Instructor for Online Trading Academy, announced that rental
property can be a good investment for 2014. In a recent byline, she provided real estate trends she expects to see in 2014, as well as guidelines for a wise
real estate investment.
“An upward trend in values and sales should continue through 2014,” said Hill. “Appreciation will likely not accelerate at the same level as 2013. One of the
things that continue to drive appreciation is the lack of inventory.”
Hill expects to see more homes come on the market that are standard sales rather than distressed sales during 2014, which should slow appreciation to a healthy
rate of 2-3 percent. She warns however, that investors should keep in mind that real estate is extremely localized and the need to consider how their area is
doing with relationship to jobs, rents, and other economic factors before investing.
One of the other driving factors in the market is household formation. Household formation is increasing, but not fast enough. Investors should be aware that the
U.S. population is not decreasing or creating the shortage of households. Household formation is down because young adults are not leaving the nest and starting
their own households as quickly as they have in the past. The share of 18-34 year olds living with their parents rose from approximately 27 percent just before
the recession and again by 31 percent after the recession. Several factors come into play when it comes to the reasons why young adults are fleeing the nest
later: jobs or lack thereof, debt from student loans, and how easy parents make it to live at home.
When these young adults begin the search for housing, there will be a surge in demand. Naturally, when the demand increases, it will be for rental housing first.
This, along with the trend that young people are starting families later, bodes well for rental housing in the next decade.
Another factor that makes it attractive to buy rental property is the low interest rates. Loan costs will be fixed at current day rates as rents increase because
of pent-up demand. This means that cash flow will continue to grow. This does not even take into consideration the appreciation of the property as well. Rental
real estate can see growth in both the value of the asset and income.
For example: The purchase of a 6 unit building at the cost of $50,000 a door equates to a purchase price of $300,000. If the building is purchased with 20 percent
down, the loan would be $240,000. The mortgage payment at 5.75 percent interest on a 30 year loan would be $1,400.00. Rent increases annually by 4 percent, the
chart below demonstrates how quickly cash flow grows. In this example, there is a 65 percent growth in 6 years.
Note: This is a simple example without many contributing factors, such as vacancy factor, repairs, taxes etc. But it does illustrate the power of rental real estate.
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