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The Changing Face of American Housing – Part 2

Zani Patasin, OTA Real Estate
Zani Patasin
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As discussed in the previous article, forces from the Baby Boomer and Millennial generations are colliding to create a whole new housing market.

With the Millennials, the question becomes, will the Millennials ever buy homes? The answer is yes, but at a later date. Consider this, years spent in college is at an all-time high and advanced degrees are growing in commonality. Factor in that marriage is happening much older and often after living together. In turn, family formation is also not only occurring at an older age, but family size, aka number of children per household, is in steep decline. When their needs become reality, they will enter the housing market like their parents before them.

As for Baby Boomers, consider this: 10,000 Boomers are retiring each day. However, it is estimated that the average Baby Boomer has only $91,000 saved for retirement! How can this be, you ask?

Tragically, the Boomers have endured more major market events than any generation in American history. Hyperinflation and gas lines of the 1970’s were a factor. 1987 saw the largest Stock Market crash since the Great Depression, cutting many of their fixed investment plans like IRAs and 401(k)s in half. Fight their way back they did, only to get hammered by the Tech Bubble of late 2000 and early 2001, only to rebuild and get crushed once again in 2008 and 2009 at the hands of yet another market collapse along with Big Bank Bailouts and the Subprime Melt Down causing millions of individuals to lose their homes or to have the value significantly reduced. For many of them, investing has been like running on a treadmill. But to their credit they did one thing right: they bought a home, and for many of them that home now represents the largest Bastian of cash augmenting their undefended retirements, known as equity.

Housing rentals are on the rise making rental units a great real estate investment for the future.

So where is the opportunity you may ask? Rental Property! Every savvy investor, big or small, should consider adding rental property to their portfolio. Rentals can serve as a great source of monthly income as well as building long term wealth and much needed cash flow for your retirement years.

As mobility becomes the norm and the gap between income and housing prices widens, renting is no longer considered the lowest barrier of housing. Consider this: 48 percent of all homes in LA County are now owned by individual investors or equity fund groups. Factor in that the current level of demand for rentals far exceeds available supply and prices are on the rise nationally; it is the perfect storm for investors. Individuals have to rent from someone. Why isn’t it you?

As for Boomers…due to their lack of retirement savings, many Boomers are being forced to sell their homes to free up the much needed equity for retirement. This means they too are transitioning to the fixed cost of housing known as renting.

But what if the market turns again? Consider that a return to higher interest rates will only create more renters as it will require larger down payments and reduce the amount one qualifies for. Mass unemployment creates more renters. Significant market collapses and corrections only serve to reduce available down payment capital and reduce consumer confidence, thus creating more renters.

Free Real Estate Investing WorkshopYes folks, what I am saying is that now is the time to buy rental property. For the properly positioned investor, if you participate now, your real estate investments can thrive. If another major financial occurrence happens, your real estate has the potential to only get stronger! Remember, housing, like food and water is a core human necessity. Whether we are housing people, businesses, or stuff we are all forced to participate.

As we say at OTA Real Estate, ‘Do what Wall Street does, not what Wall Street says.’ Large equity investment groups such as Blackstone, Colony Capital and Progress Residential have had salacious appetites for buying rental property in an effort to capitalize on the tremendous gap in available supply and burgeoning demand for rentals.

If the wealthy have used Real Estate as a vehicle to hedge against market volatility, leverage its many tax advantages and serve as a tool to transfer generational wealth, why shouldn’t you?

To learn more about adding rental property to your investment portfolio, or other Real Estate acquisition strategies such as Fix & Flip, Wholesaling or investing in Commercial Property, contact us or visit www.otarealestate.com.

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.