One bright spot in the dismal real estate market is the rental market. Demand is up and rents are rising. That’s partly because those foreclosures have turned more than 4 million former homeowners into rents, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.
As with many investments, the best time to get in is when most others are sitting on the sidelines.
Mortgage rates are at a 40 year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities. With this increase, it has allowed landlords to charge more. Hotpads.com, a real estate research firm, reports that rents nationwide jumped 11.6% in 2010 to $1,320 a month.
You’ll need that rental income to tide you over until home prices bounce back; in fact, the typical investor today plans to hold for 10 years, according to a survey by the National Association of Realtors. If you can hang on that long, you have got a good shot at solid gains, especially if you are financing the home.