The art of trading home equity for real rentals is not lost on the masses. One would surmise that, with the recent bursting of the real estate bubble, the real rental market would begin to boom. Over the last ten years, one of the favorite tag lines for most real estate agents has been that there must be a tipping point at which it is actually cheaper to buy than to rent. Add to that the inevitable follow-up benefit of gaining equity and the real estate deal-maker silver bullet was born. And it was used often.
Fast forward to the present real estate market and now we find out that a return to owning rentals may indeed be better than owning your own home. Let's not go into the fact that for real estate agents who sold property under the auspices of it being a good investment was downright illegal. Setting that aside for another post, let's concentrate instead on buying real rentals vs. owning your own house or other investments.
First, as we all know and by the very definition of a real estate bubble bursting, the actual market value of property has declined significantly and accept that as not only fact, but also an understatement. This makes buying property in this market attractive. Combine this buyer's market with insanely low mortgage rates and we have the perfect storm. The kicker is that a good number of past or would-be homeowners are no longer homeowners due to the massive amount of defaults in conjunction with the new neck-strangling requirements the banks now exercise in order to issue a real estate loan. The overall effect of this has been a good swell in the real rental market, so the landlords are now in a position that the home sellers were in a short number of years ago.
Secondarily, rents have been driven up by the huge demand from those who no longer own their own home or those who cannot qualify for a construction loan in today's lending climate. And, with rents often exceeding mortgage note payments (remember super low rates?), many have flocked to real rentals as an alternative to traditional investments.
